How much debt do banks have on Adani’s companies? Which bank has the most risk?
Following the Hindenburg Research report on Gautam Adani’s companies, shares of Adani Group as well as banks in India declined. This is because many banks have given huge loans to Adani. Earlier, Fitch had given a report expressing concern over Adani Group’s excessive debt. However, according to brokerage firms Jefferies and CLSA, Adani Group’s debt does not pose a major risk to the Indian banking system.
What do CSLA and Jefferies say?
CSLA said in its report that the share of banks’ funds in the total debt of Adani Group is less than 40 percent. Most of the debt is owed to financial institutions and foreign banks. Jefferies, on the other hand, said that Indian banks’ investment in the Adani group is within ‘manageable limits’.
Adani Group shares have fallen 15 to 20 per cent after Hindenburg Research accused Adani group companies of using tax havens. In the last three years, the debt of Adani Group has increased from one lakh crore to two lakh crore. While the bank’s loan has increased by 25 percent. Loans from Indian banks account for less than 40 per cent of Adani’s total debt. The share of private banks is less than 10 per cent.
CLSA claims that most banks, including ICICI and Axis, have funded only Adani Group assets, which have huge cash inflows. This includes airports and seaports. The debt of PSU banks is 30 percent of Adani’s total debt, but there has been no increase in it in the last three years. Most of the incremental funding has come for new businesses and acquisitions.
In the last three years, Adani group companies have taken a loan of one lakh crore, in which Indian banks have given a loan of only Rs 15,000 crore. ACC and Ambuja Cement Company were recently bought by the Adani Group, but were fully funded by foreign banks.
Pressure on bank stocks
On Friday, Adani Group’s shares fell sharply by 20 percent, while bank shares also Fell. Shares of top private bank ICICI Bank closed at 818, down 4.33 per cent. Shares of Bank of Baroda closed at Rs 157, down 7.48 per cent. Punjab National Bank declined by 4.84 percent. HDFC Bank’s stock fell 2.05 percent to close at 1614. Shares of SBi closed at 542, down 4.69 per cent, while Axis Bank closed at 874, up over two per cent. Kotak Bank also declined by 2 percent.