Adani Green/Ports and Carmichael funding exposures

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This brief note comments on news that the Adani Group has posted stocks in Adani Green and Adani Ports as collateral for a credit line for the Carmichael greenfield thermal coal mine.

Collateral-taking party (and lender to Carmichael) is the State Bank of India, which is surprising given that SBI earlier has had significant pushback from its own investors with regards to Carmichael. It is worrying that investments into green - or at least not coal - companies in the Group is now effectively being used to fund one of the world’s most controversial energy projects.

It seems reasonable that investors, especially those with greenfield thermal coal mine exclusions, assess their exposures to Adani Green and Adani Ports in the light of this development.

Note that normally when a shareholder pledges their shares as collateral for something, this should not necessarily implicate the other shareholders’ in the stock. But the Adani Group situation can be argued to be atypical due to the high concentration of stock ownership and other interrelationships.

We would argue that due to the purchase, a higher price/value on Adani Green stocks increases the value of SBI’s collateral. A higher valuation of the collateral increases the credit quality and lowers the credit risk for SBI and thus the bank’s required spread for the Carmichael credit facility.

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