More trouble for Adani Group as Moody's downgrades outlook for 7 firms

The downgrade comes in the wake of legal troubles involving Gautam Adani, the chairman of Adani Group, and his associates after charges of bribery by US authorities.

In Short

• Moody's downgrades outlook for 7 Adani firms to negative
• Adani Ports, Green Energy, Transmission among affected entities
• Fitch also places Adani bonds on 'rating watch negative'

The Adani Group is facing increased scrutiny as Moody’s Ratings announced a downgrade of its outlook for seven companies within the group. These include Adani Green Energy, Adani Ports, and Adani Transmission, among others. The outlook for these entities has been changed from stable to negative, according to Moody’s.

REASONS FOR THE DOWNGRADE

The downgrade comes in the wake of legal troubles involving Gautam Adani, the chairman of Adani Green Energy Ltd (AGEL), and senior members of the group’s management. The US Attorney’s Office has indicted them in a criminal case, while the US Securities and Exchange Commission (SEC) has filed a civil case against the group.

Moody’s stated that these developments could make it harder for the Adani Group to secure funding and may increase borrowing costs. The ratings' agency also expressed concerns over possible weaknesses in governance across the group and the potential impact on its operations and future spending plans.

AFFECTED ENTITIES

The companies affected by Moody’s revised outlook include:

• Adani Ports and Special Economic Zone Ltd (APSEZ)
• Adani International Container Terminal
• Adani Electricity Mumbai Ltd
• Two units of Adani Green Energy
• Two units of Adani Transmission

Despite these outlook changes, Moody’s has affirmed the Ba1 ratings on Adani Green Energy and Baa3 ratings on Adani Transmission, Adani Electricity, Adani Ports, and Adani International Container Terminal.

Moody’s said that a ratings upgrade is unlikely in the near future due to the negative outlook. However, it suggested that the outlook could return to stable if the legal proceedings are resolved without significant credit implications for the group.

OTHER RATING ACTIONS

Fitch Ratings has also taken negative actions on several Adani Group entities. Fitch placed bonds issued by Adani Energy Solutions Ltd, Adani Electricity Mumbai, and some rupee and dollar bonds of Adani Ports and Special Economic Zone under “rating watch negative.”

Additionally, Fitch downgraded the ratings of four senior unsecured dollar bonds issued by Adani units from stable to negative. While the agency acknowledged stable short-term liquidity for most Adani Group entities, it raised concerns about tighter funding access and higher borrowing costs.

Despite recent challenges, GQG Partners, one of Adani’s largest foreign investors, has reiterated its support for the group. In a memo, GQG stated that it would not sell its holdings, expressing confidence in the fundamentals of the Adani Group companies it has invested in. The firm described the current level of exposure as manageable, even amid the volatility in Adani Group stocks.