No Credit Quality Concerns With Adani Group, Says SBI Official — BQ Exclusive
SBI not worried about credit quality of Adani Group firms, says official
India's largest lender has not felt any credit quality concerns with exposures to Adani Group companies, according to a senior official at the bank.
While Adani Group companies have seen their stock lose value in the equity markets, it has not led to any concerns about a credit default by them. The exposures are backed by cash flows from revenue-generating assets, according to the official said on the condition of anonymity. Currently, the State Bank of India has adequate visibility on the future cash flows of these assets and is not concerned, the official said.
The bank does not have any pledged shares from Adani Group companies, which may lead to a margin call, the official said.
On Wednesday, Adani Enterprises decided to call off its Rs 20,000 crore further public offer, even after it was fully subscribed. The company said it will repay all the funds it has in escrow accounts. The decision was taken due to sharp volatility in the group's stocks with the board stating that it would not be "morally correct" to go ahead with the offer, it said.
"We will continue to focus on long-term value creation, and growth will be managed by internal accruals. Once the market stabilizes, we will review our capital market strategy," Adani Enterprises said in a statement to exchanges.
The decision to call off the FPO might impact investments in future projects, but these do not pose any immediate problems for SBI, the official quoted above said.
Total bank debt to the top five Adani Group companies is estimated to be over Rs 81,000 crore, CLSA said in a report on Jan. 26. This constitutes only 0.55% of banking sector loans. Overall debt to these five companies has risen from Rs 1.15 lakh crore as of March 2019 to Rs 2.11 lakh crore as of March 2022, CLSA said in its report. Most of this incremental debt was financed through dollar bonds, the report said.
The Reserve Bank of India has sought details of bank exposures to Adani Group companies in recent weeks, the SBI official said. This is part of the regulator's usual supervisory practices, where it keeps tabs on exposures to large borrowers, the banker said.
Another public sector banker, who also commented on the condition of anonymity, said that the group's financial position has not deteriorated enough to cause concerns among lenders. Unless there is a major change in the revenue generation capabilities of the group's firms, credit quality concerns will not arise, this second banker said.
Private sector lender IDFC First Bank clarified to the exchanges on Thursday that the bank's funded outstanding toward Adani Group companies is only 0.06% of its funded assets as of December 2022. Non-funded working capital exposure to the Adani Group firms stands at 0.51% of the bank's assets, the majority of which is secured by way of letters of credit maturing in two to five months.
"The bank does not have any exposure to any offshore entities in the Adani Group or against the shares of the Adani Group companies," IDFC First Bank said in its exchange notification.
Adani Group stocks have taken a major hit after a report by international short seller Hindenburg Research, which questioned corporate structures in the group. The Adani Group hit back at the allegations with a detailed rebuttal last week.
At 12:15 p.m. on Thursday, Adani Enterprises was trading at Rs 1,958.25 per share, down over 8% from Wednesday's close.
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.