Bernstein says Adani Group's 'hard-bank' phase may be over as risks ease

Bernstein says leverage, pledged-share and overseas funding concerns around Adani Group have eased after recent US-related legal overhangs were resolved

Global brokerage Bernstein said the worst may be over for Adani group, as concerns around leverage, share pledges and access to overseas funding have eased significantly after the resolution of recent US-related legal overhangs. 

 

In a report titled “India Infra: Adani group — The ‘Hard-Bank’...”, Bernstein said the port-to-media conglomerate’s execution capabilities and dominance in infrastructure businesses continue to remain its core strengths despite multiple crises over the past few years. 

 

It noted that the group had faced two major shocks in the past four years — the now disbanded US-based short-seller Hindenburg Research’s January 2023 report and the US SEC-DoJ (Securities and Exchange Commission-Department of Justice) related developments beginning November 2024 — both of which triggered sharp corrections in Adani group stocks and bonds. However, with US prosecutors now moving to drop charges and the SEC case settled, “a key overhang has been removed”, the report said.

 

 

Bernstein said many global funds had stayed away from the group awaiting clarity on the US proceedings, resulting in most Adani stocks remaining under-owned. Yet, the brokerage argued that the group’s ability to execute large infrastructure projects at scale was never seriously questioned. 

 

The report highlighted three structural advantages for the group — access to large contiguous land parcels at the right location, ability to take market share from government-run businesses, and execution efficiency in large-scale projects. The brokerage pointed to Adani Green Energy’s roughly 250,000-acre renewable land bank and Adani Ports and SEZ’s dominance in container traffic as examples of these advantages. 

 

On leverage, Bernstein said net group debt has risen by around ₹1 trillion since September 2024 due to aggressive capital expenditure in businesses such as Adani Green and Adani Enterprises Ltd. However, the increase has been accompanied by strong earnings growth, with group Ebitda (Earnings before interest, taxes, depreciation, and amortisation) rising at a compounded annual growth rate (CAGR) of 22 per cent between financial year 2022-23 (FY23) and 2025-26 (FY26).

 

The brokerage noted that the group’s net debt-to-Ebitda ratio fell sharply from 4.4 times during the Hindenburg episode to 2.7 times by September 2024, before rising again to 3.9 times by March 2026. Even so, Bernstein said leverage remains below levels seen during the short-seller crisis. 

 

The report also sought to address concerns around pledged promoter shares, one of the biggest worries during the Hindenburg episode. According to Bernstein, pledged shares across group companies have declined sharply since 2022 and are now “negligible”.

 

Bernstein added that the group’s access to dollar funding could improve again. It observed that the Adani group had shifted away from international bond markets after the Hindenburg Research and US legal developments, relying more on public sector undertaking (PSU) banks and non-banking financial companies (NBFCs). With the easing of legal uncertainty, the brokerage expects the group’s overseas fundraising avenues to reopen. Bond yields for Adani group entities have also improved significantly and are now below India’s five-year government bond yields, the report said.

 

On stock recommendations, Bernstein maintained an “Outperform” rating on Adani Ports and Adani Power Ltd, citing strong competitive positioning and growth visibility. It retained a “Market-Perform” rating on Ambuja Cements due to weaker operational performance relative to peers, while continuing with an “Underperform” rating on Adani Green, saying valuations remain expensive despite the correction from pre-Hindenburg levels.

 

Bernstein said despite a sharp rally Adani Ports continues to trade broadly in line with peers, while Ambuja trades at a discount to large cement companies. Adani Green, however, still commands a significant premium to renewable energy segment peers.