Debt servicing ratio comfortable at Adani Group

According to a credit note released by Adani Enterprises on exchanges, the group's total debt is expected to remain stable at Rs 2.3 lakh crore for FY23 compared with that in the 12 months to September 2022. This reflects the reducing focus on debt funded capex amid efforts to improve the group's debt profile. The group’s debt was Rs 1.9 lakh crore in FY22.

During the December quarter earnings call, the management of Adani Enterprises said that given the current volatility it will moderate certain acceleration budgeted earlier but the existing commitment in the core infrastructure and utility will continue as planned.

According to Adani Port’s post earnings presentation, the company has halved its capital expenditure forecast to Rs 4,000-4,500 crore for FY24 compared with Rs 8,600 crore in FY23. It also aims at reducing the net debt-EBITDA ratio to 2.5 in the next fiscal year from around 3.5 in FY23. The ratio depicts how many years it would take to repay existing debt based on the current operating profit before interest, tax, depreciation and amortization (EBITDA).

The group claims that it has enough cash reserves to pay debt obligations and there is no immediate major debt maturity in the near and medium term that poses refinancing risk. The group’s cash reserve rose by 6.4% to Rs 31,646 crore at the end of December 2022 from the previous quarter.

The debt repayment for the group is pegged at Rs 7,825 crore for the March 2023 quarter and at Rs 11,772 crore for FY24. In the remainder of the current fiscal year, the largest loan repayment of Rs 4,391 crore will be from the Adani Port and SEZ followed by Rs 2,482 crore from Adani Enterprises. Adani Port’s cash balance was at Rs 6,257 crore at the end of December 2022 after its loan payment of Rs 5,989 crore and interest payment of Rs 1,616 crore.

The listed six entities of the group that are asset heavy are expected to have a cash flow of Rs 44,078 crore in FY23 and will serve debt of Rs 23,590 crore. It implies a Debt servicing coverage ratio, which captures the company’s ability to service debt, of 1.9; a reading above 1.25 is considered good. For the group’s listed companies, the ratio is between 1.3 and 4.5 with Adani Port at the lower end and Adani Total Gas at the upper end of the range.