The Adani Group has been identified as the “most attractive” corporate entity among Indian companies by global brokerage firm Nomura. Despite recent challenges, including allegations in an indictment by the U.S. Department of Justice (DoJ), Nomura’s analysis suggests the conglomerate remains well-positioned to weather financial and operational uncertainties.
Improved Liquidity Management
Nomura highlighted significant improvements in the Adani Group’s liquidity management over the past year. This progress has been particularly notable since the allegations by Hindenburg Research in early 2023, which scrutinized the conglomerate’s financial practices. According to Nomura, the group’s management has effectively navigated risks associated with share pledge loans despite fluctuations in stock prices. The brokerage firm remains confident that the group’s proactive risk management strategies will help mitigate short-term volatility.
Nomura also emphasized that any temporary slowdown in the group’s growth initiatives is unlikely to derail its overall stability. “The Adani Group should be able to weather this round of turmoil,” the firm noted, referring to the current allegations by the DoJ.
Impact of Global Financial Relationships
Concerns have been raised about global banks potentially halting financial support to the Adani Group amid ongoing investigations. However, Nomura remains optimistic, suggesting that such disruptions are temporary. The brokerage firm cited the continued support of major Japanese banks as a positive indicator of the group’s resilience. “Big three Japanese banks plan to continue their relationship with the Adani Group,” Nomura confirmed.
The DoJ allegations, as per Adani Group management, remain unsubstantiated. Nomura clarified that the charges do not currently breach anti-corruption covenants. Any such breach would only arise if the allegations are proven, a scenario that remains hypothetical at this stage. The research firm further explained that even if certain lenders choose to disengage in the future, it is unlikely to trigger a systemic default within the group.
Capital Measures to Support Stability
In response to the financial turbulence, the Adani Group has announced a series of measures aimed at reinforcing its stability. These include a comprehensive plan to cut capital expenditure and a bond buyback initiative. Nomura expects these steps to bolster bond prices and enhance investor confidence gradually.
Adani bonds, including those issued by Adani Green Energy Ltd., Adani Ports & Special Economic Zone Ltd., and Adani Electricity Mumbai Ltd., are expected to trade at levels of 7–8% in the medium term. These projections align with the group’s efforts to ensure financial stability and meet its obligations to investors.
Nomura’s Perspective on Adani Bonds
Nomura expressed a cautiously optimistic outlook on Adani’s bond performance. The brokerage firm acknowledged that while the current risk-reward ratio of Adani bonds may not be highly attractive, maintaining a small long exposure could prove beneficial in the event of an upside scenario.
For Adani Green Energy Ltd., bond prices could increase by up to 7 points, while bonds of other Adani entities, including Adani Ports, Adani Renewable Energy Ltd., and Adani T-One Transmission Ltd., could see price hikes of 2–4 points. However, Nomura also warned of potential downsides ranging from 5–16 points, depending on market dynamics.
Navigating Uncertainty
Nomura’s analysis highlights the resilience of the Adani Group in managing financial pressures and external scrutiny. The firm remains confident in the group’s ability to navigate ongoing challenges, supported by its improved liquidity management, strategic financial adjustments, and continued relationships with key lenders.
While uncertainties persist, particularly surrounding the DoJ allegations, Nomura’s overall assessment portrays a conglomerate poised to stabilize and capitalise on future opportunities. For investors, the Adani Group’s proactive measures and focus on financial discipline may signal a long-term trajectory of recovery and growth.