PwC has presented a debt report on the Adani group to the State Bank of India. The report, all of 111 pages is as alarming as its volume. The Adani group’s total outside liability as on March 31, 2017 stands at a mindboggling Rs 126,354 crore. Outside liability means short-term, long-term borrowings and debt to suppliers.

PwC was appointed by SBI to determine Adani group’s total leverage, in other words, to report on the total assets of the group, net equity and total third-party liability. The source material was information available in public domain and was time-referenced, financial years, FY 2015-16 & FY 2016-17. Financial figures of group’s four verticals ie Adani Power Ltd, Adani Enterprises Ltd, Adani Port & SEZ Ltd, and Adani Transmission Ltd were analyzed. PwC did not have access to documents of promoter trusts and entities and hence these were excluded from the analysis.

The major findings of the report are as follows: Adani Power is the highest contributor to the overall outside liabilities. It accounts for 46 per cent of the liabilities. It is followed by Adani Enterprise Ltd which is at 25 per cent and Adani Ports & SEZ Ltd accounts for and 20.50 per cent. As for the lender profile, the banks account for the major share. Of the Rs 126,354 crores liability, the exposure of the banks constitutes 48 per cent.

Adani Power has been described as ‘highly levered’ at 17.5 per cent, which means that its debt is about 18 times of its equity. PwC also noted in its report that if the four companies were considered as a group, the debt to equity ratio is 2.76 which is in alignment with industry practice. However, from a lender perspective this has value only if the loans are secured by the group, otherwise it is meaningless. Because if Adani Power makes a repayment default, the lender can only take the defaulting company through the insolvency process and not the other three companies of the group.

The total outstanding borrowing for the four verticals amounted to Rs 103,789 crore. The secured borrowings amounted to Rs 75,229 crore and unsecured borrowing Rs 28,490 crore. About 57 per cent of total secured borrowings pertained to Adani Power Ltd and 21 per cent pertained to Adani Enterprise Ltd. Adani Ports and SEZ Ltd accounted for 49 per cent of the unsecured borrowing. For full details read our cover story.