'Adani Group’s Operations Remain Sound Amid Structural Protections, Reflecting Strong Market Access': BofA Securities

Ahmedabad: BofA Securities on Tuesday said that Adani Group’s operations remain sound amid structural protections, which reflect strong market access, adding that a solid asset base anchors cash flow and credit profile of the Group's USD bond issuers across ports, utilities and renewable sectors.

The Adani Group showcased operation, expansion and market access amid global scrutiny as ratings stayed put while outlooks/watches changed, according to the global brokerage, which added that the Group’s “solid credit fundamentals support our positive stance on the USD bond”. According to BofA, the holding companies of the group's USD bond issuers have reported better fundamentals over the last two years, underpinned by EBITDA growth on capacity expansion, along with moderation in leverage.

“Looking ahead, we expect ADSEZ's credit profile to improve further, supported by its diversified ports, sticky volumes and efficient operations. We estimate ADSEZ's leverage to stay 2.5x despite heſty investments,” said the global brokerage. The Adani Group is one of India's largest conglomerates operating across various infrastructure sectors with 12 listed entities and around $200 billion market cap.

“We expect Adani Transmission Ltd (ADTIN) and Adani Electricity Mumbai (ADANEM) to maintain steady credit profiles supported by their diversified operations and regulated and/or long-term fixed-price contracts,” the note further said. BofA said it forecasts both ADTIN and ADANEM to maintain leverage under 6x and coverage above 2x in the next three years, despite ADTIN's high capex plan, while ADANEM further benefits from maintenance like modular outlays. “The credit profile of restricted groups - ADINCO (AdaniConneX), Adani Green Energy Limited (ADGREG) and Adani Renewable Energy (ARENRJ), will gradually improve as the debt amortises per bond indentures,” it added.

Adani Group's USD bonds have experienced significant volatility since early 2023. However, consistent market access and a lack of adverse conclusions from domestic regulators supported a strong rebound across the complex. The bonds outperformed YTD with tightening by 80-325bps and trading 14-64 bps under pre-US indictment level.

“Operational resilience and continued liability management underpin our constructive stance on the complex despite YTD tightening. We are Overweight on ADSEZ 31s/32s, ADINCO 31s, ADTIN 36s, and ADANEM 30s, supported by strong credit fundamentals and attractive relative valuation,” the note explained.

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