India’s market regulators are finally waking up to the disastrous Adani Group saga, with its central bank seeking details from banks about their exposure to the group.
The country market watchdog – the Securities and Exchange Board of India (SEBI) is also reportedly examining the rout of Adani Group shares and looking into any ‘possible irregularities’ in the $2.45 billion FPO of its flagship company.
The National Stock Exchange (NSE) has put three Adani Group companies – flagship Adani Enterprises, Adani Ports, and Ambuja Cements under the bourse’s additional surveillance measure (ASM) framework effective February 3, 2023 to curb short-selling.
RBI seeks details from banks on Adani dispute
“There has been no official communication from the Reserve Bank, but they have informally sought details about our fund and non-fund exposures (to the Adani Group). The finance ministry is also very closely watching it,” the Indian Express reported, quoting an unnamed official with a public sector bank.
“We have been asked for information on our total exposure and outstanding to the group, bond outstanding and investments in commercial papers as of end-December 2022 and end-January 2023,” said another banker.
The central bank has not given an official statement on the matter yet.
The group is estimated to have a consolidated debt of over $24.3 billion.
The RBI move comes even as India’s finance secretary says that public sector financial institutions are in a very strong position and their exposure to one private company would not create difficulty for them.
Finance secretary TV Somanathan, in his reaction to the Adani issue, reportedly said it was for regulators, markets and the company to address the issue.
“The government does not concern itself with the fortunes of individual private sector companies,” he told the Economic Times.
Banks exposure
While India’s leading bank, State Bank of India (SBI) is yet to officially disclose its exposure, Indian Express, quoting unnamed sources said it could be over $2.55 billion (₹210 billion).
The public sector Punjab National Bank (PNB) said its total exposure of about $851 million (₹70 billion) to the group is backed by adequate cash flows and there was no worry on repayments at present.
The lender has a fund-based exposure of ₹63 billion crore and a non-fund exposure of ₹7 billion to various companies of the group, according to the bank’s managing director and CEO, A K Goel.
Bank of Baroda, another public sector bank, has an exposure of $48.6 million (₹40 billion).
Other banks have not yet disclosed their exposure.
Last week, Swaminathan J, Managing Director (corporate banking & subsidiaries), SBI, had said the Indian banking system’s exposure to the group as a percentage to their total debt has been declining over the last two-three years.
“As is known, most of their (Adani Group’s) acquisitions have been financed through overseas borrowings and market instruments, hence there is no exposure built up to the Indian banking system on this count,” Swaminathan said.
Mounting debt
According to a report by investment firm CLSA, the top five Adani Group companies — Adani Enterprises, Adani Ports, Adani Power, Adani Green and Adani Transmission — have a consolidated debt of about $24.3 billion.
Indian banks’ exposure is estimated to be less than 40 percent of the total group debt. Within this, private banks’ exposure is less than 10 percent of total group debt.
The CLSA report estimates that banking exposure to the group is 0.55 percent of system loans as bank debt stands at less than 40 percent of total group borrowing.
Within this, PSU banks’ exposure, as a share of their loans, is 0.7 percent, with figures for some banks potentially at more than 1 percent of loans, while for private banks the exposure is 0.3 percent of loans, CLSA said.
Meanwhile…
The hammering of the group stocks continued on Friday, with shares share price of Adani Enterprises plunging more than 35 percent in the morning trade, a day after it was placed under NSE’s Additional Surveillance Measure (ASM) framework.
This is the worst-ever intraday fall for the stock.
The stock has wiped out 76 percent value from its peak of $50.94 (₹4,190 apiece), hit last December.
Since January 24, after publication of the Hindenburg report, the company has erased around $117 billion market cap, one of the worst in Indian corporate history. This is almost half of the group’s combined market value.
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