The Adani Group's debt situation is under scrutiny once again.

Context: CreditSights, a unit of the rating group Fitch, called the Adani Group "deeply overleveraged."

• The report indicated the possibility of a default in the worst-case scenario.

• The revelations led to a wipe-out of Rs 94,000 crore ($10 billion) in the Group's stocks during the first half of the trading day, 24 August.

The big question: Is the Adani Group really in trouble?

Biz behemoth: The Adani Group's stocks have been some of the best value creators in the Indian stock market over the last few years.

• The company has been on a growth spree, largely fuelled by acquisitions in the port, airport, and energy businesses.

• Adani Ports acquired the Dhamra, Abott, Krishnapatnam, and Gangavaram ports, though the Mundhra port remains the company's crown jewel.

• It acquired a controlling stake and the entire debt in Mumbai International Airport Limited, which runs the Mumbai Airport.

• Adani Green Energy acquired SB Energy Limited, India's largest renewables player, for $3.5 billion in an all-cash deal.

• The company also signed a mega cement deal recently.

Ambitious goals: Over the years, announcements have surfaced about the Group planning to enter multiple businesses like aluminium refining and green hydrogen.

• Copper refining, data centres, petrochemical refining, enterprise telecom, and media are also on the Group's radar.

• These are all in addition to already announced expansion plans in existing businesses.

Debt play: The Group's businesses, present and future, are highly capital-intensive and would have to be financed by external capital (mainly debt).

• The undertakings have led to a rise in gross debt from around Rs 1 lakh crore in FY16 to 2.2 lakh crore in FY22.

• That's a growth of 12 per cent each year over the period.

• The Group managed to secure financing for the planned Navi Mumbai Airport from SBI, which has underwritten the Rs 12,770 crore loan.

Adani Vs Ambani: The Adani Group can be compared with Reliance Industries Limited in terms of size and the focus on asset-heavy businesses.

• Reliance's gross debt stood at around Rs 3 lakh crore at the end of FY22, as per data provided by screener.in.

• With operating profits of Rs 1.1 lakh crore, the gross debt-to-operating income ratio stands at a comfortable 2.7 times.

• This ratio for the Adani Group, at the end of FY22, stood at 6.6 times, with an operating income of around Rs 33,000 crore in FY22.

• Reliance also scores significantly better in terms of its ability to cover interest payments. Its operating income-to-interest expense ratio stands at 7.58 times, while Adani Group's ratio stands at 2.2 times.

Welcome debt sustainability. It refers to the ability to repay both the principal amount and the interest accrued.

• The Adani Group has grown rapidly without facing any significant financial issues and has never defaulted on its debt.

• It owns highly valued infrastructure assets that generate strong and stable cash flows, protecting the company from volatility in cash flow generation.

• The loans have been used to finance new projects and acquisitions. Naturally, the profitability of the asset after completion or acquisition and the gestation period of new assets would determine the Group's solvency.

• The Group must be able to raise capital to roll over loans until the new greenfield assets become fully operational.

• Its strong relationship with banks and a good standing in the capital markets have allowed the Group to raise capital without any hiccups.

What to make of it? The Group's gross debt stands at Rs 2.2 lakh crore. But actually, if adjusted for liquid assets on books, it falls to Rs 1.72 lakh crore. Though still on the higher side, it eases up the overall picture.

If the Adani Group can continue to recreate its past magic, the debt burden would be an insignificant concern.