“We estimate that their exposures to Adani are less than 1% of their total loans,” Moody’s said in a report Tuesday. “We estimate that the bulk of the exposures are collateralized, either with operational assets or with projects under execution, rather than to the corporate level.”
The finances of billionaire Gautam Adani’s conglomerate have come under scrutiny after US short-seller Hindenburg Research levied accusations of accounting fraud and market manipulation at the Adani Group, wiping more than $100 billion from its market capitalization. Adani Group has repeatedly denied the charges.
However, Adani’s access to funding from global markets can be curtailed because of heightened risk perception, potentially making domestic banks the main source for raising capital for the group, Moody’s said. That would increase banks’ exposure to the conglomerate and greater risks for them, it added.
Moody’s report comes at a time when the group’s flagship Adani Enterprises Ltd surged, as most of the Indian conglomerate’s stocks rose after its founders pre-paid some debt and traders covered short positions.
Adani and his family prepaid $1.11 billion worth of debt in a bid to calm a selloff that sparked fears of a contagion across India’s economy and markets.
Earlier Tuesday, Fitch Ratings said Indian banks’ ratings remain driven by expectations they would receive extraordinary sovereign support if needed, so exposure to the Adani Group is insufficient in itself to present substantial risk to the banks’ standalone credit profiles.
Moody’s said that any spillover effects on other corporates would be credit neutral for banks.
“If other corporates do have difficulty raising external funding from capital markets, their loan demand would grow, leading to greater funding requirements. On the other hand, however, banks would have stronger pricing power for loans.”