Adani Group India’s largest critical Infrastructure developer today released a credit update on its group portfolio (as attached).
Strong fundamentals are reflected in strong credit ratio:
- Net Debt to EBITDA (run rate) is now at 2.81x, (net debt to accounting EBITDA is at 3.27x). This is in the lowest quartile for a large infrastructure portfolio.
- Net debt to Gross assets is now over 2.25x thus at debt to asset in percentage gearing is now below 50% (this is driven by prudent growth path driving high return on assets).
- Debt service cover at aggregate portfolio level now exceeds 2x
- Cash balance at listed portfolio is now over USD 4.75 billion INR 40,351 crore.
Key Highlights of the Adani Portfolio credit update:
The Group has made a full prepayment of margin linked share backed financing totalling USD 2.15 bn before 12 March, well in advance of the 31st March 2023 timeline. The promoters also prepaid USD 700 mn debt taken for the Ambuja Cement acquisition. The prepayment was done along with interest payment of USD 203 mn. Further, the credit update states that the promoters completed a secondary transaction with GQG Partners, a leading global investment firm, of USD 1.87 bn (INR 155 bn) for four key listed entities.
“The deleveraging program testifies the strong liquidity management and capital access at sponsor level even in volatile market condition, supplementing the solid capital prudency adopted at all portfolio companies,” said the Adani Group in the credit update.
The comprehensive credit update further highlights major improvements in key financial metrics. Firstly, the portfolio’s combined Net Debt to EBITDA ratio showed considerable progress decreasing from 3.81 in FY22 to 3.27 in FY23. The run rate EBITDA surged from INR 50,706 crore in FY22 to INR 66,566 crore in FY23. As a result, Net Debt/RR EBITDA was as low as 2.8x. Run Rate (RR) considers annualized EBITDA from projects that commissioned during the year.
The credit update further states that the banking lines of Adani Group continue to show confidence by disbursing new debt and rolling over existing lines of credit. Moreover, rating agencies both domestic and international rating agencies have reaffirmed their ratings in all the group companies.
Robust profit growth with highly predictable and assured cash flow
• EBITDA of INR 57,219 crore, up 36.2% year-on-year
• RR EBITDA of INR 66,566 crore for FY23, up 31.3% year-on-year
• Core Infra constitutes ~ 83% of the portfolio EBITDA providing resiliency, stability and high predictability to the cash flow given majority of projects are largely contracted.
Strong and rapid deleveraging
• Portfolio’s combined Net Debt/RR EBITDA improved to 2.81x in FY23 from 3.16x in FY22.
• Portfolio’s combined Net Debt/EBITDA improved to 3.27x in FY23 from 3.81x in FY22.
• Debt Service Cover Ratio (DSCR) has improved to 2.02x during FY23 from 1.47x during FY22.
Gross Assets grow despite deleveraging
• Gross Assets increased to INR 4.23 lakh crore, up by INR 1.06 lakh crore.
• Gross Asset / Net Debt cover has improved to 2.26x in FY23 from 1.98x FY22.
• Continued investments in Core Infra with Gross Assets of INR 3.77 lakh crore (~89% of the portfolio) which provides long term multi decadal visibility of Cash Flow.
Prudent capital management and high liquidity
• Cash balance higher by 41.5% at INR 40,351 crore against INR 28,519 crore.
• Free Flow from operations – FFO – (EBITDA less finance cost less tax paid) at INR 37,538 crore.
• Cash Balance and FFO (together at INR 77,889 crore) are much higher than debt maturity cover for FY24, FY25 and FY26 of INR 11,796 crore, INR 32,373 crore and INR 16,614 crore respectively at combined portfolio level.