Moody’s downgrade setback to Adani

Amid a stock market rout, Moody’s Investors Service on Friday downgraded its rating outlook on four Adani group companies including Adani Green Energy to “negative” from “stable” while financial index provider MSCI lowered the weightings of nearly half of the group entities.

Besides Adani Green Energy, the outlook on Adani Green Energy Restricted Group, Adani Transmission Step-One, and Adani Electricity Mumbai has also been downgraded to negative.

“These rating actions follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the Group,” Moody’s noted in its rating action report.

Moody’s announced its rating action on eight Adani group entities. The agency has not changed the rating of any of the group entities. While the outlook on four entities has been downgraded to negative, the rating agency has maintained a stable outlook on other four companies.

Read | Moody's says bank exposure to Adani not large to affect credit quality

The change in the outlook to negative on Adani Green Energy considers the company’s large capital spending programme and dependence on sponsor support, potentially in the form of subordinated debt or shareholder loans, which will likely be less certain in the current environment, Moody’s said.

The negative outlook also factors in the company’s significant refinancing needs of around $2.7 billion in fiscal year ending March 2025 and limited headroom in its credit metrics to manage any material increase in funding costs, the rating agency added.

New York-based financial index provider MSCI has reduced the free-float status of four Adani Group companies -- Adani Enterprises, Adani Total Gas, Adani Transmission and ACC.

MSCI defines “free-float” as a proportion of shares that can be bought publicly in share markets by international investors. The change in free-float status will impact the firms in their index weightings and lead to further rout in the stocks.

Stocks of billionaire Gautam Adani-led group companies slumped further on Friday. Adani Green Energy dipped 5% to hit the lower price band of Rs 723.90 at the BSE. Adani Total Gas also slumped 5% to hit the lower price band. Adani Enterprises tumbled 4.15% to Rs 1,847.35.

Meanwhile, market regulator Securities and Exchange Board of India (Sebi) has started investigating Adani Group’s links to some of the investors in the aborted Rs 20,000-crore follow-on public offer (FPO).

Sebi is investigating relationships between Adani and at least two Mauritius-based firms -- Great International Tusker Fund and Ayushmat Ltd -- which participated as anchor investors in the FPO, Reuters reported.

The market regulator is looking into any potential violation of Indian securities laws or any conflict of interest in the FPO process.