With Rising Debt Burden, Adani Tops the Rich List in Asia

Last Updated on Sep 1, 2022 by

Gautam Adani has become the third richest person in the world and the richest person in Asia, as per the latest Bloomberg Billionaires Data.

With a net worth of US$ 137 bn, the business tycoon is now following Elon Musk (US$ 251 bn) and Amazon’s Jeff Bezos (US$ 153 bn) on the Bloomberg Billionaires Index 2022 List.
As per the Bloomberg Report, this is also the first time that an Asian has made the list of the top three wealthiest people in the world.
Gautam Adani’s meteoric rise to the top of the rich list has been viewed with scepticism based on what two rating agencies have to say about his Group’s debts.

The Adani Group has diversified businesses like ports, mines, and power plants, defence, data centres, airports. Recently, it forayed into the cement sector by acquiring Holcim’s India units for US$ 10.5 bn and is also planning to set up an aluminium factory. It is to be noted that most of this expansion has been funded by debt.

Adani’s aggressive growth strategy

Over the past year, the group has made a number of announcements regarding its ambitions to enter a number of industries, including media, data centres, petrochemical refining, green hydrogen, copper refining, and aluminium refining. These goals go hand in hand with its previously stated intentions to grow its current businesses. Below is his investment plan for the next decade:

Green Hydrogen: US $50 – US$70 bn
Green Energy: US $23 bn
Transmission: US $7 bn
Data Centers: US $6.5 bn
Transport Utility: US $12 bn
Roads: US $5 bn
Airports: US $9-10 bn

Debt-funded acquisitions raise concerns

After Fitch reported Adani Group’s mounting debt, another rating agency S&P Global said the conglomerate’s debt-funded future acquisitions can start putting pressure on the ratings of its group companies. S&P Global Ratings says, “If you look at the rated entities (of Adani group), like Adani Ports, their business fundamentals are fairly solid. Port business is generating healthy cash flows. Where, probably, the risk could lie for the group is, some of the acquisitions it is doing. Some of the recent acquisitions that we are seeing are largely debt-funded and that is taking away the headroom.”
Recently, CreditSights, a division of rating agency Fitch, attracted attention when it said that the Adani Group is deeply overleveraged and that, in the worst-case scenario, it might default. They said that it remains ‘cautiously watchful’ of the debt-funded expansion of Adani Group, particularly that of the listed entities. In the last few years, the Adani Group has pursued an aggressive expansion plan that has pressurised its credit metrics and cash flows. All this was briefed in their report titled “Adani Group: Deeply Overleveraged”.

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