Moody’s, Fitch take negative rating actions on Adani group

In a torrid Tuesday for the Adani group, hit by a U.S. Court indictment of promoter Gautam Adani and group employees along with civil charges from the U.S. market watchdog, Fitch Ratings and Moody’s took negative rating actions on Adani firms in quick succession, while all its listed entities lost ground on the bourses.

Adani Green Energy Ltd. (AGEL), at the centre of the fresh turmoil engulfing the group over charges that include bribery of Indian government officials, securities and wire fraud, making false statements in its annual reports and in response to the U.S. probe, slid again to hit a new 52-week low of ₹893, before closing at ₹899.4 on the National Stock Exchange.

Citing governance risks for its rating action, Moody’s said there could be a broader credit impact from AGEL’s crisis on group firms “given Gautam Adani’s prominent role as chairman of each of the rated entities or their parent companies as well as the controlling shareholder.”

While changed the outlook on seven group entities to negative from stable, stating the indictment of Mr. Adani and other senior group executives “will likely weaken Adani Group’s access to funding and increase its capital costs”. Moreover, this action 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”, it said.

Earlier on Tuesday, Fitch Ratings also took negative rating actions on the Adani group’s infrastructure entities and restricted group bond issuances, rated under its Infrastructure and Project Finance Rating Criteria, following the bribery charges and indictment of certain board members of Adani Green Energy Limited (AGEL) by the U.S. SEC and Department of Justice.

Fitch placed the ratings of six Adani group entities, including Adani Ports and Special Economic Zone Limited’s (APSEZ), Mumbai International Airport Limited’s (MIAL), Adani Energy Solutions (AESL), Adani Electricity Mumbai (AEML) and orth Queensland Export Terminal Pty Ltd’s (NQXT), on ‘Rating Watch Negative’. Separately, it also the affirmed its ‘BBB-‘ ratings on US dollar secured bonds issued by AGEL, AESL and Adani International Container Terminal Pvt. Ltd. but revised their outlook from stable to negative.

Last Friday, S&P Global Ratings had also altered its outlook on three Adani entities to ‘negative’ from ‘stable’, citing risks to funding access following the U.S. Court indictment that became public a day earlier on November 21.

Moody’s 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.