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Adani Group’s Financial Fortitude: A Tale of Transformation

Adani Group has always been phenomenal in all sectors. Tapping into different markets, they are strengthening the foundation of the nation. The Adani Group has achieved a significant milestone in its financial journey, marked by strong liquidity and strategic financial initiatives. As per Gautam Adani News, at the end of the June quarter, the conglomerate boasts an impressive cash balance of INR 42,115 crore—a record high. This achievement reflects the diligent efforts of Adani Group’s portfolio in boosting their financial foundations. This is helping them pave the way for ambitious projects.

In this blog, we will cover the factors that have paced up the financial transformation for the Adani group. 

Key Factors Fueling Positive Transformation

Gautam Adani has a knack for understanding the dynamics of the market and overcoming difficulties smartly. In moving his business towards a positive approach, several factors are listed here:

  1. Equity Deployment

From Gautam Adani News, facts reveal that equity deployment has surged, constituting 55.77% of total assets, a remarkable increase from 40.16% at the close of FY19. By the end of FY23, the group deployed INR 2,35,812 crore in equity, significantly surpassing net debt of INR 1,87,087 crore.

  1. Growth in EBITDA and Gross Assets

Over the past four years (from FY19 to FY23), both EBITDA and gross assets have witnessed substantial growth, with a compounded annual growth rate (CAGR) of 18.13% and 21.7%, respectively. In the June FY24 quarter alone, EBITDA surged by 42% year-on-year, accounting for over 40% of the entire FY23 EBITDA. In contrast, net debt exhibited a comparatively modest CAGR of 14.56%, resulting in consistent improvements in leverage ratios. Have a quick look at these financial figures:

  • Net debt to run-rate EBITDA for FY23 decreased to 2.8x, down from 3.2x in the previous year.
  • The ratio of gross assets to net debt stood at 2.3x at the close of FY23.
  • Net Debt to Equity was at a comfortable 0.8x at the end of FY23.
  • The debt coverage ratio improved to 2.02x for FY23 compared to 1.47x for FY22.
  1. High Credit Ratings

More than half of the portfolio’s EBITDA originates from businesses with credit ratings equivalent to India’s sovereign rating. This exceptional creditworthiness has facilitated consistent access to capital markets.

  1. Core Infrastructure and Utility Dominance

The core infrastructure and utility platform played a pivotal role, contributing 83% of total EBITDA in FY23 and further increasing to 86% in the June FY24 quarter. Contractual businesses accounted for a significant 82% of the portfolio’s EBITDA in FY23. This high contribution offers stability and long-term earnings visibility.

  1. Diverse Financing Sources

Well-diversified financing sources, including global and domestic banks, capital markets, and others, have mitigated concentration risk and strengthened the group’s financial resilience.

  1. Maturity Cover and Refinancing Protection

Conservative financial planning has ensured a robust maturity cover. The debt maturity profile for all companies exceeds the cover period, providing refinancing protection and eliminating systemic risks.

  1. Strong Free Cash Flow

Free funds flow plus cash for FY23 stood at 2.72x, a reassuring figure compared to an average debt maturity cover of 6.55 years. This has effectively eliminated refinance risks. Free funds flow is calculated as EBITDA minus finance costs paid minus taxes.

  1. Strategic Equity Program

The Adani portfolio initiated a 10-year equity program in collaboration with long-only global investors in 2016. This initiative has attracted over USD 9.5 billion in investments since 2019, bolstering strategic priorities, including pre-payment of margin-linked share-backed financing.

  1. Promoter Transactions

At the promoter level, transactions in the secondary market have generated INR 30,900 crore. These transactions do not include the recent stake sale in Adani Power to GQG Partners, indicating dynamic promoter-level activity.

Summing Up

The Adani Group’s financial transformation represents their significant stand in the market, moving up their financial position. As this group continues to thrive in the ever-evolving economic landscape, they are sure to drive India’s growth story forward. In the coming years, the Adani group will become a global powerhouse with a foothold in major sectors. Their devotion to adaptability and innovation are the keys to sustainability and their success.

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