S&P cuts two Adani firms’ rating to negative from stable

By Tanvi Mehta

(Reuters) -Credit ratings agency S&P on Friday cut its rating outlook on Adani Ports and Special Economic Zone and Adani Electricity to negative from stable, while peer Moody’s warned the recent sell-off in Adani Group’s shares could hurt the Indian conglomerate’s ability to raise capital.

This comes after U.S. short seller Hindenburg Research accused the Adani Group last week of improper use of tax havens and stock manipulation, while also raising concerns over high debt levels.

The conglomerate has denied the accusations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law.

Hindenburg’s report has led to a stock rout in Adani Group’s seven listed companies, which have lost more than $100 billion combined, or about half of their market value.

“The negative outlook reflects the risk of a deterioration in the credit profile of Adani Ports and Adani Electricity Mumbai due to governance risks and funding challenges for the larger Adani Group,” S&P said in statement.

It added that the short seller’s allegations may hit the Adani Group’s ability to raise fresh equity or borrow.

Moody’s said its ratings for Adani Ports and Special Economic Zone, Adani Green Energy and Adani Transmission were not changed, however it also warned the sell-off could affect financing options.

“These adverse developments are likely to reduce the group’s ability to raise capital to fund committed capex or refinance maturing debt over the next 1-2 years,” Moody’s said in a statement that also pointed out that companies has some financial space.

“We recognise that a portion of the capex is deferrable, and the rated entities do not have significant maturing debt until FY2025,” the ratings agency added.

Separately, Fitch Ratings said that it did not expect material changes to Adani Group’s cash flow forecast.

Fitch has ratings on eight entities within the Adani group, including Adani Transmission Ltd, Adani Electricity Mumbai Ltd and Adani International Container Terminal.

“Our ongoing monitoring will be looking closely at any major changes to the rated entities’ access to financing or cost of financing on a long-term basis, unfavourable regulatory/legal developments or ESG-related matters that could affect credit profiles,” the ratings agency said in a report.

(Reporting by Akriti Sharma in Bengaluru, Tanvi Mehta in New Delhi; Writing by Shivam Patel; Editing by Rashmi Aich and Frank Jack Daniel)