With the barrage of allegations on Adani group not ending anytime soon, it is gathered from highly placed sources that the fresh lending by banks to the group companies have come at a significant premium compared to loans availed prior to the January 2023 Hindenburg report. “While there is willingness to lend among banks, the interest rates have certainly gone up,” said a head of credit at a foreign bank with operations in India. With the investigation by the Supreme court ongoing, banks are loading up their risk premium as well as reputation premium for loans sanctioned after January. While there hasn’t been a material change in the credit rating of the group companies, banks call the additional premium a ‘cover for contingency’.
Jacked up rates
According to sources some domestic banks have lent fresh long-tenure loans at 8.75 – 9.15 per cent to the group in recent months. This is a tad higher compared to the current ruling rate for companies (8.5 – 8.75 per cent) with credit ratings of A and above. Presently, most of Adani group companies enjoy a rating of A/AA. Adani group could tap in loans at rates as low as 6 – 6.5 per cent prior to the allegations thrown by Hindenburg in January 2023.
“We would wait for the outcome of the ongoing Supreme Court investigation on the group and SEBI’s response to the matter. If the verdict is positive, we may review the rates,” said a senior executive of a PSU bank.
Even foreign banks lending to the Adani group are said to have increased their lending rates in recent times. As against LIBOR+0.5/0.75 per cent rate enjoyed by the group prior to December 2022, the rates are said to have risen to SOFR+1/1.25 per cent now.
With fresh charges leveled by Organized Crime and Corruption Reporting Project (OCCRP), an outfit funded by global businessman George Soros surfacing on Thursday, bankers say they may turn a little cautious on the drawdowns in the next 3 – 4 weeks. “The Supreme Court verdict will play a critical role in deciding the group’s ability to borrow from banks here on,” said a banker quoted above.