India's ports-to-mining conglomerate Adani Group is gradually shedding reliance on the US market to fund its ambitious $100 billion capital expenditure target in the next five years, industry sources told Sputnik India.
"Cash is no longer a constraint for us as we have pledged a $100 billion investment in the next five years. Of course, the US market offered that diversification, but is no longer a constraint," these sources said, adding that the conglomerate has been successfully raising long-term debt at attractive interest rates from Indian entities such as Life Insurance Corporation (LIC), Bombay Stock Exchange (BSE), National Stock Exchange (NSE) as well as Indian Renewable Energy Development Agency Limited (IREDA).
The US market offered longer-term loans at a higher tenure. But, now, even in India, public entities like LIC, BSE, NSE, IREDA as well banks like State Bank of India (SBI) and HDFC now offer long-term debt options, industry sources said, while noting that loan rates in the US have gone up while those in India have come down over the last year or so.
"There were two reasons Adani companies used to go to the US bond market between 2021 and 2023-24. Number one, the rate was very low, which enabled cheaper loans at 2-4% rate of interest. Secondly, the US market offered longer-term loan tenures," private sector sources explained.
Since last year, Adani's parent company Adani Enterprises has raised debt from the domestic market on two occasions through its Non-Convertible Debenture (NCD) offerings.
In May, Adani Ports raised around $567 million from the domestic bond market through the sale of 15-year NCDs from the state-insurer LIC.
In July, Adani Airport Holdings Limited (AAHL), India's largest airport infrastructure company managing eight airports, raised around over $232 million through a domestic bond sale.
They noted that the Adani companies haven't been able to raise money from the US public market since the surfacing of the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC) charges last November.
The US Federal indictment claims names of top Adani executives were involved in schemes to pay $250 million in bribes to Indian officials to secure solar power contracts in India, a charge denied by the company and relevant state authorities.
However, private entities and asset managers have stepped up their investments in the Adani portfolio. In April, global asset manager Blackrock subscribed to around a third of the $750 billion bond offering by Renew Exim DMCC, an offshore entity backed by Adani's promoters.
In what has been viewed as tightening of pressure on the Indian billionaire conglomerate, the US investigators are also reportedly investigating the group for violating the US sanctions by importing Iranian LPG cargoes to the Mundra Port, operated by Adani Ports and Special Economic Zone (APSEZ).
Adani has rejected the charge, reiterating its entities don't engage in "sanctions-evasion". At the same time, APSEZ is believed to have directed the Mundra and Dhamra port authorities to stop docking tankers carrying sanctioned cargoes.
As far as the impact of 50% US tariff is concerned, the group doesn't foresee any major fallout on business operations, according to people aware of these issues.
Industry sources said that ports and solar manufacturing are two segments in which some impact may be felt in near to medium-term.
"In ports, around 10% of overall imports and exports at APSEZ's 12 ports came in and went to the US. One may anticipate that those revenues may be impacted, as exporters export less to the US market in view of the tariffs. That's only 0.5% to 1% of the company's revenues, which can be compensated for. In solar manufacturing, some of Adani's exports went to the US market, but the Indian market has enough growth opportunities to absorb these losses," industry sources explained.