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Bank of America (BofA) Global Research has initiated coverage on the Adani Group with 'Overweight' (OW) ratings on several of its US dollar bonds, citing the conglomerate's solid fundamentals, strong asset base, and intact funding access despite regulatory scrutiny and tightening market conditions.
In its latest report, BofA stated that the group's solid asset base anchors its cash flow and credit profile across ports, utilities, and renewable energy sectors. It highlighted that the Adani Group has consistently demonstrated operational performance, expansion, and market access, even amid global scrutiny. The report noted that while ratings have largely remained stable, some outlooks and watch statuses were revised. It stated, "Solid asset base anchors cash flow and credit profile of Adani's $ bond issuers across ports, utilities and renewable sectors. The group showcased operation, expansion and market access amid global scrutiny; ratings stayed put, outlooks/watches changed OW." The report noted that Adani Group, one of India's largest conglomerates, operates across various infrastructure sectors with 12 listed entities and a combined market capitalisation of around USD 200 billion. The holding companies of the group's USD bond issuers have demonstrated improved fundamentals over the past two years, supported by EBITDA growth resulting from capacity expansion and a moderation in leverage. Looking ahead, BofA expects Adani Ports and Special Economic Zone (ADSEZ) to witness further improvement in its credit profile, backed by diversified port operations, sticky cargo volumes, and efficient operations. The brokerage estimated ADSEZ's leverage to remain around 2.5X despite hefty investments. For Adani Transmission (ADTIN) and Adani Energy (ADANEM), BofA expects steady credit profiles, supported by diversified operations and long-term fixed-price or regulated contracts. The report forecasts both companies to maintain leverage under 6x and coverage above 2x over the next three years. BofA further noted that the credit profiles of restricted groups such as ADINCO, ADGREG, and ARENRJ are likely to improve gradually as debt amortises according to bond indentures. Despite ongoing investigations by US authorities and past regulatory scrutiny following the 2023 short-seller report, the report said the group has continued to maintain robust funding access at competitive pricing, supported by its strong financial profile. Indian regulators have also completed most inspections without adverse findings. While rating agencies have assigned negative outlooks or watches due to governance concerns, the report noted that the absence of rating downgrades over the last three years validates the group's sound operations and strong structural protections. The Adani Group came under global scrutiny in 2023 following allegations by short-sellers of governance lapses and regulatory breaches, which the company refuted. It later received a clean chit from India's market regulator, SEBI. In November 2024, the US Department of Justice indicted Chairman Gautam Adani and other group executives on governance-related issues. Despite these challenges, the report shared that the group's solid fundamentals and stable market access continue to support investor confidence. (ANI)
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