DBS Group Holdings D05 % CEO Piyush Gupta says he is “not concerned” about the bank’s exposure to India’s Adani Group, despite having financed $1 billion for its US$10.5 billion ($13.99 billion) acquisition of Holcim’s cement business last year.
“Our exposure to Adani is actually of two kinds; the larger is about a billion dollars, which we’ve done to finance their M&A,” says Gupta at the release of the bank’s FY2022 ended December results on Feb 13. M&A stands for merger and acquisition.
“The cement companies are completely debt-free and they're solid, cash-generating companies,” says Gupta. “So, we're not concerned about the exposure.”
DBS also counts some $300 million in Adani exposure via a “range of different companies”, says Gupta.
Gupta says he has personally visited these companies in India. “The management is good, the companies are good, the cashflow is solid. As long as you can ringfence cashflows, and you're close to the cash, you're not taking exposure to promoter shares and so on; there’s no reason for not looking at opportunities.”
The cement industry in India has huge growth potential, he adds, with companies’ ebitda adequate to “pay off this entire M&A financing debt before five years”.
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He adds: “We have no exposure to any of the shares of Adani; we have no exposure to any promoter financing for Adani. So, we're not affected by all of these changes in the share price.”
The Adani Group has faced scrutiny in recent weeks after New York-based Hindenburg Research accused the multinational conglomerate of stock manipulation and accounting fraud. The Jan 24 report alleges that founder and chairman Gautam Adani amassed a net worth of roughly US$120 billion, largely through stock price appreciation in the group’s seven key listed companies.
The conglomerate, which has denied any wrongdoing, has since seen US$110 billion wiped off the value of its seven listed firms.
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DBS posted record high net profit of $8.19 billion for FY2022, up 20% y-o-y, with 4QFY2022 net profit surging 69% y-o-y to $2.34 billion, marking a quarterly record.
DBS could achieve its $10 billion full-year net profit goal in FY2023, says Gupta. “There’s a lot of uncertainty in the environment, but if you look at our projections on net interest margins, on costs and specific provisions, I will say that we have a shot at it.”
The strength of the Singapore dollar is also another factor, adds Gupta. “The translation impact of our income from our overseas activities into Singapore is also material. The stronger the Singdollar is, the less those overseas revenue streams convert into Singdollars as well. So, it's hard to say whether we hit that number, but I think we have a shot at it this year.”