Adani Group bonds flash warnings even as $153 billion stock rout eases
Adani Group’s historic market meltdown has prompted the Indian conglomerate to go on a confidence-building tour and secure a $1.9 billion investment from a high-profile money manager.
But while a closer look at billionaire Gautam Adani’s empire shows fears of debt spiraling over the next three years have eased, investors are still skeptical about the conglomerate’s long-term repayment capabilities. A slump in the port-to-power group’s stock market and uncertainty over credit ratings continue to raise concerns about access to funds following allegations of fraud by a short seller.
Such concerns remain even after efforts by the Adani group to appease investors during a three-day roadshow in Singapore and Hong Kong this week, where officials said the group had enough money to repay debt over the next three years. Is. A family trust sold shares worth 154.5 billion rupees ($1.9 billion) in the four companies to GQG Partners, a US-based money manager led by Rajeev Jain.
“It’s definitely a positive that he’s managing to sell some of his holdings and raise some cash,” said Kamil Dimich of North of South Capital. “If we can restart that engine where he can access the financial markets again, that can stabilize things,” he said, referring to the billionaire.
The Adani Group has also cut expenses and made early debt repayments to ease a rout that wiped $153 billion from its shares since US-based Hindenburg Research’s fraud allegations, which it has denied. The following indicators will prove important to money managers’ decisions on the conglomerate, as its crisis of confidence continues to unfold.
While most of Adani Group’s $15 bonds have recovered from their lows just after Hindenburg’s January 24 report, all but one are still in the red.
The group’s four notes are trading between 84 cents and 94 cents on the dollar by the end of 2026, down from 91 cents to 99 cents before the report, but still indicating relatively low payment risk.
It’s a different picture for bonds with maturities down the road. Seven of the group’s 11 notes due in 2027 or later are trading at or below 70 cents on the dollar, a level that defines distress or serious concerns about timely payments.
After wiping out nearly two-thirds of their combined market value, group 10 stocks staged a collective rebound on Wednesday for the first time after the Hindenburg report, led by a nearly 15% rise in flagship Adani Enterprises Ltd.
The latest gains have helped reduce the conglomerate’s market cap to around $140 billion from a peak of $153 billion.
But, it’s still early days. Adani Total Gas Ltd, Adani Transmission Ltd and Adani Green Energy Ltd, which took the biggest losses, were down 70% to 80% from their January 24 levels. Hindenburg said in his report that Adani’s seven flagship stocks were overvalued and suffered a fall of 85%.
Moody’s Investors Service, which last month cut its outlook for Adani Green and three other group firms from stable to negative, said refinancing of maturing debt, changes in capital-expenditure plans, and capital-raising efforts to watch are important variables.
If the firm’s ability to raise capital has decreased significantly, borrowing costs have increased significantly or fundamentals have deteriorated, further rating action may follow.
Similarly, S&P Global Ratings also downgraded Adani Group’s outlook to negative in February. It added that Indian banks would charge a higher risk premium and become extra cautious after the crisis.
Of the seven major companies, five have modest analyst coverage and even with more followers for the other two, the brutal selloff has had limited impact on brokerages’ sentiments.
Flagship Adani Enterprises, which is tracked by only two brokerages, is split between buy and hold recommendations, according to data compiled by Bloomberg. Adani Ports and Special Economic Zone Ltd., the crown jewel and a constituent of India’s benchmark NSE Nifty 50 index, is the most followed and has actually increased the number of buy calls from 20 to 21 before the crisis.
“What’s missing here, that no one’s talking about, is these phenomenal, irreplaceable assets,” said Jain, president of GQG. “When people are fearful you have to be greedy.”
But some are not convinced. “Investors should still avoid these stocks as they are highly volatile,” said Karthik Jonagadla, chief executive, Mumbai-based Quantes Research & Capital Pvt Ltd. “If an investor sold these stocks a few weeks back because of a whistleblower report and now wants to buy because they are cheap, such trades are mere speculation and lack fundamentals.”
The crisis has spread to the ESG market as well, prompting the asset management arm of JPMorgan Chase & Co to clean up its respective portfolios of exposure to the Adani empire.
India’s top court said on Thursday that it has set up a panel to investigate allegations against the Adani Group. It asked the local market regulator to probe any manipulation in the group’s shares and inform about its findings within two months.