Fitch, Moody’s downgrade Adani Group’s rating outlook to negative from stable

US ratings agencies Moody’s and Fitch on Tuesday downgraded the Adani Group of Companies’ bonds following bribery allegations and indictments against certain board members of Adani Green Energy Limited (AGEL), including group chairman Gautam Adani. The outlook was revised down to negative from stable. U.S. Securities and Exchange Commission and Department of Justice.

Last week, Standard & Poor’s downgraded the outlook for five Adani companies including Adani Ports and Special Economic Zone (APSEZ) to negative following indictments by US authorities.

Adverse ratings action could harm the group’s ability to raise new capital and increase its cost of capital.

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Adani shares fell sharply after the rating action, with Adani Green Energy falling the most on Tuesday as Adani Green Energy, which is at the heart of a $250 million scheme to bribe Indian state government officials to secure power supply contracts, fell 7.3% .

Adani Group strongly denied the US accusations, calling them “baseless” and reiterated its commitment to maintaining the highest standards of governance and compliance.

On Monday, the group said it had enough cash to repay the debt of all its companies over the next 12 months in an effort to calm investor nerves. Adani Group said in a statement that consolidated cash flow over the past 12 months exceeded projected debt repayments in each of the next 10 financial years. The company said this underscored its ability to manage its debt repayment obligations with earnings.

Despite the group’s assertions about its financial health, Moody’s revised the outlook for seven Adani Group companies to negative from stable, saying the U.S. prosecution could weaken the group’s ability to access capital and increase its financing costs. . The companies include two units each of Adani Green Energy and Adani Transmission, Adani Power Mumbai Ltd, Adani Ports and Special Economic Zone Ltd (APSEZ) and Adani International Container Terminal.

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Previously, Fitch had already downgraded the bond ratings of Adani Ports, North Queensland Export Terminals and Mumbai International Airport Limited for possible downgrades.

Additionally, it maintained the rating on Adani Green Energy Limited but revised the outlook to negative from stable. The negative outlook reflects the risk of rising financing costs and possible weaknesses in corporate governance and internal controls, the company said.

“We will monitor the ongoing investigation for developments affecting the financial flexibility of the rated entities, particularly any material deterioration in access to short- and medium-term funding, including their ability to roll over existing credit lines or obtain new loans, and potentially “Higher financing costs,” Fitch said in a statement.

Fitch’s downgrade highlights the risk that the group’s access to financing will tighten and borrowing costs may increase. However, the ratings agency affirmed the ratings for some restricted groups, citing fenced structures and stable cash flow as mitigating factors.

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“We believe the latest developments may hamper the group’s access to financing. Although there is some flexibility in its capital expenditure plans, this may severely impact the growth plans of certain rated entities such as APSEZ. Offshore financing is reduced Later, increased reliance on onshore financing could increase refinancing risks in the medium term, while a significant rise in financing costs could reduce operating cash flow,” Fitch said.

Nonetheless, Fitch expects the rated entity’s near-term liquidity to be adequate as there is no significant scheduled debt.

Total market capitalization of Adani group of companies fell $The losses have reached Rs 65,392 crore since the US indicted Gautam Adani and seven other executives on November 21. As of November 26, the group’s total market capitalization was $11.4 trillion.