Home Debt Adani companies: Rating companies set to examine debt risks, creditworthiness of Adani companies afresh

Adani companies: Rating companies set to examine debt risks, creditworthiness of Adani companies afresh

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Mumbai: Rating agencies are set to examine afresh the creditworthiness and debt risks at the Adani Group of companies after a stock rout, precipitated by misgovernance allegations by a US short-seller, erased more than $70 billion of the conglomerate’s market value in just three trading days.

Senior ratings officials said Securities and Exchange Board of India (Sebi) rules say that a company’s rating has to be put under review within seven days of any ‘material impact’ on a company.

“The sharp fall in the share prices of some of these companies does constitute a material impact; so, rating agencies are already taking stock,” a senior executive at a credit rating company told ET. “The focus will be on cash flows, assets, liquidity profile assessment and refinancing ability to decide on the credit rating.”


While most of the Adani group companies enjoy AA rating, concerns raised by Hindenburg Research have put the debt levels of the group under lens.

Last week, Hindenburg Research had accused the Adani Group of pulling off what it headlined as the “largest con in corporate history,” alleging ‘stock manipulation, accounting fraud, and substantial leverage.’

The Adani Group has since described the allegations as baseless in a detailed rebuttal, although the group stocks have lost more than $70 billion in value since Wednesday. Several of the group’s stocks –

, , , and Adani – lost substantially and remained locked in daily lower limits, on consecutive trading days.

Credit rating agencies that rate many of the different Adani Group bonds trading in the market have so far been silent on the impact these allegations will have on their ratings.Investors will be keenly watching the rating actions because of the concerns raised on the debt levels of the group.

Emails sent to spokespersons from

Care and IndiaRatings did not elicit a response. An spokesperson declined to comment.

Ratings firm executives said that committees within credit rating companies are already taking stock of the impact on Adani group companies.

“But the fact of the matter is we do not look at day to day price movements. We look at fundamentals which don’t change overnight,” said a second executive at a rating agency. “Nevertheless, because of such a big impact that has happened in the companies’ securities, we will have to relook at all parameters and update all market participants if there are any material changes which could impact future ratings.”

To be sure, foreign currency bonds make up about 29% of the group’s Rs 2.1-lakh crore debt; local bonds account for 8%, said a CLSA report.

Rating executives said these bonds mostly have bullet repayments and are exposed to currency risks, which could make it tricky for the Adani Group if things don’t go as planned.

“When the time comes to refinance these bonds, the group will have to contend with higher rates and liquidity challenges. Added to that is the foreign currency risk because companies like Adani Green which have revenues in rupee have a huge amount of dollar bonds traded abroad. All these points will have to be factored in the ratings,” said a former ratings executive.

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