Moody’s Investors Services and Fitch Ratings, in separate notes on Friday, indicated they were monitoring Adani Group companies’ financials and funding initiatives following the developments over the past 10 days.
Moody’s said the adverse developments were likely to reduce the group’s ability to raise capital to fund committed capex or refinance debt maturing over the next 1-2 years.
Fitch said that there was no immediate impact on the ratings of the companies in the group and the securities issued by them.
Last week, short-seller hedge fund Hindenberg Research came out with allegations of malpractices in the group companies and round-tripping through a complex web of shell companies, triggering large-scale selling in group companies. They took a further beating when the group decided to pull back Adani Enterprises’ ₹20,000-crore follow-on share sale on Wednesday, though it was fully subscribed.
Globally listed bond prices also slumped to distressed levels.
Moody’s view
Moody’s Investors Services said its primary focus was to assess the rated entities’ overall financial flexibility, their liquidity positions, and access to the funding needed to refinance debt and for ongoing capex.
“We recognise that a portion of the capex is deferrable, and the rated entities do not have significant maturing debt until FY25.”
Last Sunday, while talking to businessline, Adani Group Chief Financial Officer Jugeshinder Singh said if Adani Enterprises was unable to raise funds through the FPO, it would defer its capex plans for many of the new businesses it was incubating.
Fitch view
Fitch said it will be monitoring Adani Group companies’ access to financing, cost of financing, or any other developments that could affect their credit profiles and consequently their ratings.
Fitch pointed out that were no material changes to the companies’ forecasted cash flows that could affect their current rating profile. There is a bond issuance by Adani Ports and Special Economic Zone maturing in June 2024, and in December 2024 for Adan Green Energy Restricted Group. All other maturities were expected to occur in 2026 and beyond.
Fitch has a rating of BBB- for most Adani Group entities, and said it was constrained by India’s sovereign rating of BBB-, “barring this constraint the entities credit profiles would be commensurate with a BBB rating, which indicates that expectations of default risks are low, but adverse business or economic conditions are more likely to impair the capacity for repayments”.
Fitch pointed out that the businesses that are rated by it are in the infrastructure and utilities segment, and have “relatively stable cash flows.” The offshore bonds issued by some of the companies have a cash waterfall mechanism, paying creditors in order of priority, as well as covenants restricting cash upstreaming to shareholders and limiting indebtedness.
It stressed on the fact that related party transactions at the companies, “outside of the normal course of business are also limited.” Related party transactions was one of the issues flagged by Hindenberg Research in its allegations.
Adani Transmission and Adani Electricity Mumbai had received loans from related parties but they had repaid them over time with investments received from Qatar Investment Authority and Abu Dhabi based Investment Holding Company, Fitch said.
Adani Transmission has tied up funding for its projects and while it had adequate nterest cover at the operating level, any rise in financing costs could weaken that, according to Fitch.
Adani Ports’ credit profile looked stable as it had resilient volumes, “almost 50 percent steady cargo” and flexibility in its investment plans, the rating agency said.