Moody’s has changed the outlook on four Adani Group companies to negative from stable while maintaining the stable outlook on other four companies.

The four companies for which the outlook has been changed to negative include Adani Green Energy Limited (AGEL), Adani Green Energy Restricted Group (AGEL RG-1), Adani Transmission Step-One Limited (ATSOL), and Adani Electricity Mumbai Limited (AEML).

“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,” said Moody’s in a report.

The change in the outlook to negative on AGEL considers 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. The negative outlook also factors in the company’s significant refinancing needs of around $2.7 billion in fiscal year ending March 2025 (fiscal 2025), and limited headroom in its credit metrics to manage material increase in funding costs.

The change in the outlook on AGEL RG-1 to negative factors in the refinancing risk associated with $500 million of bonds maturing in December 2024. Moody’s recognises that the project finance structure of AGEL RG-1 provides protection from any contagion risk from the broader Adani Group.

The change in the outlook on ATSOL to negative considers the modest headroom in ATL’s credit metrics relative to the minimum tolerance level under Moody’s base case scenario, which limits the group’s ability to withstand a material increase in funding cost or reduced funding access.

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Given the negative outlook on AGEL, AGEL RG-1, ATSOL and AEML, an upgrade of the ratings is unlikely in the near term, said Moody’s.

However, Moody’s could change the rating outlook to stable, if the entities can demonstrate their access to the capital markets to meet their growth funding and refinancing requirements; and if their management can effectively implement timely and effective countermeasures to preserve the companies’ credit metrics, including a reduction in capital spending or financial leverage with support from the promoter.