Rating downgrade adds to Adani woes

New Delhi: Amid bribery scandals and indictment in the US, troubles continue to mount for Gautam Adani as global rating agencies Moody's and Fitch on Tuesday lowered their outlook on several Adani group companies, including Adani Green Energy and Adani Ports to "negative" from "stable" even as governments in Andhra Pradesh and Sri Lanka, reportedly, mull scrapping contracts.

Moody's has lowered its outlook on seven Adani group companies while Fitch on four.

The companies on which Moody’s has lowered its outlook to negative include Adani Green Energy, Adani Transmission, Adani Electricity Mumbai, Adani Ports and Special Economic Zone and Adani International Container Terminal.

Fitch announced that it has placed four Adani group companies to "Rating Watch Negative (RWN)" status. These companies include Adani International Container Terminal, Adani Green Energy and Adani Energy Solutions.

Negative outlook indicates that there is a higher probability of rating downgrade. While the rating agencies have revised their outlook on these Adani group companies, the ratings remain the same.

Fitch said in a statement that the RWN (rating watch negative) on Adani group companies "reflects increased corporate governance risk and potential contagion risk that could impact funding access and liquidity of the rated entities, if corporate governance risk materialises following the US indictment".

The news led to a further plunge in the share prices of Adani group companies. Adani Green Energy, which is at the centre of the bribery scandals, plunged by over 7 per cent. Adani Enterprises slumped by nearly 5 per cent while Adani Energy Solutions dipped by 3.79 per cent. Adani Total Gas and Adani Ports fell by more than 3 per cent, each.

Combined market capitalisation of the listed Adani group companies declined by around Rs 45,000 crore on Tuesday, taking the cumulative erosion in the past four sessions to nearly Rs 3 lakh crore.

Adani group companies share prices have slumped after the US prosecutors and the Securities and Exchange Commission (SEC) last week announced the indictment of founder Gautam Adani, his nephew Sagar Adani, and six others, in a $265 million (about Rs 2,200 crore) bribery case.

Meanwhile, Andhra Pradesh, where most of the alleged $265 million bribes were paid, is exploring the possibility of cancelling the power-purchase contract.  

Andhra Pradesh Finance Minister Payyavula Keshav told news agency Reuters that the state government was "digging into all the internal files" from the previous administration, under which the alleged misconduct took place.

"We will also examine what can be done next, like is there a possibility to cancel the contract … the state government is looking into this issue closely," Keshav said. Bribery was allegedly paid during the government led by Jagan Mohan Reddy.

In another development that would put Adani port contract in Sri Lanka in trouble, the US International Development Finance Corporation announced that it is conducting due diligence on the project in the wake of bribery allegations, Reuters reported. Last November, the US agency had announced that it would provide $553 million in financing for the port terminal project in Colombo. The project is partly owned by Adani Group.