After Fitch, Moody’s also switches outlook on Adani group firms to ‘negative’

Rating agency cites governance risk stemming from bribery and other charges facing the group promoter and senior employees; says upgrade unlikely in near term but downgrades possible for some entities based on specific business risks

Moody’s Ratings has on Tuesday (November 26, 2024) affirmed the ratings of seven Adani Group companies from ‘stable’ to ‘negative’. In a statement the global rating firm said “At the same time, we have changed the outlook on all seven issuers to negative from stable.”

Earlier on Tuesday (November 26, 2024) Fitch Ratings also put Adani group firms on a negative rating watch.

The seven affected issuers are:

1. Adani Green Energy Limited Restricted Group (AGEL RG-1), which comprises Adani Green Energy (UP) Limited; Parampujya Solar Energy Private Limited; Prayatna Developers Private Limited, 2. Adani Green Energy Limited Restricted Group (AGEL RG-2), which comprises Wardha Solar (Maharashtra) Private Limited, Kodangal Solar Parks Private Limited and Adani Renewable Energy (Rj) Limited, 3. Adani Transmission Step-One Limited (ATSOL), Adani Transmission Restricted Group 1 (AESL RG1), which comprises Barmer Power Transmission Service Limited; Raipur-Rajnandgaon-Warora Transmission Ltd; Sipat Transmission Limited; Thar Power Transmission Service Limited; Hadoti Power Transmission Service Limited; Chhattisgarh-WR Transmission Limited, and 5. Adani Electricity Mumbai Limited (AEML).

Adani Ports and Special Economic Zone Limited (APSEZ) and Adani International Container Terminal Private Ltd (AICTPL) have also been subjected to an outlook change from stable to negative, Moody’s said.

Moody’s said its rating actions follow the indictment of Adani Green Energy Ltd’s (AGEL) chairman Gautam Adani and several senior management team members by the US Attorney’s Office in a criminal case and the filing of charges by the US Securities and Exchange Commission (SEC) in a civil case. The charges and allegations include: (1) bribery of Indian government officials, (2) securities and wire fraud, (3) conspiracy to violate the US Foreign Corrupt Practices Act and obstruct justice, (4) false statements made in AGEL’s annual reports, and (5) false statements made to the US government in relation to its investigation into the group.

Identifying governance risks as material for its rating action, Moody’s said the negative outlook considers that this indictment of Mr. Adani and other senior Adani executives “will likely weaken Adani Group’s access to funding and increase its capital costs” and recognises “the possibility of broader weaknesses in the governance structure across the rated Adani group entities as well as potential operational disruptions, including on their capital spending plans, while legal proceedings are going”.

“Although the allegations and the charges made by US Attorney’s Office and SEC pertain to AGEL’s chairman and senior management team members, we believe they could have a broader credit impact on all rated Adani Group issuers, given Gautam Adani’s prominent role as chairman of each of the rated entities or their parent companies as well as the controlling shareholder,” it reasoned.

The firm said an upgrade of these firms’ ratings is unlikely in the near term, given the negative outlook on all seven issuers. “However, we could change the rating outlooks to stable if legal proceedings conclude clearly with no material negative credit impact,” it noted, adding that the rated firms could also be subjected to downgrades based on specific risks relating to each business, including “access to funding” challenges that may arise for a couple of them.

Published - November 26, 2024 04:26 pm IST