Adani bond yields surge to new highs

Prices of multiple bonds issued by different companies of the Adani Group fell sharply on Thursday, a day after flagship

dramatically announced the withdrawal of its follow-on public offer (FPO) worth ₹20,000 crore late Wednesday. The issue got full subscription, although the stock has since plunged nearly 50% below the lowest issue-price threshold.

Some bonds of

& Special Economic Zone and Adani Green Energy currently yield more than 30% in global secondary markets, which is much higher than the average investment grade yield of 4.96% and junk bond yield of 8.14%. Most of these high-yielding bonds have shorter repayment tenures, traders said. To be sure, yields on most of the group’s bonds abroad are still in single digits, said Ajay Manglunia, head of investment grade group, .

Bond yields and prices move in opposite directions. When yields surge, bond prices fall.

Market sources said that the sharp fall in the bond prices of the company was expected as it mirrored the route in the company’s share prices and investors are now demanding a higher risk premium on these instruments.

As per Bloomberg data, bond prices issued by entities in the Adani Group fell to record lows on Thursday as fallout from the Hindenburg Research report and the resultant impact on the company’s valuations.

“The withdrawal of the FPO has accentuated the fall in bond prices. All the companies in the group have seen their market cap erode very significantly, which is why bond investors are now adjusting their risk premiums and demanding higher yields,” said a top asset manager who manages wealth for high-networth clients.“High-risk investors could come in at these levels and try to make a killing by buying at a low price, hoping that the company will be able to weather this storm and not face a write off.”

The asset manager spoke on the condition of anonymity.

Adani Green Energy dollar bonds due in 2024 slid 13.4 cents on the dollar to 61.6, according to prices compiled by Bloomberg. Adani Ports & Special Economic Zone notes due in 2031 – on which a coupon payment is due on Thursday – fell 5.2 cents to 63.2; they earlier reached an intra-day low of 59.6 before retracing some of their losses.

Step-One bonds due in 2026 lost 5 cents on the dollar to 75. Citibank also rejected these bonds, resulting in some short selling overseas. But traders said there is no risk of any default on bonds yet.

“Yields on bonds which are in double digits abroad are the one where maturity is closer so some people may have shorted them,” said JM Financial’s Manglunia.