Adani Bond Portfolio's Liquidity Stable, Short-Term Papers Attractive, Says JPMorgan

Billionaire Gautam Adani's group companies liquidity seems stable after accounting for near-term maturities for offshore debt, JPMorgan said, adding that Adani Green Energy Ltd.'s bond issue will be in focus.

The Adani group bonds have gone through a period of volatility after indictments from the US authorities, the global brokerage house said in a report. Since then, the spreads of the group's bonds have settled, widening by about 100–200 basis points, it noted.

JPMorgan said the ports-to-power conglomerate's short-tenor bonds saw more spread widening due to higher dollar prices.

On average, the group's bond yields have widened by:

• Adani Ports & Special Economic Zone: 140 basis points.

• Adani Transmission: 180 basis points.

• Adani Electricity Mumbai: 140 basis points.

• Adani Green RG bonds: 150 to 160 basis points.

After these moves, the brokerage house prefers some short-end bonds and 'ADTIN 2026s' (Adani Transmission) in particular, on which they moved to an 'overweight' rating.

Within the ADSEZ (Adani Ports & SEZ) curve, which is an 'overweight', JPMorgan prefers 'ADSEZ 32s' versus 'ADSEZ 41s', thereby initiating coverage with overweight on the former and upgrading the latter to 'overweight'.

It remained 'neutral' on 'ADANEM' (Adani Electricity) and 'Adani Green RG bonds', where they believe the headline risks are higher.

After tabulating near-term maturities for offshore debt at various group companies, JPMorgan took "varying degrees of comfort". It said the key to watch among the bond-issuing entities is mainly Adani Green, which has a decent-size loan ($1.1 billion) due in March 2025.

One of the push-backs from the investors was the unsecured nature of the ADSEZ dollar-denominated bonds, the brokerage said. However, JPMorgan favoured cash flows over security largely on its ability to scale and grow using internal cash flows.

The Adani Group has firmly rejected allegations made by the US authorities and later said that Founder Gautam Adani, Adani Green Energy Executive Director Sagar Adani, and Chief Executive Officer Vneet Jaain have not been named in the bribery charges.

The operational risks in Adani Group have reduced over the years, with a fall in share pledges, and improving leverage among others, Bernstein Research recently said in a note.