The Group vows more equity with the Adani SBI collaboration for Australia project

According to The Hindu Businessline (BL), a consortium of banks led by the State Bank of India (SBI) has agreed to fund a significant portion of the Adani Group’s 34,000 crores for the Adani Australia project (polyvinyl chloride (PVC)) in Mundra. The PVC project was financially closed by the middle of August thanks to the Adani SBI partnership.

As part of his credit line arrangement with SBI, Adani Group chairman Gautam Adani pledged further shares of his firms worth Rs 1,038 crore as security for the Carmichael coal mine and rail project in Australia. On February 8, his flagship Adani Enterprises, which canceled its Rs 20,000-crore follow-on public offering (FPO) last week due to the Adani Hindenburg Research report fiasco, promised 0.35% of Adani Ports and SEZ, 0.11% of Adani Transmission, and 0.38% of Adani Green Energy’s equity.

Adani’s Big Bet: How the Billionaire Pledged Rs 1 Billion for Australia’s Coal Project?

As part of his credit line arrangement with the Adani SBI collaboration, Adani Group Chairman Gautam Adani has pledged additional shares of his firms worth Rs 1,038 crore as security for the Adani Australia project (Carmichael coal mine and rail project). On February 8, stock exchange disclosures revealed that his flagship company, Adani Enterprises, canceled its Rs 20,000 crore follow-on public offering (FPO) due to the Adani Hindenburg report controversy.

The Group pledged 0.35% of Adani Ports & SEZ, 0.11% of Adani Transmission, and 0.38% of Adani Green Energy’s equity. Adani Group received a Rs 27,000 crore loan from SBI. Following concerns raised by the Hindenburg Report on the Group’s high debt levels, its chairman recently stated that the lender does not anticipate the conglomerate encountering difficulties meeting its repayment commitments. SBICap Trustee Company, a division of SBI, the largest state lender in India, guaranteed the new shares.

The entire amount of shares committed for the infrastructure project after extra security equals 1% of Adani Ports, 0.55% of Adani Transmission, and 1.06% of Adani Green Energy.

The Adani SBI collaboration credits $300

For the $300 million Carmichael project in Australia, owned by the Adani Group, SBI has given a standby letter of credit facility. In addition, shares of the three group firms have been pledged as collateral. Each month’s minimum collateral coverage is assessed, and any mark-to-market (MTM)-related deficit must be made up, according to SBI. Each of June and July saw a top-up, and the third one was carried out on February 8 following a review as of January 31.

Further clarification is provided, stating concerns regarding the Adani SBI collaboration. The company is making the additional pledge to maintain compliance with the covenant.

Other banks are confident about their loans to the Adani Group

Atul Goel, the chief executive of Punjab National Bank, estimated that the bank has a 7000 crore rupee exposure to Adani firms. A third went to Adani’s airport company, which pays off all the advances. According to a filing with the exchange, among private participants, IDFC First has exposure to Adani equivalent to 0.1% of its loan book, while IndusInd has given the conglomerate 0.5% of its INR 29 lakh crore loan book, or more than INR 15,000 crore.

The Reserve Bank of India questioned PSU banks’ exposure to the Adani Group of enterprises. According to sources cited by Reuters, the RBI is interested in learning more about the collateral used to support loans and any potential indirect exposure banks may have.

The Adani SBI collaboration is safe as the Group is capable of meeting its obligations

The Adani Group represents 0.88% of SBI’s overall exposure, or around Rs 27,000 crore, of its loan book, according to SBI Chairman Dinesh Khara at a recent media conference. He had stated that the bank loans given to the organization were for project finance, adding that they had tangible assets and enough cash flow to cover their commitments. According to a recent Reserve Bank of India letter, loans under the Adani SBI collaboration are within acceptable bounds.

In a post-policy news conference, RBI governor Shaktikanta Das stated that the financial system is now much broader and more powerful to be impacted by a single occurrence or a case like this.

Conclusion

A consortium of banks led by SBI has agreed to finance a significant part of the Adani Group’s ₹34,000-crore PVC project in Mundra as collateral for the Carmichael coal mine and rail project in Australia as part of his credit line agreement with SBI. This is a major deal for the group after facing allegations from Hindenburg Research earlier this year. The project will set up a petrochemical cluster at Mundra and produce 1 million tonnes of PVC annually in the first phase.