On Tuesday, BofA Securities stated that the Adani Group’s operations remain robust due to structural protections that indicate strong market access. The group’s solid asset base supports the cash flow and credit profile of its USD bond issuers in the ports, utilities, and renewable sectors. Despite global scrutiny, the Adani Group demonstrated operational stability, expansion, and market access, with ratings remaining unchanged even as outlooks adjusted. BofA noted that the group’s strong credit fundamentals bolster its positive outlook on USD bonds. Over the past two years, the holding companies of the group’s USD bond issuers have shown improved fundamentals, driven by EBITDA growth from capacity expansion and a reduction in leverage.
Looking ahead, BofA anticipates further enhancement of ADSEZ’s credit profile, aided by its diverse port operations, stable volumes, and efficient management. They project ADSEZ’s leverage to remain at 2.5x despite significant investments. The Adani Group, one of India’s largest conglomerates with approximately $200 billion in market capitalization, operates across various infrastructure sectors with 12 listed entities. BofA expects Adani Transmission Ltd (ADTIN) and Adani Electricity Mumbai (ADANEM) to sustain stable credit profiles, backed by their diversified operations and regulated or long-term fixed-price contracts. The brokerage predicts that both ADTIN and ADANEM will keep leverage below 6x and coverage above 2x over the next three years, even with ADTIN’s substantial capital expenditure plans, while ADANEM benefits from maintenance investments.
The credit profiles of restricted groups such as ADINCO (AdaniConneX), Adani Green Energy Limited (ADGREG), and Adani Renewable Energy (ARENRJ) are expected to improve gradually as debts are amortized according to bond terms. Since early 2023, Adani Group’s USD bonds have faced considerable volatility. Nonetheless, steady market access and the absence of negative findings from domestic regulators have facilitated a strong recovery across the bond complex, which has outperformed year-to-date, with spreads tightening by 80-325 basis points and trading 14-64 basis points below pre-indictment levels in the US. The note concluded that operational resilience and ongoing liability management support a positive outlook on the bond complex despite the tightening observed this year.
BofA maintains an Overweight rating on ADSEZ 31s/32s, ADINCO 31s, ADTIN 36s, and ADANEM 30s, citing robust credit fundamentals and appealing relative valuations.