India’s Gautam Adani: is Asia’s richest man still ‘a goose that lays golden eggs’ despite a debt-fuelled spending spree?
- Thanks in part to his close ties with Indian PM Narendra Modi, Gautam Adani has grown a business empire that makes him the third richest man on Earth
- His Adani Group’s rise has been meteoric. But will US$28.8 billion in debts send it crashing back down, as analysts warn it’s ‘deeply overleveraged’?
Fitch Group’s debt-research arm CreditSights called the Adani Group “deeply overleveraged” in a strongly worded report last week, calculating its debt at US$28.8 billion. The group’s “quick rate of growth and high levels of leverage are causing us, as well as other clients and other investors, to have reservations”, wrote analysts Lakshmanan R, Rohan Kapur, and Jonathan Tan.
The group “has a wonderful track record of churning out strong and stable enterprises and boasts a portfolio of solid infrastructure assets,” CreditSight said, adding that Adani’s “entrepreneurial vision is impressive”. But debt, it warned, could be his empire’s downfall.
In what it described as the “worst-case scenario”, CreditSight said “overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap”, which may lead to parts of the group falling into financial distress or defaulting – and weighing heavily on India’s economy given their sheer size.
What’s behind Adani’s gravity-defying ascent?
Adani’s meteoric rise has been driven by the soaring share prices of his namesake group’s seven listed companies – as his family own up to 75 per cent of each. The combined market value of those companies rose tenfold over the past three years to US$220 billion.