Bank of America Backs Adani Group Bonds Amid Global Scrutiny

Bank of America Global Research has given an 'Overweight' rating to several Adani Group US dollar bonds, citing strong fundamentals and robust funding access despite regulatory scrutiny. The group's solid asset base supports its cash flow and credit profile, crucial amid ongoing global and local regulatory challenges.

Bank of America (BofA) Global Research has initiated an 'Overweight' rating on several US dollar bonds issued by the Adani Group, highlighting the conglomerate's strong fundamentals, robust asset base, and sustained funding access amid regulatory scrutiny and tightening market conditions.

BofA underscored Adani Group's consistent operational performance, expansion, and market access, despite global scrutiny. While ratings have largely remained stable, some outlooks and watch statuses have been revised. The group has showcased its capacity for operation and expansion under pressure, maintaining stable ratings despite changing outlooks.

The Adani Group, one of India's largest conglomerates, spans various infrastructure sectors with 12 publicly listed entities and a market capitalization of approximately USD 200 billion. The group's USD bond issuers have improved fundamentals, bolstered by EBITDA growth due to capacity expansion, and leverage moderation over the past two years.

Moving forward, BofA anticipates an enhanced credit profile for Adani Ports and Special Economic Zone (ADSEZ), driven by diversified port operations, consistent cargo volumes, and efficient operations, even as its leverage remains at approximately 2.5X.

For Adani Transmission (ADTIN) and Adani Energy (ADANEM), BofA expects stable credit profiles backed by diversified operations and long-term fixed-price or regulated contracts, with both companies projected to maintain leverage under 6x and coverage above 2x over the next three years.

BofA also noted the gradual improvement of credit profiles for restricted groups such as ADINCO, ADGREG, and ARENRJ, as debt amortizes per bond indentures.

Despite ongoing investigations by US authorities and prior regulatory scrutiny following the 2023 short-seller report, the group has sustained robust funding access at competitive pricing, thanks to its firm financial profile, even as Indian regulators found no adverse results in most inspections.

The absence of rating downgrades over the last three years underpins the group's sound operations and strong structural protections, despite some rating agencies assigning negative outlooks due to governance concerns.

The Adani Group faced global scrutiny in 2023 after governance lapse allegations from short-sellers, which the firm refuted, ultimately receiving clearance from India's market regulator, SEBI. However, in November 2024, the US Department of Justice indicted Chairman Gautam Adani and other executives on governance-related accusations.

Despite these challenges, the report emphasizes the group's solid fundamentals and stable market access, which continue to bolster investor confidence.

(With inputs from agencies.)