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Banks' risks from Adani Group exposure limited but may increase: Moody's

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New Delhi | February 8, 2023 12:03:30 AM IST
Moody's Investors Service has said banks' exposures to Adani Group are not large enough to affect their credit quality materially but it has cautioned that the exposure may increase in case the conglomerate becomes more reliant on bank loans.

"The group's access to funding from international markets can be curtailed because of heightened risk perception. In that case, domestic banks may become the main source of funding for the group, resulting in increases in banks' exposures to Adani and greater risks for them," it said in a report on Tuesday.

"Yet the overall quality of Indian banks' corporate loans will be stable. Corporates in general have deleveraged in the past few years. This is reflected in modest growth in their corporate loan books. Further, banks' underwriting has been conservative," it added.

Through this report, Moody's tried to answer frequently asked questions about risks for Indian banks from their exposures to Adani companies.

According to Moody's, banks' exposures to Adani Group are less than 1 per cent of their total loans.

While we estimate that the exposures are larger for public sector banks than for private sector banks -- they are smaller than 1 per cent of total loans for most banks.

In the past week, share prices of companies in Adani group (Adani) have dropped significantly, following a US-based Hindenburg Research, a short-seller, published a report alleging stock manipulation and fraud by the conglomerate.

While Adani has denied the allegation and termed it as a lie.

The continued sell-offs in the group's stocks have led its flagship firm, Adani Enterprises Limited, to cancel a fully subscribed Rs 20,000 share follow-on public offer.

Adani Group on January 29 said the recent report by Hindenburg Research was not an attack on any specific company but a "calculated attack" on India, its growth story, and ambitions.

"This is not merely an unwarranted attack on any specific company but a "calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India," the Adani Group said in a 413-page response.

In its response to the Hindenburg Research, the Adani Group has attacked Hindenburg as "an unethical short seller". It added the report was "nothing but a lie".

A short seller in the securities market books gain from the subsequent reduction in prices of shares.

The Adani Group states that by "holding short positions" in Adani stocks, it is betting on the stock falling.

Hindenburg exposed its hand as it made huge money with the fall of Adani stocks immediately following the publication of the report on January 24.

"The document is a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive," the Adani Group's response said.

It went on to say the report by the US-based firm was intended only to create a "false market insecurities" to enable Hindenburg, an admitted short seller, to book massive financial gain through "wrongful means at the cost of countless investors".

Adani Group, in its 413-page report, has also responded to all 88 questions raised by Hindenburg in details.

The timing of the report by Hindenburg Research, Adani Group had said is "clearly betrays a brazen, mala fide intention to undermine" the Adani Group's reputation with the "principal objective of damaging" the group's Follow-on Public Offering from Adani Enterprises, the biggest FPO ever in India. (ANI)

 
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