Adani Group Most Attractive Among India Corporates, Says Nomura

Adani Group of companies appears "most attractive" among other Indian corporates, according to Nomura, as the latter remain comparatively expensive. The ports-to-power conglomerate will also be able to withstand recent turmoil brought on by allegations in an indictment by the US Department of Justice, the brokerage said.

Adani Group's liquidity management awareness has improved meaningfully compared to one year back, when the Hindenburg surfaced, Nomura said. The research firm isn't worried about the promoter share pledge loan amid the steep price changes in the companies' stocks, when the risk has been managed in the past.

As far as global banks halting their financial support to Adani companies is concerned, Nomura expects that it will not be a problem when the matter regarding DoJ allegations settles down. "Separately, big three Japanese banks plan to continue their relationship with Adani group."

The DoJ indictment is only an allegation, Nomura said citing Adani Management. The allegation does not constitute any breach in anti–corruption covenants. It could indicate a breach if found guilty.

If only lenders decide not to continue their relationship with the Adani Group in the future, they are unlikely to trigger the End of Default, the research firm said. However, they can request consent fees for covenant wavier or ask Adani Green Energy Ltd. to paydown the affected loan portion instead.

"Notably, a default on these syndicated loans will not translate into a cross default/acceleration on ADGREG RG1/ARENRJ RG2 USD bonds."

The group announced a comprehensive plan including capital expenditure cuts and bond buyback plan to support bond prices. Nomura expects the bonds of Adani companies should trade at 7–8% levels, in a gradual manner.

Nomura On Adani Bonds 

Nomura expects upside on bond prices for Adani Green Energy Ltd., Adani Ports & Special Economic Zone Ltd., Adani International Container Terminal, Adani Electricity Mumbai Ltd., Adani T–One Transmission Ltd., and Adani Renewable Energy Ltd.

"We acknowledge that risk-reward at current bond prices are unattractive, but we keep a small long Adani exposure, as we have assigned a higher likelihood on the upside scenario," Nomura said.

For Adani Green Energy, the prices may go up to 7 points, for others it sees 2–4 points. The downside could be ranging from 5–16 points, it said.

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