ICRA downgrades rating for two Adani companies to negative

ICRA has revised the outlook for Adani Total Gas Limited (ATGL) and Adani Ports and Special Economic Zone Limited (APSEZL) due to the deterioration in Adani Group’s financial flexibility following a sharp fall in share prices and a rise in international bond yields issued by the Adani Group companies were issued.

This followed a report by US-based short seller Hindenburg. ICRA notes that while ATGL has staggered some of its investment plans over the next two years, given the progress made on projects awarded in the ninth and tenth rounds. In addition, ATGL has financing commitments to meet capital expenditure needs in the short-term and has large long-term capital expenditure needs that require significant debt financing. Therefore, Adani Group’s limited financial flexibility may affect ATGL’s ability to raise funds in domestic and international markets and result in higher capital costs.

“ICRA will oversee Adani Group’s ability to raise capital in the domestic/global market as equity/debt capital at competitive prices. In addition, ICRA also sees an increased risk of regulatory/legal scrutiny of Adani Group companies and its impact on ATGL’s credit quality is being monitored,” the rating agency said.

ICRA noted that any review of Total’s investment in ATGL in the light of current developments leading to a weakening of the link remains a sensitive factor and developments will be monitored.

ICRA noted that the group’s strong financial flexibility and APSEZL’s track record of refinancing a large portion of its debt by borrowing (mainly from overseas capital markets) with longer maturities at lower interest rates were the main credit strengths that were negatively impacted. ICRA will oversee the Group’s ability to raise capital in the domestic/global market as equity/debt at competitive prices. In addition, ICRA sees an increased risk of regulatory/legal scrutiny of the group companies and its impact on APSEZL’s credit quality is being monitored. However, ICRA notes that APSEZL’s liquidity profile remains robust and a large $650 million international bond repayment is not due until fiscal 2025.