Rating agency Fitch Ratings has said that two subsidiaries of the ports-to-power conglomerate Adani Group are exposed to higher contagion risks which could impact financial flexibility. Fitch attributed the contagion risks to governance weakness at the Adani Group’s sponsorship level and assigned it a rating of BBB-.
Explaining its rationale behind the rating, Fitch said in its note dated March 28, “Fitch believes contagion risk is lower for restricted groups. The restricted group’s credit profile is supported by structural enhancements, such as a defined cash waterfall and limits on the incurrence of additional debt.”
The rating agency also mentioned that most of the group’s senior debt is offshore and largely secured as of December 2022-end. Senior debt refers to the borrowed money that a company must repay first if it goes out of business. It also added that the group’s US dollar bonds will mature only from mid-2024.
The rating agency further noted, “The liquidity position at all rated entities or restricted groups would benefit from cash flow generation from January 2023 to March 2024, adding to the cash balances in end-December 2022.”
The development comes after Adani Group’s market capitalisation (m-cap) dropped by Rs 80,000 crore to less than Rs 9 lakh crore in three days as of March 28. The group’s m-cap stood at Rs 8,90,750 crore as of Tuesday. Adani Group’s m-cap has seen massive erosion ever since the US-based short-seller Hindenburg Research alleged in its report that the Adani Group was indulging in stock manipulation and accounting fraud. Hindenburg also accused the Adani Group of running shell companies out of tax havens like Mauritius and having substantial debt. The short seller also accused Adani Group chairman Gautam Adani’s brother Vinod Adani of running a network of offshore entities. These allegations have, however, been denied by the Adani Group.
Meanwhile, Adani stocks were back in focus on Wednesday after the exchange sought clarification from the group after some media reports. Adani Transmission, Adani Total Gas, and Adani Green hit a lower circuit of 5 per cent each, whereas Adani Power and Adani Wilmar mere slightly down. However, Adani Enterprises and Adani Ports were trading higher.