The Adani Group's debt and the exposure of LIC and public sector banks to the firm have been a cause for concern ever since the Hindenburg report accused the conglomerate of inflating stocks. While the RBI and LIC, as well as the government have downplayed the exposure as limited, Adani has been prepaying loans to address concerns about debt. But now the world's largest financial newspaper Nikkei Asia has found that Adani's debt is equivalent to 1 per cent of India's economy.
Nikkei's analysis, which took NDTV, Ambuja Cement and ACC's debt into account, found that the Adani Group needs to pay up Rs 3.39 lakh crore. Considering that India's nominal GDP was Rs 273 lakh crore by the end of October 2022, the Adani debt is 1.2 per cent of that figure. This analysis only looked at the 10 listed companies, which have assets worth Rs 4.8 lakh crore, but the debt could turn out to be higher if several privately held firms of the Adani Group are taken into consideration.
The Hindenburg report alleged that prices of stocks pledged for loans by Adani had been inflated using shell firms. As of now the group's 10 listed firms have a 25 per cent equity ration, which indicates the difference between funds acquired via share sale and financing via debt. Despite the firm's claims that the allegations by Hindenburg are malicious, investor sentiment has been hit, triggering a freefall in its stock prices.
Citigroup and Credit Suisse have stopped accepting Adani securities as collateral, while Morgan Stanley has stripped some of its firms of free float market status. Its French partner TotalEnergies has put a green hydrogen project on hold, while Adani-linked Elara Capital is being investigated in the UK. Three banks which were going to refinance its debt for Holcim India's acquisition, have also reportedly stalled negotiations.
