In the first rating action since the Hindenburg report, S&P has lowered the outlook on Adani Ports and Adani Electricity to negative from stable. The ratings agency cited the deterioration in the credit profile of Adani Ports and Adani Electricity Mumbai due to governance risks and funding challenges for the larger Adani Group.
Earlier ICRA, an arm of Moody’s, said that it is monitoring the impact of these developments on its rated portfolio in Adani Group. The monitoring was especially for the financial flexibility of the group, its access to domestic & international capital markets and banking channels, pricing of debt, tightening of debt covenants, recall or acceleration of debt facilities and refinancing. According to ICRA, the companies it rates do not have any immediate refinancing requirements.
Another international rating agency Fitch said that there was no immediate impact on the Adani companies that it rates from the short-seller report.
A rating downgrade is a cause of worry for investors as it increases the returns demanded by debtors. This results in the prices of outstanding bonds falling.
S&P said that the allegations may hit the group’s ability to raise fresh equity or borrow. “Adani Group entities – rated and unrated – have significant growth ambitions. They will need an ongoing supply of equity and debt capital. The recent allegations may hurt the group’s ability to raise fresh equity or to borrow, particularly in US dollar public bond markets,” said S&P in its ratings rationale.
According to S&P, the decision to return the proceeds of the $2.4-billion follow-on public offer of shares shows fresh public funding might be challenging until market confidence is restored. ICRA said that while the companies that it rates do not have any immediate refinancing requirement, it is expected for some of the entities from FY25 onwards.
