We always quote Mukesh Ambani when we talk about rich business personalities. But these days, we have Gautam Adani on the trending list. He is currently the richest person in India, confirmed by Forbes Real-Time Data. Adani, after completing his school studies went to Gujrat University for a B. Com degree. He took a drop from college after 2nd year only, then shifted to Mumbai and worked with Mahendra Brothers as a diamond sorter.
After an experience of a few years, he started his diamond brokerage firm. Adani slowly climbed the stairs of success using his sharp entrepreneurial mind. His hard work and passion have made him the richest in India. But, his success history is not something that we will cover today. As the heading clarifies the content, let’s dive into it.
Memes once flashed State Bank of India as Adani Bank Of India, with no intention to hurt sentiments. Is this a situation worrisome? Isn’t it important for every Indian to know how their tax money is getting used?
Loan History Of Adani
Talking about the last month, Adani took a loan from SBI of roughly Rs 6,701 crore to start a manufacturing business. Now, Adani has again approached SBI for a loan of 14,000 crores for starting a new business! An article even mentioned that loan defaults have increased by 10 times since 2012. 95% of such loans are given by public sector banks. While 30% is issued by SBI alone.
SBI has given a significant amount of loans to a bunch of people, they are some cases that are most discussed. One of the cases is of Mr. Vijaya Malya. He took a loan of 9000 crores. People like him fall under the category of wilful defaulters. They are the people who can pay the loans by selling off their assets, but they choose not to do so. The second most discussed scam is the ABG shipyard scam. Here also, SBI was one of the main loan lenders.
The third most controversial case was of Nirav Modi and Mehul Choksi. So, whenever we come to know about an NPA problem somewhere, we will have SBI’s name associated with it. The main question is why such big banks undergo such defaults.
The key reason behind shadiness with banks is that the performance indicators are not set. Their operational parameters have not updated themselves the way it is done in private banks. Talking about Adani group, one of the biggest debt-ridden business people in India with a debt of Rs 2.2 lakh crores by March-end. According to a report by Business Standard, Adani Group needed debt support to develop its corporate, and the business’s debt was up by a gigantic 42 percent year-on-year.
Adani’s debt-to-equity ratio went up from 2.02 to 2.36 at a record high. According to the authorities, despite the highly significant debt, his debt return capacity has seen a lot of improvement. A deterioration in interest duties in the earlier two years because of the disease has destined low development in interest charges despite more borrowings.
One of the questions is whether Adani can pay off the debt or not. Keeping the main logic away from the political reasons that all of us are well aware of. These industrialists get loans faster compared to the public. Whereas, when common people are unable to pay off their loans end up getting themselves advertised from the bank side in newspapers. When it comes to richer ones, we often get to statements where banks try to hide the actual debt amount.
No one can deny the fact that Adani’s borrowings are not of a comfortable level. While Ambani was trying to make sure that the company pays off all the bills of the banks. On the other hand, Adani was more interested in expanding the empire. So much so that he has ended up making a debt mountain for themselves to climb up. Still, the desire for more and more expansions has no climax yet. The Adani group is busy buying airports, and harbors. It was digestible till the time their feet were in the nation only. But they are approaching other countries too to purchase land and services.
Would Adani be able to implement all his dream projects despite the debt trap?
For now, the markets have not imitated any alarm. All stocks in the Group have produced optimistic returns except Adani Power in the last year. The debt markets also do not seem to reflect any concern. They find themselves confident about the group. But back in history around 2015/16 Reliance Power and Reliance Infra had similar influence equations and relished market assurance. Yet, tumbled down when Reliance Communication fell.
Another point of concern is the areas it is growing into. Airfields and Data Centres are high-leverage trades where the past is not inspiring at all. Let’s hope for the best! It may be possible that the Adani Group which has a history of good execution and management, may come up with a surprise of greater success without any disappointments.
edited and proofread by nikita sharma