“Deeply Overleveraged”
An important financial metric is Debt-Equity ratio, which indicates the capital structure of the firm and helps us evaluate the company’s financial leverage. It is calculated by dividing the company’s total liabilities (short and long term) with shareholders’ equity. High-interest payments and a high risk of default are two of the few implications of a high debt-to-equity ratio.
Bloomberg data says Adani green’s debt to equity ratio stands and 2021% and is the second highest among 892 listed companies in Asia. In 2022, the company’s debt to capital ratio has increased to a record high as the company takes more debt to become a renewable energy giant.
Debt to capital indicates the percentage of capital that comes from debt, Adani’s debt to capital ratio is around 95.3% which is said to be on the higher side even for a growing company.
On Tuesday, International credit rating agency Fitch said that Adani Group is “Deeply Overleveraged” and may land in a debt trap. The report also mentioned that the Adani group is venturing into new and unrelated businesses, which are highly capital intensive.
Following the report, the Adani group stocks have tanked. Adani Power fell 4.99%, Adani Wilmar fell by 4.73% and Adani Green Energy declined by 4.15%.
What do you think about the Adani group stocks?
