Rating agency S&P Global Ratings said the bribery case against the Adani group chairman Gautam Adani and senior business executives could further impair the group's funding access and increase funding costs. Expecting a potential impact across the wider Adani group, the rating agency revised its outlook to 'negative' on Adani Electricity Mumbai Ltd (Adani Electricity), listed company Adani Ports and Special Economic Zone Ltd (Adani Ports) and project finance entity Adani Green Energy Ltd. Restricted Group 2 (AGEL RG2).
AGEL RG2 is a subsidiary of Adani Green Energy Ltd, which has been linked to the allegations. Although it is ringfenced from the parent, S&P revised its outlook on this entity to negative on AGEL RG2 and but affirmed its 'BB+' issue rating. It affirmed its 'BBB-' ratings on the rest two entities.
Shares of Adani Ports were down 2.63 per cent at Rs 1,085.35. Adani Green Energy shares tanked 5.80 per cent o Rs 1,079.20. S&P Global said the negative outlook on these three entities suggests that their cash flows could be materially affected if their funding access weakens, their funding costs rise significantly, or the allegations are proven, in addition to our assessment of their governance and business profiles.
The US indictment, S&P said, raised questions regarding the management and governance of various Adani group entities, adding the US indictment is independent of, but follows, Hindenburg Research's report that led to investigation by Indian Supreme Court and India's capital market regulator Sebi.
"A 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), thereby potentially impairing their funding access and increasing their funding costs," S&P said.
S&P move came after after rating agency Moody’s Ratings said it would look at the group’s governance practices when assessing its ability to access capital in the aftermath of the indictment of the group head Gautam Adani on bribery charges.
“The indictment of Adani Group’s chairman and other senior officials on bribery charges is credit negative for the group’s companies,” Moody's Ratings said in a statement.
(More to come)