A man pushes a rickshaw filled with LPG cylinders on the road below Adani premises in Mumbai. US-based company Hindenburg Research’s allegations of fraud by Adani Enterprise have fueled a political debate in India by opposition parties.
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Moody’s downgraded the outlook for four Adani Group companies on Friday, citing a “significant and rapid decline” in the market value of the entities, the rating agency said in a notice.
It cut the outlook for Adani Green Energy from stable to negative, along with Adani Transmission Step-One, Adani Electricity Mumbai and Adani Green Energy Restricted Group – an entity that includes Adani Green Energy, Parampujya Solar Energy, and Prayatna Developers.
“The rating action follows a significant and rapid decline in the market equity value of Adani Group companies following the recent release of reports from short sellers,” Moody’s said.
Without naming Hindenburg Research, the rating agency highlighted “the recent release of a report from a short seller that highlights governance issues at the Group.”
US short sellers in a January 24 report accused the Indian conglomerate of stock manipulation and accounting fraud, and Adani denied the allegations.
Adani group companies lost more than $100 billion in market capitalization as shares tumbled since the Hindenburg report.
Credit concerns
For Adani Green Energy, Moody’s said the downgrade to negative takes into consideration the company’s large capital spending program and its dependence on the support of its sponsors.
Moody explained that Adani Green Energy’s support could come in the form of subordinated debt or shareholder loans, adding that it would be “less certain in the current environment.”
“The negative outlook also factors in the company’s outstanding refinancing needs of about $2.7 billion in the fiscal year ending March 2025 and the limited headroom in credit metrics to manage any material increase in funding costs,” he said.
Adani’s four entities remain stable
Meanwhile, Moody’s maintained a stable outlook for four other Adani group companies, incl Adani Port and Special Economic Zone and Adani International Container Terminal. Adani Green Energy Restricted Group and Adani Transmission Restricted Group are also on the list.
The latest revision from Moody’s comes after global index provider MSCI announced last week it would cut the weighting of Adani Enterprises, the conglomerate’s flagship company, and three other Adani group companies.
MSCI’s latest quarterly review, however, shows that Adani shares have not been removed from its global index.
Adani Enterprises’ latest financial report on earnings is 31/12/2019.