Rating agency ICRA on Friday revised its outlook on two Adani Group stocks to 'negative' from 'stable' due to "deterioration in the Group’s financial flexibility". ICRA downgraded Adani Total Gas Ltd and Adani Ports "following a sharp decline in share prices and an increase in the yield of international bonds raised by the Adani group entities".
Adani firms' stock prices have been on a declining trend ever since US short-seller Hindenburg Research released a scathing report against the ports-to-power conglomerate. Adani shares surged on Friday after the Rs 15,446-crore investment by US-based GQG Partners eased concerns about the conglomerate's ability to attract funding after Hindenburg report. Shares of flagship firm Adani Enterprises rose as much as 17.5% on Friday, while Adani Ports surged 10%. Adani Green Energy, Adani Total Gas and Adani Transmission jumped 5% each.
In the Jan. 24 report, US-based Hindenburg Research noted high debt and alleged improper use of offshore tax havens and stock manipulation, which Adani denied. A dive in Adani stocks, which lost about $130 billion in market capitalisation, then prompted the group to shelve a $2.5-billion FPO.
"Adani Ports' track record of refinancing a large part of its debt with borrowings (mostly from overseas debt capital markets) of longer tenures at lower interest rates were the key credit strengths, which have been adversely impacted. Further, ICRA sees an increased risk of regulatory/legal scrutiny on the group entities and its impact on the credit quality of APSEZL will be monitored. However, ICRA notes that the APSEZL’s liquidity profile remains robust and a large repayment of international bond of $650 million is due only in FY2025," said ICRA in its rationale for downgrading Adani Ports.
ICRA said Adani Total Gas has large capex requirements that need significant debt funding, which could be affected in the aftermath of the Hindenburg report.
"ICRA notes that while ATGL has staggered some of the capex plans over the next two years considering progress achieved in projects awarded in ninth and tenth rounds. Further, ATGL has funding tie-ups to meet the capex requirements in the near term, it has large capex requirements over the longer term which need significant debt funding. Hence, the Adani Group’s reduced financial flexibility can impact ATGL’s ability to raise funds from the domestic and international markets and result in higher cost of capital," said the rating agency in its rationale for downgrading Adani Total Gas.
The ratings continue to factor in ATGL’s healthy financial risk profile, characterised by adequate return and debt protection metrics because of the robust cash generation from its ongoing business, said ICRA.
The ten listed Adani Group firms saw their combined market capitalisation climb a whopping Rs 1.73 lakh crore in the past four trading sessions till March 3. The market valuation of Hindenburg-hit Adani Group companies jumped to Rs 8.55 lakh crore on March 3 from Rs 6.82 lakh crore on February 27.
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