While affirming the ratings of seven companies from the Adani group, Moody's Ratings changed the outlook on all seven issuers to negative from stable. The Adani group issuers affected by the change are: Adani Green Energy Ltd restricted group (AGEL RG-1), Adani Green Energy Ltd restricted group (AGEL RG-2), Adani Transmission Step-One Ltd (ATSOL), Adani Electricity Mumbai Ltd (AEML), Adani Ports and Special Economic Zone Ltd (APSEZ) and Adani International Container Terminal Pvt Ltd (AICTPL).
Moody's says these rating actions follow the indictment of Adani Green Energy Ltd's (AGEL) chairman Gautam Adani and several senior management team members by the US attorney's office in a criminal case and the filing of charges by the US Securities and Exchange Commission (SEC) in a civil case. The charges and allegations include bribery of Indian government officials, securities and wire fraud, conspiracy to violate the US Foreign Corrupt Practices Act and obstruct justice, false statements made in AGEL's annual reports, and false statements made to the US government in relation to its investigation into the group.
"Although the allegations and the charges made by the US attorney's office and SEC pertain to AGEL's chairman and senior management team members, we believe they could have a broader credit impact on all rated Adani group issuers, given Gautam Adani's prominent role as chairman of each of the rated entities or their parent companies as well as the controlling shareholder," the rating agency says.
It says the change in the outlook on the seven Adani entities to negative considers the indictment of Mr Adani and other senior Adani executives on bribery and other charges, which will likely weaken Adani group's access to funding and increase its capital costs. "The rating action further recognises the possibility of broader weaknesses in the governance structure across the rated Adani group entities as well as potential operational disruptions, including on their capital spending plans, while legal proceedings are going."
According to Moody's, the project finance entities of the group, including AGEL RG-1, AGEL RG-2, AESL RG1 and AICTPL, are not exposed to refinancing risk and do not require any substantial capital investment. However, they remain exposed to potential governance weaknesses and risks that could arise from any negative findings in the ongoing legal proceedings. Governance risks are material to the rating action, it added.
"An upgrade of the ratings is unlikely in the near term, given the negative outlook on all seven issuers," Moody's says. "However, we could change the rating outlooks to stable if legal proceedings conclude clearly with no material negative credit impact. A stable outlook will also be predicated on the group maintaining appropriate financial metrics for the respective ratings, demonstrating its retained access to funding to meet growth initiatives and refinancing requirements, and strengthening its governance practices across the group entities."
Here are the rating actions on seven affected issuers:
- AGEL RG-1, which comprises Adani Green Energy (UP) Ltd; Parampujya Solar Energy Pvt Ltd; Prayatna Developers Pvt Ltd - Ba1 ratings affirmed; outlook changed to negative from stable.
- AGEL RG-2, which comprises Wardha Solar (Maharashtra) Pvt Ltd, Kodangal Solar Parks Pvt Ltd and Adani Renewable Energy (Rj) Ltd - Ba1 ratings affirmed; outlook changed to negative from stable.
- ATSOL - Baa3 ratings affirmed; outlook changed to negative from stable.
- Adani Transmission Restricted Group 1 (AESL RG1), which comprises Barmer Power Transmission Service Ltd, Raipur-Rajnandgaon-Warora Transmission Ltd, Sipat Transmission Ltd, Thar Power Transmission Service Ltd, Hadoti Power Transmission Service Ltd, and Chhattisgarh-WR Transmission Ltd - Baa3 ratings affirmed; outlook changed to negative from stable.
- AEML - Baa3 ratings affirmed; outlook changed to negative from stable.
- APSEZ - Baa3 ratings affirmed; outlook changed to negative from stable.
- AICTPL - Baa3 ratings affirmed; outlook changed to negative from stable.
