NEW DELHI: In what could be a setback for Adani Group stocks, which witnessed a big recovery this week, ratings agency ICRA has revised the outlook for Adani Total Gas (ATGL) and Adani Ports & Special Economic Zone (APSEZ) from ‘Stable’ to ‘Negative’ on account of deterioration in Adani Group’s financial flexibility, following a sharp decline in share prices and an increase in yield of international bonds raised by the Group entities.
This change in rating outlook comes a day after GQG Partners, a US-based global equity investment boutique, bought shares worth Rs 15,446 crore in four Adani Group firms, leading to a sharp surge in Group share prices.ICRA said their action follows a report published by US-based short seller Hindenburg Research. The report accused the port-to-power conglomerate of stock price manipulation. The allegations triggered a stock rout, which wiped out the market value of Adani Group by about 60 per cent.
ICRA noted that the Group’s strong financial flexibility and APSEZ’s track record of refinancing a large part of its debt with borrowings (mostly from overseas debt capital markets) of longer tenures at lower interest rates were the key credit strengths, which have been adversely impacted. APSEZ’s net debt levels were at Rs 39,277 crore as of December 31, 2022.
ICRA said APSEZL has maintained an aggressive acquisition policy and capex plans but in the wake of recent developments, the company has revised down its capex plans for FY2024 to Rs 4,000-4,500 crore from Rs 6,000-8,000 crore. Any significant debt-funded acquisition that will impact the deleveraging plans will be a rating sensitivity, said ICRA.
According to ICRA, APSEZ’s ratings could be revised downwards if the financial flexibility of the Group deteriorates on a sustained basis, impacting its ability to raise funds at competitive rates and increasing the cost of funding, or if there are any adverse regulatory actions.
On ATGL, ICRA said it sees an increased risk of regulatory/legal scrutiny on Adani Group entities and its impact on the credit quality of ATGL will be monitored. Further, any review of investment in ATGL by France’s TotalEnergies SE, in the backdrop of current developments leading to any weakening of linkage, remains a sensitivity factor and the developments will be monitored. On ATGL’s large capex requirements of Rs 19,000-20,000 crore to be incurred over an 8-10 year period, ICRA said.