When the market started worrying about the Adani group of companies about a month ago, we fielded a number of calls asking us if we had exposure. The answer was an easy and resounding negative. Although there is one edible oil company that has a popular brand in India, most of the group is involved in energy and infrastructure with no direct dealings with the consumer which is our focus. Secondly, high levels of leverage and excessive valuations are not an attractive combination, albeit those valuations are now less excessive than they were. It is also reasonable to expect that the accusations levelled at the group will attract a greater level of scrutiny RE governance.
A final observation on the group came from a recent trip to India where the local reaction was clear. First, the local banks seem distinctly under exposed and generally relaxed with regards their exposure. Meanwhile the local fund managers have welcomed the correction since they own very little and have been fighting “Adani heavy” indices for some time. Rumours about the manipulations was not new news in India.
The irony is that most other Indian corporates have probably never been in better financial shape, with gearing levels at historic lows. Banks are also well capitalised and in a good position to lend which suggests that any Adani shortfalls will be quickly filled by others.
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