Fitch Group’s CreditSights discovers errors in debt report on Adani Group firms

Fitch Group’s debt research unit CreditSights, which had raised red flags over Adani Group being over-leveraged, said in a new report that it “has discovered calculation errors” in its recent debt report on two Adani Group companies, following a conversation with the management. However, it also pointed out that the latest “corrections” did not change its investment recommendations.

“In a follow-up to our report outlining our credit concerns with Adani Group companies, we are presenting this piece to reconcile our calculations with Adani Group’s presentation. We have also spoken with Adani Group’s CFO (Mr. Jugeshinder (Robbie) Singh), Head of Corporate Finance (Mr. Anupam Misra) and Head of Ratings (Mr. Rahul Kumar) during the week of 22 August,” CreditSights said in a report dated September 7.

“As part of this discussion, we discovered calculation errors we had made in two of the Adani Group companies, Adani Transmission and Adani Power. For Adani Transmission, we have corrected our EBITDA estimate from INR 42 bn to INR 52 bn (from Rs 4,200 crore to Rs 5,200 crore). For Adani Power, we have corrected our gross debt estimate from INR 582 bn to INR 489 bn (from Rs 58,200 crore to Rs 48,900 crore). These corrections did not change our investment recommendations,” it added.

Last month, CreditSights had said that the Adani Group is “deeply over leveraged”, and may, “in the worst-case scenario”, spiral into a debt trap and possibly a default. The report noted that the Group has been making aggressive investments that are predominantly funded with debt, putting pressure on its credit metrics and cash flow. Following this, the Adani Group had issued a statement saying its companies have reduced their debt burden and that the leverage ratios of the group companies “continue to be healthy and are in line with industry benchmarks”.

In its latest report, CreditSights noted: “Management views that the group’s leverage is at manageable levels, and that its expansion plans have not been mainly debt funded”. “Though we have taken cognisance of management’s viewpoints, we have a different opinion on the above,” it added.

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