S&P Global Ratings will be answering many questions about India-based Adani Group in the coming months, the credit rating agency said on Wednesday.
In a statement issued, S&P Global said investors seek clarity on the credit impact of a string of allegations against the group in a short-seller report published in late January, and on the findings of a recently launched Supreme Court investigation.
"Like much of the market, we are waiting for more information about the Adani Group before deciding the direction of our ratings. We believe further details on governance and funding risks over the next 12-24 months would drive the ratings," said Credit Analyst Abhishek Dangra.
"Downside risks could stem not just from restricted access to funding, but also from our broader view on the quality of the group's governance. For example, we are likely to take a negative rating action should any investigation uncover serious wrongdoing. This may include previously undisclosed material related-party loans, cash leakage, or misreporting," S&P Global said.
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"Conversely, to revise the outlook to stable, we will need to be convinced that governance practices in the group and funding access will improve in line with an investment-grade credit profile," S&P Global added.
According to S&P Global, in February 2023 it had revised to negative the rating outlook on Adani Electricity Mumbai Ltd and Adani Ports and Special Economic Zone Ltd., to reflect the governance risks and funding challenges of the wider group. The credit rating agency also affirmed the 'BBB-' ratings on these entities.
Investors want to understand the reasons for the rating action, and the watchpoints and timeline for the negative outlook. They broadly want insight into the funding and governance risks that will determine whether these entities remain investment grade or become fallen angels, S&P Global said.
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"Assessing the group's creditworthiness, leverage, and liquidity position is difficult given our reliance on public information for unrated listed entities. We also rely on limited public disclosures of unlisted, private entities, and of funding or liabilities at the promoter level," said Credit Analyst Richard Langberg.
"We already assess governance as a relative weakness in our rating analysis of Adani Group entities due to significant promoter control, frequent related-party transactions, lack of transparency of the credit position of the promoter-held entities, and aggressive growth appetite," added Langberg.