ADANI LOAN: WHY THE FUSS?

There is a group of people on twitter including some journalists and editors trying to suggest that Adani managed a loan from SBI because of his "alleged" proximity to prime minister Modi. One such editor, recently tweeted an article saying “Adani group, already $10 bn in debt, gets $1 bn loan”…Now, one can only laugh at this kind of statement.

First of all, as clarified to the Bombay Stock Exchange by the Adani group – the loan is not final yet. There is a difference between MOU and final agreement. Here is what Adani has told exchanges.

Adani Enterprises Ltd replied stating "The Company has signed Memorandum of Understanding (''MOU") with State Bank of India ("SBI") wherein SBI has agreed in principle to consider extending financial assistance of an amount upto USD 1 bn for development of Carmichael coal mine. This is, however, subject to SBI's due diligence and internal credit approval and also pursuant to the definitive understanding/agreement to be executed between the parties."

Note the phrase in bold– there will be due diligence by SBI. Raise this issue if they approve the loan without appropriate collateral in place or without being satisfied by the viability of the project. Anyway that’s a technical issue, so we move on.What exactly is this project and how did Adani manage to get this? Let’s take a look at a Reuters story just to put things in perspective

"This project has the potential to be the largest coal mine in Australia and one of the largest in the world," Queensland deputy premier Jeff Seeny said in a statement.

The state's report, which set 190 conditions for Adani to meet, including compensating landholders affected by any harm to water supplies, now goes to Australia's environment minister for a final decision.

Now this is a $15 bn project, won by Adani fair and square after meeting 190 conditions set by Australian government and more importantly, this is not in India. Unless you want to brand the entire Australian decision making body also a Modi agent, you would want to believe that there is nothing wrong in winning a contract in Australia. 

Now coming back to the loan for a group which has a long-term debt of $10 bn – yes, it has – but the group also has a market capitalization of $20 bn!! Ever heard of a concept called the debt/equity ratio? It has a networth of nearly $5 bn. For a power, infra, port conglomerate – this is a reasonably healthy ratio.

For me, the biggest question is “Has Adani ever defaulted on any loan”? – The answer is no.

This is an absolute non issue. If you want to raise bad loan issues, go chase Mr Vijay Mallya –whose Kingfisher Airlines kept getting loans from PSU banks under the tenure of previous governments.

Oh and one more thing, yes Adani group has debt of $10 bn – but 60% of that, or nearly $6 bn is not even raised in India – it’s overseas debt. Go find out all those Adani agents in these countries.

Disclaimer – These are my personal views.