Is Adani into Debt Trap?

Adani Group’s total debt is around 2.2 Lakh crores as of March 31, the major expansion of the adani’s empire is majorly fueled by debt which has put pressure on cash flows and credit metrics of the company.

Adani’s Group Expansion Journey

The journey of the adani’s empire was started as Adani Exports in 1980 and after that it was divided into multiple businesses like from airports to ports, mining, defense,cement and media.

Recently the group has also acquired Holcim’s India unit consisting of ACC and Ambuja for $10.5 billion through which they entered into the cement Industry.

And in 1985 he started importing primary polymers for small size industries then in 1988 Adani established Adani Exports, now known as Adani enterprises.

In 1996 the strongest arm of Adani Group, Adani Power was established. Adani power holds thermal power plants which are the largest private thermal power producer of the country.

In september 2020, Adani acquired 74% stake in Mumbai International Airport which is the india’s second busiest airport after delhi.

In 2021 Gautam Adani added $49 billion to his net worth making him the world’s 5th richest person leaving Warren Buffet behind.Adani’s net worth reached around $123 billion dollars in 2022.

Adani Group Total Debt 2022

Adani’s group is growing in a rapid pace but it is majorly fueled by debt.The total debt on Adani group is around $21 billion dollars which is very high for a company.

The report from Business standard states the revenue of listed stocks of Adani’s is 4.5 billion dollars and the profit is 1.14 billion dollars.

There are 6 adani’s group firms which are listed and has a gross debt of Rs. 2,309 billion as of FY22.

Adani Group Total Debt 2022

Company

Total Debt ( in Crores)

Adani Enterprises

41,024

Adani Power

48,796

Adani Wilmar

2,568

Adani Green

52,188

Adani Ports & SEZ

45,453

Adani Transmission

29,815

Adani Total Gas

995

Adani, a bubble?

1. The valuation of every adani’s share is very high and the P/E ratio is incredibly high, which is not good if you see for the short term investment.
2. Debt to Equity ratio is also very high for every adani’s share like adani enterprise debt to equity ration is 1.87, adani port is having 1.48, adani power is having 2.61 which is very high and almost every adani’s share debt to equity ratio is incredibly high, which is not a good sign, atleast for now.
3. Political relationships is one of the factor thats benefiting adani group for now as they are getting many projects from the government too, so if all this growth is depending upon the political reasons then you should know that government can change at any moment, so the benefits which adani group is grabbing now, there are probabilities that it can be change when there is a government change.
4. Fundamentals of adani group is not matching with the valuation what market is giving to them.Thier fundamentals are not that strong and the company’s growth depends alot upon the fundamentals of the company and the management of the company.

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My name is Anubhav and i write articles on multiple topics. Thanks for showing support.