Debt ratio at billionaire Adani's green firm needs 'watching'

A key financial metric of Adani Green Energy Ltd is flashing signs of concern as its billionaire owner takes on more debt to become a renewable energy giant.

The Gautam Adani-owned company’s debt-to-capital ratio has soared to 95.3 per cent, a level that is on the "higher side" for a private company, according to Sharon Chen, an analyst at Bloomberg Intelligence. The company’s capital expenditure plans and its funding are other factors that need a close watch, Chen added.

"We would be more comfortable looking at a 70 per cent level or up to 80 per cent for a company in a growth phase," she said. "Adani Green warrants watching closely".

Asia's richest man has pledged to invest around $70 billion in the entire green energy supply chain by 2030. His conglomerate aims to become the world’s biggest renewable power producer by the end of this decade. That makes Adani a key player in India’s quest to become carbon net-zero by 2070.

To be sure, Chen said the Adani Group has a track record of getting external investors to put in money and that overseas companies have a lot of interest in India. "Adani is in that sweet spot," she said.

Still, Adani Green is one of the most leveraged companies in the tycoon’s empire, with Asia’s second-worst debt-to-equity ratio of 2,021 per cent.