- Dec 16, 2020
No big deal. So as long their profit can pay debt installments there is no issues .Ya'll Nibbiars The Adani has completed the process of 15,000 crore SBI loan. And now Adani debt this years alone has risen to almost 4,00,000 crores. It's the most debted group in India now. And now it's debt is almost 300 percent of the earnings.
Ya'll Nibbiars now it's now almost in the red line. It would be extremely hard to sustain further even if they achieve double digit revenue growth. This groups is smaller than L & T but debt wise is Mist DeStefano company in India.
If the company's gearing is high, it's growth prospect decreases. They'll spend most of their income servicing the debt. Which will lead to less dividend. Which will lead to fall in Market value of shares.
Ya'll Nibbiars The adani don't have any Cash making subsidiary like Tata, Reliance, Birla, Vedanta.If the company's gearing is high, it's growth prospect decreases. They'll spend most of their income servicing the debt. Which will lead to less dividend. Which will lead to fall in Market value of shares.
Also, companies with high gearing will have difficulties raising money.
Even if the company does not make profits, the debts have to be serviced. It's not a ideal position to be in.
Ya'll Nibbiars for now they faced similar problem in 2016. But luckily got out of it unscathed. But ofcourse had to disinvest in many subsidiaries. With the investment Adani is calling to make will surely stress the Financial health of the firms. And even with the cash reserves that are large in some firms many subsidiaries are almost out if cash.Their interest coverage is 13.5
Seems like they're managing it well enough.
Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of...simplywall.st
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