In light of the Adani Group of Companies’ stocks and bonds taking a beating over the past few days and Adani Enterprises’ withdrawal of its fully subscribed 20,000 crore follow-on public offer, the Reserve Bank of India (RBI) has asked banks to share details of the loans they have sanctioned to the Adani Group of Companies, their outstanding exposure, and the security structure.
Following negative findings by Hindenburg Research involving accounting methods, related-party transactions, and concentrated share ownership by a small number of foreign investment firms, securities (shares and bonds) of Adani Group companies are under fire. The Adani Group rejected short seller Hindenburg’s document because it contained malicious information that was selectively omitted and concealed facts pertaining to unfounded and disproven allegations in order to further an unstated goal. According to bankers, the RBI may seek to evaluate the systemic effects of the aforementioned events on banks.
They emphasised that the group’s existing businesses have sufficient cash flow to repay bank loans. However, in the case of new projects undertaken by the group, banks may reconsider the sanctions if the promoter’s equity portion is late. Bankers emphasised that asset hypothecation or mortgages are prohibited while providing funding to Adani Group enterprises by Indian banks. Foreign banks, meanwhile, have used the commitment of volatile shares to fund the purchases of group firms.
The group may need to carefully review the pricing and funding options for refinancing of international bonds that will be redeemable, they said. According to a banker, the group exposure limits set by the RBI “may make it difficult for Indian banks to refinance the overseas bonds.”