The unprecedented rise in Adani Group stocks made its founder, Gautam Adani, the second richest man in the world, but the bond market isn’t quite as enthusiastic, according to a Bloomberg report.
Stocks of firms in his Indian business empire spanning ports to gas distribution and coal mining have jumped in part on soaring energy prices. Adani Ports & Special Economic Zone Ltd. climbed 29% in 2022 and hit a record this week, while shares in some of his other companies have surged more than 1,000% in the past two years.
But in the debt market, Adani Ports’ dollar bonds have dropped more than their Indian peers on concern about the group’s debt, and its notes due in August 2027 fell to an all-time low this week, according to Bloomberg-compiled prices.
Bonds of group companies, including Adani Green Energy Ltd. and Adani Transmission Step-One Ltd., also mostly underperformed the broader Indian market, the report says.
Adani Ports’ seven dollar-denominated notes have lost about 14% on average so far this year, while Adani Transmission Step-One’s notes due in 2036 and Adani Electricity Mumbai’s 2030 securities have lost more than 17% each. That exceeds a 10% decline in Indian dollar debt overall and a 13% drop in US currency notes in Asia excluding Japan, as rising borrowing costs in the US dragged down the region’s greenback debt.
Adani Group declined to comment when asked about its dollar bonds underperforming Indian and regional peers. In the past, the conglomerate has allayed concerns about the high debt levels, saying its credit metrics have improved in the past few years and it has received an equity infusion from global investors.
Meanwhile, Not all Adani bonds have underperformed the broader market, though, even as they’ve lost money. For instance, Adani Green Energy’s 2024 notes lost 9%, while Adani Ports’ securities due in the same year dropped 4.4%.
The recent run of investments by Adani includes a plan to inject 200 billion rupees ($2.5 billion) into a cement firm that he acquired to bolster his infrastructure empire, and a $70 billion bet on green energy.
Adani’s investment plan provides a "visible path for debt to increase" but a "less transparent path for EBITDA to grow," particularly further in the future, CreditSights analysts wrote in a note this month.
Adani Ports’ total debt stood at 456.4 billion rupees at the end of March, according to a statement from the group. That would be the highest in at least 10 years, data compiled by Bloomberg shows.
Future potential big-ticket acquisitions by the company could damage its credit profile if they’re largely debt-funded, and its leverage ratio of Pro-forma net debt to EBITDA could worsen past the current 4 times, CreditSights analysts wrote in the report.
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