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An Adani Group Enterprise could soon be rated higher than the sovereign

Recently, the Adani Group’s Chief Finance Officer opened up to the group of investors that an unnamed company of the Adani Group is soon likely to be rated above India’s sovereign rating.

When this happens, it will be the first time that an Indian firm with all its business in the country has been rated higher than the sovereign. The statements were reported by the news agency PTI from the meeting.

Many companies, including the public sector companies, are rated at the same level or below the sovereign rating.

The development can be speculated amidst lower debt and rapid growth in businesses for the ports-to-energy sectors controlled by the Gujarat-based conglomerate.

Singh has further revealed that announcements will be made shortly regarding the accomplishment. He has not yet revealed the name of the company in discussion with the investors.

adani group

Many rating agencies, including S&P Global and Fitch, have declared that India has the lowest investment grade rating of BBB.

In 2021, the Fitch ratings upgraded Reliance Industries’ rating to a level above India’s sovereign rating. The progress has contributed to the lower debt profile of the company conglomerate Mukesh Ambani.

But Reliance Industries Limited operates its business outside India, but the Adani group’s entity operates in India, and thus, the accomplishment is one-of-the-kind in the nation.

Apart from that Adani Green Energy Limited has a similar kind of rating.

A restructuring process was conducted in the company, which led the S&P Global Ratings to withdraw its global ratings for Adani Transmission limited based on the company’s request.

Adani Group, which initially started as a trading sector situated in Ahmedabad has experienced massive growth over the years. The market capitalization of the company has surpassed most of the major companies like Tata Group and Reliance.

The returns have taken many to surprise as Adani has been positioned in the third spot on the list of the world’s richest people according to Bloomberg’s index. 

The value of the entities listed by the group has surged from 16 billion USD in 2015 to 240 billion in 2022. 

But Gautam Adani’s dream does not end here. He plans to take his group valuation to 1 trillion USD. 

Gautam Adani began his journey as a commodity trader in 1988 and later expanded his ventures rapidly into multiple businesses such as ports, airports, roads, power, renewable energy, transmission, and various other sectors.

adani

The Adani Group has focussed on building its infrastructure and logistic portfolios in a way that it could be included in the top five key players globally and not just be restricted to India’s largest key player. 

Adani Group has realized that power and logistics are the most integral factors of any metal and material business. This enabled the group to enter into copper, aluminum, and cement businesses.

Power is one of the integral goals that is focused on by the Adani Group at present. The end of 2022 has marked the launch of Adani Green which plans to redefine the future of renewable energy. 

In 2020, Adani Group became one of the largest solar power companies in the world.

Adani New Industries, which currently falls within Adani Enterprises will focus on the group’s venture in the new business.

The share prices of the group have surged significantly which gave Gautam Adani the third spot based on Bloomberg’s Wealth Index.

At the meeting, CFO Singh clarified that the conglomerate has experienced its expansion being funded equally with equity.

The data shows that the businesses handled by the group are efficient and profitable, which in turn generate high levels of free cash flows.

The growth is higher than some of the tech companies.

The group’s debt has gone up significantly, and so is its EBITDA. Records of the last nine years show that the group’s EBITDA has surged by 23 percent whereas its debt has increased by 12 percent.

Nearly, Adani’s 41 percent of the portfolios have the same rating as the government of India. 

In addition, Singh has shared the group is trying to increase its share free float in an attempt to improve the trading liquidity, 

Six of the listed companies of the Adani Group have a small free float, and this causes greater volatility in the share prices.

Adani Enterprises’ free float accounts for 19.6 percent. On the other hand, RIL’s free float accounts for 50.4 percent while that of Tata Consultancy Service is accounted for 27.7 percent. 

What does the high sovereign rating for the Adani Group indicate?

A sovereign credit rating is an independent assessment of the creditworthiness of a company. The ratings enable the investors’ insights into the levels of risk associated with investing in the debt of a particular company.adani

The ratings depend mainly on the low or high default risk and the financial stability of the issuer.

Being rated higher than a sovereign would help the Adani group reach an unprecedented height.

edited and proofread by nikita sharma 

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