Piyush Gupta, the CEO of the Singaporean bank, said during an earnings briefing that his company had exposures to Adani amounting to about SG1.3 billion (around US$1 billion).
Of that, SG$1 billion was exposed to the Indian group’s cement units, with the rest to a range of its other businesses. Gupta said Adani’s cement units are “solid”, as they generate operating cash flows from their business without needing to rely on debt.
“We are not concerned about the exposure,” he said. “The cement industry in India has got huge potential given the growth in the market, and so that exposure is quite tightly managed.”
The CEO emphasised that DBS has no exposure to any of Adani’s shares, and is thus not affected by the changes in stock prices of the Indian group, following sharp sell-offs that have impacted the conglomerate.
Adani’s troubles began on Jan 24, when US short-seller Hindenburg Research issued a scathing report alleging accounting fraud and stock manipulation by the conglomerate over several years.
Hindenburg claimed that many of Adani’s group companies are on “precarious financial footing” with an insufficient amount of liquid assets. The conglomerate denied the allegations, but its stock prices tumbled across the board following the report.
The Adani Group has accumulated debts of US$30 billion, according to its chief financial officer, as it became a central player in India’s push to develop world-class infrastructure, with stakes in everything from ports, airports and roads to mining, electricity and green hydrogen.
“The Indian large corporates borrow at way below India country risk,” Gupta said on Monday. “I don’t see this materially impacting the overall market, so the general view that this is going to tarnish all of India’s story, I don’t see it happening.”
Adani in September last year said it became India’s second-largest cement player after completing the acquisition of producers Ambuja Cements and ACC, with the stake valued at US$6.5 billion – the largest ever acquisition by the conglomerate.
“What makes cement an exciting business is the headroom for growth in India, which exceeds that of every other country well beyond 2050,” Gautam Adani, the Adani Group’s chairman, said upon the completion of the deal.
DBS’s Gupta on Monday backed Adani’s cement units. “Between ACC and Ambuja … it’s high-quality companies,” he said. “I have personally gone and spent time and looked at the companies – the management is good, the companies have got the cash flows.”
For the October-December quarter, DBS booked a record net profit of SG$2.34 billion, a 69% surge from a year earlier as a higher interest rate environment boosted DBS’s interest income.
For the whole of 2022, the lender said it achieved a record performance as net profit grew 20% to SG$8.19 billion. Total income increased 16% to SG$16.5 billion, crossing the SG$16 billion mark for the first time.
The Singaporean bank proposed payouts at 42 Singapore cents per share for the October-December quarter, an increase of six cents from the previous payout. In addition, a special dividend of 50 cents per share was also proposed.
“The substantial increase in our ordinary dividend and the special dividend to a total of 92 cents per share reflect our robust earnings profile and the strength of our capital position,” Gupta said in his earnings statement.