20233101 Indian billionaire Gautam Adani
Indian billionaire Gautam Adani. Adani Ports has more than Rs63 billion of liabilities due next year. Image Credit: Reuters

Adani Group bonds rose after a key company started the first debt buyback by Indian billionaire Gautam Adani’s conglomerate since it was targeted by a short seller in January.

Adani Ports & Special Economic Zone Ltd plans to buy back as much as $130 million of its July 2024 bonds and similar amounts in each of the next four quarters, as it tries to show that its liquidity position is comfortable, the firm said in a stock exchange filing.

Prices for nine out of 15 dollar-denominated notes of Adani Group companies tracked by Bloomberg rose as of 3:10pm in Hong Kong on Monday. That was led by a 0.7 cent on the dollar gain of Adani Ports’ July 2024 3.375 per cent senior debt, the biggest advance in a month.

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The buyback would mark another effort by the group to regain investor confidence, including trimming capital spending, after a Hindenburg Research report pounded its bonds and shares. Adani Ports’ “measured pace” of repaying debt should enable it to maintain its revised capital spending target of Rs40 billion to 45 billion ($548 million) in the fiscal year started this month, according to Bloomberg Intelligence.

“We believe the announced bond buyback plan by Adani Ports, together with prior efforts by the Adani group to prepay share-backed loans, should help improve market sentiment,” said Eric Liu, credit desk analyst at Nomura Holdings Inc. in Hong Kong. However, “Adani bonds shall still trade at a meaningful yield differential over other similarly rated Indian issuers as ESG concerns remain on the table.”

The company has more than Rs63 billion of liabilities due next year, its biggest maturity wall in the near term, according to data compiled by Bloomberg, with an even larger year for maturities coming in 2027.

While Adani Ports’ plans for capital spending reduction and loan prepayments “could alleviate refinancing concerns ahead of major maturities in 2024”, those steps “will impede the company’s ability to boost earnings growth via infrastructure expansion and M&A”, Bloomberg Intelligence analyst Denise Wong wrote in a report dated April 24.

Concerns also remain about $6 billion worth of Adani bonds facing the possibility of being downgraded to high-yield debt, in what’s known as fallen-angel risk, BI analyst Sharon Chen wrote in a separate report. She also said that Adani Ports might be less pressured than the group’s utilities firms, given its strong cash flows.