Moody's cuts rating outlook on 4 Adani Group companies

Moody’s Investor Service on Friday revised downwards the rating outlook on four Adani Group companies to ‘negative’ from ‘stable’ after a significant and rapid decline in market value following a report by US-based short-seller Hindenburg Research.

In a statement, Moody’s said the rating outlook for Adani Green Energy Ltd, Adani Green Energy Restricted Group, Adani Transmission Step-One Ltd and Adani Electricity Mumbai Ltd has been changed to ‘negative’ from ‘stable’.

“These rating actions follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the group,” it said.

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Adani Group companies have lost USD 100 billion in market value since the US short-seller Hindenburg Research came out with a damning report alleging fraud at the conglomerate helmed by Gautam Adani. However, Adani Group has denied all allegations and threatened to sue Hindenburg.

Moody’s said it has affirmed the ratings on eight Adani Group companies. “At the same time, Moody’s has changed the outlook on four issuers to negative from stable, while maintaining the stable outlook on other four companies,” the statement said.

The rating outlook was downgraded for the group’s renewable energy firms Adani Green Energy Ltd (AGEL) and Adani Green Energy Restricted Group (AGEL RG-1). Its transmission unit Adani Transmission Step-One Ltd (ATSOL) and Adani Electricity Mumbai Ltd (AEML) too faced similar action.

However, the outlook for Adani Ports and Special Economic Zone Ltd (APSEZ) and Adani International Container Terminal Pvt Ltd was unchanged at stable.

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The change in AGEL’s outlook was considering “the company’s large capital spending program and dependence on sponsor support, potentially in the form of subordinated debt or shareholder loans, which will likely be less certain in the current environment,” Moody’s said.

It further added that the negative outlook also factors in the company’s significant refinancing needs of around USD 2.7 billion in fiscal year ending March 2025 and limited headroom in its credit metrics to manage any material increase in funding costs. The change in the outlook on AGEL RG-1 factors in the refinancing risk associated with USD 500 million of bonds maturing in December 2024.

The change in outlook for AEML reflects the likely reduction in its funding access and reduced ability to manage any material increase in funding costs given the limited headroom in its credit metrics under Moody’s base case scenario, the statement said. Moody’s said given the negative outlook, an upgrade in the ratings of the four firms was unlikely in the near term.