Jugeshinder Singh, the Chief Financial Officer of the Adani Group, has announced that the conglomerate plans to significantly increase its debt exposure in the domestic capital markets, potentially doubling it to 10% of the group’s total loans. This strategy is contingent upon the condition that the financial instruments used to secure these funds have a maturity period of no longer than five years.
Currently, the Adani Group‘s borrowings from Indian capital markets make up approximately 5% of their total debt, amounting to ₹12,404 crore as of the end of March 2024. However, Singh has revealed that if debt instruments with longer maturities are considered, the group is open to having as much as 15% of its total debt sourced from local capital markets.
This announcement comes alongside the launch of Adani Enterprises’ inaugural non-convertible debentures (NCDs) issue, which is valued at ₹800 crore. The NCD issue is set to commence on September 4 and will conclude on September 17. The debt instruments will be offered with maturities of 24, 36, and 60 months, and will feature interest rates of 9.25%, 9.65%, and 9.90%, respectively.
The company has earmarked a substantial capital expenditure budget of ₹80,000 crore for the year, which will be allocated across various sectors, including airports and roads. This expenditure comes with a weighted average cost of capital of 9%. Singh emphasized that the current NCD issue represents merely the beginning of the group’s broader debt issuance plans over the next 20 years. He underscored the necessity of funding core infrastructure and energy projects through domestic capital markets.
As of March 31, 2024, the Adani Group’s debt from domestic lenders, including both banks and non-banking financial institutions, has risen to constitute 36% of their total debt portfolio. This marks an increase of approximately 500 basis points from the previous year. Indian lenders have extended a total of ₹88,100 crore to the Adani Group, out of a total debt of ₹2,41,394 crore.
Singh noted that while domestic debt will be utilized to fund sectors such as metals and Poly Vinyl Chloride (PVC), capital expenditures for Adani Green and Adani Energy Solutions will be financed through global markets. He explained that the focus should be on the risk-adjusted cost of capital rather than just the interest rate itself. For long-term debts extending over 20 or 30 years, global debt tends to be more economical. Conversely, for shorter-term debts, such as those lasting three years, domestic debt offers a more cost-effective solution.
The balance between global and domestic debt will continue to evolve based on the specific requirements of each business segment. Singh also highlighted that the traditional capital markets are keenly interested in debt offerings, and it is crucial to craft financial products that cater to the needs and preferences of domestic investors. He pointed out that the challenge lies in designing offerings that align with what domestic investors seek and require.
Adani Group is a prominent Indian conglomerate with diverse interests spanning infrastructure, energy, logistics, and agribusiness. Established in 1988, the group has grown into a global player with a focus on sustainable development and innovation. It operates major businesses in ports, power generation, real estate, and agribusiness, driving economic growth and development across sectors.
