NEW DELHI: Global rating agency Standard and Poor’s (S&P) has put Adani Transmission Ltd’s (ATL) environmental, social, and governance (ESG) evaluation under review. This action comes after recent allegations of severe governance lapses at the billionaire Gautam Adani-promoted Adani group by the US-based short-seller Hindenburg Research.
“We will closely monitor developments, including any investigations by the Indian regulators and any additional disclosures by the Adani group,” S&P said in a statement. Separately, global index provider MSCI Inc. is expected to release the results of a quarterly review for its ESG and climate indexes this week. According to reports, if there is a significant downgrade in the ESG ratings of any Adani companies, they could be removed from ESG indexes. This may intensify selling pressure on Adani shares.
MSCI, meanwhile, has said it will postpone the reduction of weightages of two Adani group companies, Adani Total Gas and Adani Transmission, to its next index review in May. When monitoring ESG evaluations, S&P uses the term ‘under review’ to identify certain ESG Evaluations as being potentially affected by changing events.
On January 24, 2023, Hindenburg claimed there were significant governance issues at the Adani group. It accused the port-to-power conglomerate of stock price manipulation. Since then, the equity prices of Adani firms have plummeted by up to 73%. ATL shares have crashed by 65% in three weeks. “The allegations related to group governance and disclosures may affect the appetite of fund providers and business partners in supporting ATL’s growth. This may raise financial and operational risks for the company,” the rating agency said. ATL is India’s largest private electricity transmission and distribution company.
“S&P Global Ratings today placed its ESG Evaluation of 63 for India-based Adani Transmission Ltd (ATL) under review,” the statement said. “This follows recent allegations of significant governance issues at the Adani group of companies.” Earlier in the month, S&P Dow Jones Indices had removed Adani Enterprises, the flagship firm of Adani Group, from its sustainability indices with effect from February 7.
Adani Power cancels DB Power acquisition
Adani Power has cancelled its plan to acquire DB Power, a coal plant project in central India, according to reports. This comes as Adani Group is realigning its capital expenditure to build confidence among investors and lenders following the Hindenburg Research report. Adani Power signed a deal in August 2022 to take over the thermal power assets of DB Power Limited (DBPL) from the Dainik Bhaskar Group for around Rs 7,017 crore enterprise valuation. It was first announced that the Adani firm will be completing the deal by October 31, 2022.