NEW DELHI: Global rating agencies have initiated actions against Adani Group entities in the wake of the US indictment of Chairman Gautam Adani and other senior executives on alleged bribery charges.
Moody’s has revised its outlook on seven Adani entities from ‘stable’ to ‘negative,’ while Fitch Ratings has placed certain Adani bonds on negative watch.
Moody’s affirmed the ratings for the affected entities, which include Adani Ports and Special Economic Zone Ltd (APSEZ), two limited restricted groups of Adani Green Energy Ltd, Adani Transmission Step-One Ltd, Adani Transportation Restricted Group 1, Adani Electricity Mumbai Ltd, and Adani International Container Terminal Pvt Ltd.
“These rating actions follow the indictment of Adani Green Energy Ltd’s chairman Gautam Adani and several senior management team members by the US Attorney’s Office in a criminal case, as well as charges filed by the US Securities and Exchange Commission (SEC) in a civil case,” Moody’s stated.
Bonds under scrutiny
Fitch Ratings, meanwhile, has flagged certain bonds issued by Adani entities, placing them under scrutiny for potential downgrades.
The US indictment, which accuses Gautam Adani and others of bribery and other financial misconduct, has raised concerns over the group’s access to funding and its cost of capital.
Moody’s noted that these developments could weaken investor confidence, thereby impacting the group’s ability to raise funds on favorable terms.
Adani Group has been under intense scrutiny since early 2023, following a critical report from US-based short-seller Hindenburg Research.
Big challenges
The report alleged fraud and financial irregularities within the conglomerate, wiping out billions from its market capitalisation. While Adani Group has denied these allegations, the current legal proceedings in the US have further compounded the conglomerate’s challenges.
The latest actions by global rating agencies underscore the financial and reputational risks facing the group as it seeks to stabilise operations amid heightened regulatory and investor concerns.
Past rating actions
There have been several significant rating actions and developments concerning Adani Group in the past, especially since the Hindenburg Research report in early 2023, which had a substantial impact on the group’s market standing and the actions of credit rating agencies.
Following the Hindenburg report, S&P Global Ratings, Fitch, and Moody’s did not immediately downgrade the ratings but closely monitored the situation, with some expressing concerns over governance and financial risk.
Moody’s action In February 2023, Moody’s revised its outlook on several Adani entities, including Adani Ports and Special Economic Zone Ltd (APSEZ), Adani Green Energy Ltd (AGEL), and Adani Transmission Ltd, citing increased financial risk due to the drop in stock prices and liquidity concerns.
While Moody’s affirmed the ratings at that time, it noted the elevated risks from the market volatility triggered by the Hindenburg report.
Fitch downgraded bonds
Fitch Ratings downgraded several Adani Group bonds, including those issued by Adani Ports and Adani Green Energy, following the fall in the market value of Adani stocks and the wider market uncertainty. Fitch’s move was partly due to concerns over the group’s ability to meet its debt obligations given the market turmoil.
S&P Global Ratings also revised the outlook of Adani’s entities in March 2023. It raised concerns about Adani’s high leverage and potential liquidity pressure on the group’s companies, although it did not immediately downgrade its ratings. S&P’s downgrade concern came amid the group’s efforts to raise funds through the issuance of bonds and other instruments.
Debt issuance (2023-2024)
The Adani group certainly found difficulty in accessing credit markets and raising funds at favorable rates post-Hindenburg. While some of Adani’s entities were able to raise funds, the terms were often less favorable than before the allegations surfaced, reflecting the heightened risk perception.
