Adani Group company likely to be rated higher than sovereign

An Adani Group firm is likely to be soon rated above India's sovereign rating as the ports-to-energy conglomerate helmed by Gautam Adani, Asia's richest man, sees rapid growth in business and lower debt.

Adani Group CFO Jugeshinder (Robbie) Singh told a select group of investors on October 10 in New Delhi that an announcement will soon be made of one of the group firms becoming the first Indian firm with all its business in the country, to be rated higher than the sovereign, according to two persons present at the meeting.

Singh, however, did not name the company.

Global credit rating agencies such as S&P and Fitch have assigned the lowest investment grade rating of 'BBB-' to India.

Most companies including public sector giants are rated at par or below the sovereign rating.

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In June last year, Fitch Ratings upgraded rival billionaire Mukesh Ambani's Reliance Industries Ltd to a notch above India's sovereign rating citing an improving debt profile.

But Reliance, some may argue, has business outside the country as well. And Singh at the investor meeting made it a point to say that Adani Group firm will be the first Indian company with all its business in the country to achieve that kind of rating.

Presently, Adani Transmission Ltd - one of the six listed firms of the Adani Group - is rated at par with the sovereign.

It enjoys BBB- (negative outlook) rating by Fitch, BBB- rating by S&P and Baa3 (stable outlook) rating by Moody's Investors Service. These are the same ratings that the three agencies have assigned to India as well.

On Thursday, S&P Global Ratings withdrew its rating for Adani Transmission Ltd at the company's request. This follows a restructuring at the company.

Adani Green Energy Ltd - the group's renewable energy arm - too has ratings equivalent to the sovereign.

Adani Group did not immediately respond to an email seeking comments.

The group, which was once a medium-sized trading outfit based out of Ahmedabad - has seen a meteoric rise in recent years. The market capitalisation of Adani group companies has surpassed that of Tatas, India's largest conglomerate, and Reliance Industries.

Adani, 60, started off as a commodity trader in 1988 and expanded rapidly into ports, airports, roads, power, renewable energy, power transmission, gas distribution, real estate, FMCG, cement, data centres and media business.

The stunning share price rises of Adani's six listed companies have helped propel him to become India's richest and the world's third-richest man.

At the investor meeting, the group CFO Singh said contrary to popular belief, the conglomerate isn't over-leveraged and its expansion has been equally funded by equity.

According to the two people present at the meeting, Singh said the group wants to increase its share free float in a move that could improve trading liquidity.

The six group firms have a small free float - the number of shares actually available to be traded by the public - leading to greater share price volatility, some analysts say.

Adani Enterprises, the Adani Group's new business incubator, has a free float of 19.6 per cent. In contrast, the free float of Reliance, India's biggest listed company, is 50.4 per cent, and that of Tata Consultancy Services is 27.7 per cent.

Singh said the group was working on a plan to increase the free float but did not share details, they said.

For the rating upgrade, he cited growth in business volume and cash profits that are enough to service debt.