Rating downgraded for 7 Adani group companies

New Delhi: Moody's and Fitch, two international rating agencies, downgraded as many as seven group companies to 'negative' from'stable' on Tuesday, citing governance issues, funding risks, and potential disruptions.

Rating actions follow bribery and fraud accusations against Adani chairman Gautam Adani and seven others in the United States. The rating downgrades came a day after its major investor, Total Energies of France, warned it would hold back any new investments in the business, while a US development bank said it would review the funding deal for Adanis' Sri Lanka port.

Bangladesh has hinted at reconsidering the power supply arrangements agreed upon by the country's former government with the group. It has already lost more than $2 billion on airport and power transmission line projects in Kenya, TNIE reported.

While Moody's altered its outlook on seven Adani group enterprises to negative from stable, rival agency Fitch did the same for two of the group's energy firms, Adani Energy and Adani Electricity Mumbai, placing them on negative watch. Last week, S&P downgraded three group companies.

S&P had downgraded its outlook on Adani Electricity Mumbai, Adani Ports & SEZ, and Adani Green Energy to negative, citing concerns over governance processes, and cautioned that the group's cash flows might be materially impacted if claims are proven or funding access is reduced.

Lowering the outlook on the seven companies, Moody’s cited “potential governance weaknesses across the group companies and warned of operational disruptions that may affect capital spending plans while legal proceedings are going on.”

According to the rating agency, the $250 million in corruption charges and allegations may have a wider credit impact on all-rated group issuers.

The downgrades come only days after a New York federal court indicted Gautam Adani, his cousin, and six of his business associates for allegedly paying $4,250 million in bribery to gain solar power purchase contracts from many states between 2021 and 2022.

While the agency has affirmed ratings for all seven firms (Baa3), the negative outlook is due to increased risks to the group's finance access and potential operational issues, it stated.

The downgraded entities include Adani Ports & Special Economic Zone and six others. However, the agency has exempted the group's flagship Adani Enterprises, two cement companies purchased from Holcim in 2022, and the FMCG joint venture Adani Wilmar.