Adani Green's dollar bonds plunge past junk levels as group fights crisis

Steep rise in yields raises questions about group's ability to raise fresh debt abroad

Yields on dollar bonds issued by Adani Green Energy Limited have skyrocketed past average levels for global junk bonds, indicating extreme uncertainty among investors in the company’s debt and amid a free-fall in the stock prices of other group firms.

Bloomberg data showed that bonds worth $750 million issued by Adani Green Energy are currently yielding a whopping 31 per cent in international secondary markets, well past the average 8.4 per cent for global junk bonds. According to analysts, the average investment grade yield globally is around 4.9 per cent.

Adani Green Energy’s $750 million bonds, which mature in September 2024, were issued at a coupon of 4.375 per cent, the Bloomberg data showed. Given that bond prices and yields move inversely, the degree of the rise in Adani Green’s bond yields in the secondary market implies a slump of more than 30 cents to a dollar on the securities.

The runaway rise in Adani Green’s dollar bond yields reflects unease among investors and raises questions about the conglomerate’s ability to raise fresh debt overseas.

“For any issuer, the rise in bond yields typically means risk aversion among investors. Incrementally, it will also possibly impact the new fund-raising because typically the primary issuances tend to be anchored around the secondary market bond yields,” said Anil Gupta, vice president, Financial Sector Ratings at ICRA.

“If the secondary market is trading at elevated yields you will not be able to issue at a yield which is very different. These are two broad risks–risk aversion and incremental funding cost becoming costlier if you have rollovers due in the near term. Your refinancing ability becomes an issue,” he said.

According to institutional brokerage firm CLSA, most of the Adani Group’s recent acquisitions have been funded by foreign entities. While the debt of top companies in the group rose to Rs 2 trillion from Rs 1 trillion over the past three years, the brokerage estimates that bonds, financial institutions and foreign banks form a major part of the group’s debt.

In a break-up of group-level debt based on annual reports, CLSA noted that Adani Green had foreign currency denominated bonds worth Rs 11,900 crore, while Adani Ports had issued similar debt worth Rs 30,200 crore. Adani Transmission had foreign currency denominated bonds worth Rs 19,700 crore.

Over the past six days, the stock prices of Adani Group firms have plummeted more than 50 per cent after US-based Hindenburg Research alleged that the Indian conglomerate used a web of companies in tax havens to inflate revenue and stock prices. Adani has denied the allegations.

Hindenburg has said that it has a short position in the Adani Group’s debt. A short position refers to a bet taken on the price of an asset declining.

Following immense market volatility, Adani Enterprises on Wednesday decided to call off its Rs 20,000 crore follow-on public offer (FPO).