S&P Global revises its outlook on three Adani entities to 'negative'

S&P Global Ratings in a statement said US indictment of three board representatives of Adani Group entity could affect investor confidence in other group entities

Rating agency S&P Global on Friday revised its outlook on three Adani Group entities to ‘negative’, a day after the news that US department of justice has levelled corruption charges against chairman Gautam Adani and seven others broke out.

 

S&P Global cut the outlook on Adani Electricity Mumbai Ltd (Adani Electricity), Adani Ports and Special Economic Zone Ltd (Adani Ports) and Adani Green Energy Ltd Restricted Group 2 (AGEL RG2), which is a subsidiary of Adani Green Energy Limited (AGEL).

 

AGEL is the entity linked to the allegations, although it has not been directly named in the ongoing proceedings in the US.

 

 

S&P Global Ratings in a statement said that the US indictment of three board representatives of an unrated Adani Group entity could affect investor confidence in other Adani group entities because the founder is on the board of multiple entities within the group. It could potentially impair their funding access and increase their funding costs.

 

The firm affirmed rating on three Adani group entities. Adani Electricity and Adani Ports carry 'BBB-' rating, while AGEL RG2 has ‘BB+’ issue rating.

 

It also affirmed “BB” rating on North Queensland Export Terminal Pty Ltd. (NQXT) and “BBB-” rating on Adani International Container Terminal Private Ltd. (AICTPL).

 

US prosecutors allege that the board members are involved in a US$250 million bribery scheme related to solar power contracts in India, and that they breached the anti-bribery compliance policy through misrepresentation to investors in an offshore bond (unrated). This could further raise questions regarding the management and governance of various Adani group entities.

 

The indictment is independent of, but follows, a short seller report that led to investigation by the Indian Supreme Court and India's capital market regulator, S&P Global Ratings said.

 

The negative outlook on entities indicates that their cash flows could be materially affected if their funding access weakens, funding costs rise significantly, or the allegations are proven.

 

The agency said its rating on North Queensland Export Terminal Pty Ltd. (NQXT) already captures refinancing risk for maturities due in 2025. Therefore, it affirmed the 'BB' issue rating on NQXT and the outlook remains stable.

 

Similarly, Adani International Container Terminal Private Ltd. (AICTPL) was not exposed to refinancing risk or significant foreign exchange risk. Hence, it affirmed 'BBB-' issue rating on AICTPL and the outlook remains stable, it added.  

What the agency said: 

Charges could affect investor confidence in other Adani firms because the founder is on the boards of multiple entities within the group

  Feeling the pinch:

  > Adani Electricity: BBB-

> APSEZ: BBB-

> AGEL RG2: BB+