Adani Group needs to maintain a collateral security coverage of 140% as three firms transfers additional shares: SBI

Adani group has asked for extra shares in favor of the SBICAP Trustee. The step has been taken because the group had to maintain the collateral security coverage to 140 percent as one of the covenants about the existing loan, and hence it has pledged a top-up. The Decision has been shared by SBI on Monday.

The information has been revealed in an interview with the corporate banking and other subsidiaries of SBI with valid media agencies. The bank has mentioned that they have an exposure of 300 million USD which was granted to the Carmichael facility of the Adani Group in Australia. Adani group has used 180 million USD for the development of railroads. It is part of the project while the firm has completed the mine with its resources.

The facility has a major covenant stating that they should maintain at least 140 percent of coverage of the collaterals, followed by the assets of the project.

The decision came after the Adani Ports and Special Economic Zone (APSEZ), Adani Transmission Ltd., and Adani Green Energy transferred the shares as security collateral to the SBICAP Trustee Company. The latter is the biggest lender of the SBI.

Swaminathan J, the MD of Corporate Banking and Subsidiaries has said that the new loan has not been given to the Adani group in terms of the pledge of shares, but it is a top-up to the collateral to maintain the covenants of the existing loan given to the Adani group.

He has further mentioned that the Carmichael project in Australia is becoming successful and has generated cash. The public sector bank keeps certain collateral when the project is in operation.

He has mentioned that their book of loans accounted for 31.5 lakh crore INR by the end of December, accounting for the total advances. 0.88 percent of the pertaining amounts would value 27,000 crores INR, and the valuation is far below the framework of exposure that is allowed by the RBI. The book covers both the fund based and non-fund-based-outstanding existing in the group.

Adani group has generated cash in the Carmichael Project in Australia; SBI conducts a detailed inspection every month on the firm’s exposure:

He has added that SBI does not see problems in servicing any loans by the Adani group. So, they did not find any need to discuss the issue at that time and they will talk about the matter when the occasion presents itself.

The Adani group has surplus cash and strength. The group may be able to achieve group and parent-level support if there are additional funds required by the firm in the project or a delay in the generation of cash flow.
Swaminathan has mentioned that SBI conducts detailed inspections of the exposures monthly and does not see any difficulties in its exposures as of now.

The public-sector bank has a protocol by which the covenant is reviewed and if there is a problem that occurs in terms of the stock, the number of collateral is to be increased by 140 percent. The system is followed by the bank every month since the SBI Trustee Cap came into force in May 2022.

Apart from that, the Adani Group has not approached the bank for extra international loans.
Swaminathan J. commented on the matter after the short-seller attack on the Adani Group. The research group has accused the Adani group of a haven of allegations like fraudulent transactions and manipulation of share prices. The Adani Group’s stocks have plummeted in the afternoon deals. The stocks saw a decline in valuation by 5 percent. Adani’s shares have fallen by 10% over the past month, and as a result, the company’s market cap has decreased by 10.6 billion USD.

Currently, the Adani Group has been working on a coal mine project in Australia. The flagship project aims to produce 10 million tonnes of coal per annum with a combined 200 km gauge rail line that passes through several locations in the country.

They have approached the SBI for a new pledge of shares with a 1.06 percent stake in Adani Green, a 1 percent stake in Adani Ports, and 0.55 percent in Adani Transmission.

Due to the ongoing controversy surrounding The Hindenberg Report, the Adani Group recently canceled all of its follow-on public offerings (FPO) and will refund investors’ money. Adani Group shared in a filing on an exchange that the board of directors has decided not to move forward with the FPO in the best interest of the investors, and the shares of equity stand at 20,000 crores INR.

edited and proofread by nikita sharma