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Debt exposure of Adani Group
16 Feb 2023 (146 views)  

1. DBS has an exposure of $1.3 billion SGD to the Adani Group. The CEO of DBS said that the exposure is "tightly managed" and the bank is not concerned over this exposure. This exposure represents less than 1% of DBS total loans. 

2. The table below shows the loans taken by the Adani Group.

a) The total debt of the 5 listed companies is 2,181 billion INR ($35.2 billion SGD). The debt represented an average of 292% of the equity. The group is highly leveraged, as a debt equity ratio of 100% is considered to be high.

b) The annual interest paid on the debt amounted to 127 billion INR, as compared to a net income to shareholders of 174 billion INR. An increase in interest rate on the debt (for the portion that is based on floating interest rate) or a decrease in the margin will cause problems in the servicing of the debt. 

c) It is likely that a large portion of the debt is denominated in USD and the earnings are in local currency (INR). A fall in the exchange rate of INR will increase the debt servicing burden for the group.

3. Based on the information shown above, it would appear to me that the debt to the Adani Group is highly risky. 

4. However, it should be noted that this analysis may not be correct, due to the limited information available to me, and my limited understanding of the financial position of the group. 

Note - this is my observation. I am not giving financial advice to invest or divest in these shares.

Tan Kin Lian

Debt exposure of Adani Group
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1. DBS has an exposure of $1.3 billion SGD to the Adani Group. The CEO of DBS said that the exposure is "tightly managed" and the bank is not concerned over this exposure. This exposure represents less than 1% of DBS total loans. 

2. The table below shows the loans taken by the Adani Group.

a) The total debt of the 5 listed companies is 2,181 billion INR ($35.2 billion SGD). The debt represented an average of 292% of the equity. The group is highly leveraged, as a debt equity ratio of 100% is considered to be high.

b) The annual interest paid on the debt amounted to 127 billion INR, as compared to a net income to shareholders of 174 billion INR. An increase in interest rate on the debt (for the portion that is based on floating interest rate) or a decrease in the margin will cause problems in the servicing of the debt. 

c) It is likely that a large portion of the debt is denominated in USD and the earnings are in local currency (INR). A fall in the exchange rate of INR will increase the debt servicing burden for the group.

3. Based on the information shown above, it would appear to me that the debt to the Adani Group is highly risky. 

4. However, it should be noted that this analysis may not be correct, due to the limited information available to me, and my limited understanding of the financial position of the group. 

Note - this is my observation. I am not giving financial advice to invest or divest in these shares.

Tan Kin Lian