Global broking and research firm CLSA on Thursday said it sees no significant downside risk to Indian banks from Adani group debt, in which the overall exposure for domestic public and private sector lenders remains well within the mangeable limits with adequate ring fencing.
“Indian banking exposure is less than 40% of total group debt,” CLSA said in its report dated January 26. Within this, private banks’ exposure is below 10% of total group debt and most banks have indicated that they have largely financed assets with strong cash flows, such as airports/ports,” it said. “PSU banks do have material exposure (30% of group debt) but this debt has not increased in the past three years. Most of the incremental funding to the group for new businesses and acquisitions has come via overseas sources,” the report added.
Citing lower share of banks in the Adani group’s total debt of around Rs 2 trillion, CLSA said that while Adani’s debt levels have doubled from Rs 1 trillion or Rs 1 lakh crore to Rs 2 trillion or Rs 2 lakh crore in the past three years, bank debt has increased by more than 25%. However, the share of bank debt in overall group debt has reduced materially and CLSA estimates that incrementally banks have only lent Rs 150 billion, or Rs 15,000 crore or 15% of the Rs 1 trillion the group companies have borrowed over the past three years. Large acquisitions, such as ACC and Ambuja cements, have been fully funded by foreign banks, it said.