“The group showcased operation, expansion and market access amid global scrutiny; ratings stayed put,” BofA said, adding that the Adani Group’s “solid asset base anchors cash flow and credit profile” across its ports, utilities and renewable businesses.
Overweight on select Adani bonds
BofA recommended an ‘Overweight’ rating on Adani Ports and Special Economic Zone (ADSEZ) 2031 and 2032 bonds, Adani International Container Terminal (ADINCO) 2031s, Adani Energy Solutions (ADTIN) 2036s and Adani Electricity Mumbai (ADANEM) 2030s, citing “strong credit fundamentals and attractive relative valuations.”Despite year-to-date spread tightening of 80–325 basis points, BofA said “select value” remains within the Adani complex. It assigned ‘Marketweight’ on eight other Adani bonds including ADSEZ 2027s, 2029s and 2041s, ADTIN 2026s, ADANEM 2031s, ADGREG 2042s and ARENRJ 2039s.
Stable credit profile despite probes
Adani Group faced global scrutiny following a 2023 short-seller report and a subsequent indictment of chairman Gautam Adani and other executives by the U.S. Department of Justice in late 2024. Yet, BofA noted that “the group continued to showcase robust funding access at competitive pricing supported by its strong asset base and financial profile.”Indian regulators, it said, “concluded most inspections without adverse findings.” Ratings agencies have maintained the group’s investment-grade ratings, with outlooks shifting between stable and negative depending on the entity. “Absence of rating downgrades over the last three years also validates the group’s sound operations and structural protections,” the note said.BofA cautioned that an “unfavourable outcome from ongoing investigations remains a key risk factor,” but added that the Adani Group’s “solid credit fundamentals support our positive stance on the USD bonds.”
Funding intact, leverage improving
The brokerage highlighted that Adani Ports’ leverage has moderated to around 2.4x, supported by robust operating cash flows and buy-backs of shorter-dated bonds. Adani Energy Solutions and Adani Electricity Mumbai are expected to maintain leverage below 6x and coverage ratios above 2x over the next three years.
Adani’s restricted groups, including Adani International Container Terminal (ADINCO), Adani Green Energy Restricted Group 1 (ADGREG) and Adani Green Energy Restricted Group 2 (ARENRJ), BofA said, “will gradually improve as the debt amortises per bond indentures.” It estimated group-wide market capitalisation at around $200 billion, backed by 12 listed entities.
“The Adani complex offers value versus regional investment-grade indices despite YTD tightening,” the brokerage added, positioning the conglomerate’s bonds favourably against peers in India, Indonesia and China.
Rating and outlook
Summarising its stance, BofA said, “We are Overweight on ADSEZ 31s/32s, ADINCO 31s, ADTIN 36s, and ADANEM 30s for relative value on a risk-adjusted basis despite YTD tightening.”
While investigations in the U.S. continue, the brokerage said that “resilient operations and continued liability management underpin our constructive stance on the complex.”
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)