SBI's Exposure To Adani Group Not A Major Cause Of Concern, Says Top Global Credit Analyst

State Bank of India's debt exposure to Adani Group companies is "well-manageable", given its healthy buffer of provision reserves, states CreditSights, a leading provider of independent corporate bond research.

What Happened? Research firm CreditSights on Tuesday said that it does not see State Bank of India’s (SBI) loan exposure to Adani Group stocks as an issue given its strong general provision reserves buffer of around ₹33,743 crore or around 1% of net loans.

SBI's total loan exposure to the Adani Group was disclosed to be 0.88% of total loans, as of the end of Q3FY23. “SBI’s loan exposure to Adani as of end-Q3FY23, most secured against cash-generating assets, no loans against shares provided to the group,” the firm said.

CreditSights also pointed out that SBI also has the capacity to generate pre-provisioning operating profit, or income before taking into account future bad debt provisions.

The majority of SBI’s exposure to the Adani Group was secured by completed and cash-generating assets while the rest of the exposure was to on-schedule, under-construction projects, said CreditSights.

CreditSights’ report follows a similar stance by brokerage firm Jefferies.

Fitch Group unit CreditSights in a report back in August 2022 called out the Adani Group’s “deeply overleveraged” capital structure and flagged other risks. Two weeks later the firm acknowledged calculation errors in two key group entities and put out a revised note to reflect the conglomerate's progressive reduction in debt-to-operating profit ratios and systemic capital management plans.

Price Action: State Bank of India’s share price was up 0.2% on Tuesday afternoon at ₹546.40.