More trouble for Adani Group as Moody's downgrades outlook for seven firms

In a significant blow to the Adani Group, Moody's has downgraded its outlook for seven companies within the conglomerate. This action follows recent legal issues involving Gautam Adani, the group's chairman, and his associates, who are facing bribery charges brought by US authorities.

Key Points:

Moody's Downgrade: The ratings agency has shifted the outlook for seven Adani firms, including Adani Green Energy, Adani Ports, and Adani Transmission, from stable to negative.

Legal Troubles: Gautam Adani and senior management are embroiled in legal battles, with the US Attorney’s Office and the SEC filing criminal and civil cases against them.

Funding Concerns: Moody’s highlighted potential difficulties for the group in securing funding and anticipated higher borrowing costs, citing possible governance weaknesses.

Affected Entities:

The firms impacted by Moody's outlook revision are:

Adani Ports and Special Economic Zone Ltd (APSEZ)

Adani International Container Terminal

Adani Electricity Mumbai Ltd

Two units of Adani Green Energy

Two units of Adani Transmission

Despite the negative outlook, Moody’s has affirmed the Ba1 ratings for Adani Green Energy and the Baa3 ratings for Adani Transmission, Adani Electricity, Adani Ports, and Adani International Container Terminal. The agency indicated that a return to a stable outlook would depend on the resolution of legal issues without significant credit implications.

Additional Rating Actions:

Fitch Ratings has also placed several Adani Group entities on a "rating watch negative." This includes bonds issued by Adani Energy Solutions Ltd, Adani Electricity Mumbai, and various rupee and dollar bonds of Adani Ports and Special Economic Zone. Furthermore, Fitch downgraded four senior unsecured dollar bonds issued by Adani units from stable to negative, citing concerns about funding access and borrowing costs.

Investor Confidence:

Despite the ongoing challenges, GQG Partners, one of Adani’s largest foreign investors, has reaffirmed its support for the group. In a recent memo, GQG expressed confidence in the fundamentals of the Adani companies it holds, stating it would not sell its holdings despite the volatility in Adani Group stocks.