S&P revises outlook on Adani Ports, other group firms to negative; flags funding, cash flow risks after bribery charges

S&P said the US indictment could impair funding access and increase borrowing costs across the Adani Group.

S&P Global Ratings has revised its outlook on three Adani Group entities -- Adani Ports and SEZ Ltd, Adani Green Energy Ltd (AGEL RG2) and Adani Electricity Mumbai Ltd, Adani Ports and Special Economic Zone Ltd -- to negative, in a rating action on five Adani Group entities. The rating firm cited potential risks to Adani Group’s cash flows, access to funding, funding costs and governance, following bribery charges filed in the US against founder Gautam Adani.

The rating outlook changes come in the wake of US prosecutors indicting Gautam Adani and two other board representatives for their alleged involvement in a $250 million bribery scheme related to solar power contracts in India.

S&P affirmed its 'BBB-' rating on Adani Electricity and Adani Ports, as well as its 'BB+' issue rating on AGEL RG2. However, it highlighted potential risks to the Adani Group’s cash flows, governance practices, and access to funding if the allegations are proven or if investor confidence in the group deteriorates.

Also read | Adani stocks extend fall today after steep losses amid US bribery allegations against Gautam Adani

The ratings agency noted that the indictment could impair funding access and increase borrowing costs across the Adani Group, given that the founder holds board positions in multiple group entities. S&P warned of the possibility that domestic and international banks, as well as bond market investors, could impose group-level exposure limits, affecting the funding of rated entities.

Although the rated entities have no immediate major debt maturities, S&P flagged Adani group’s reliance on regular equity and debt market access for growth and refinancing needs as a vulnerability.

S&P also pointed out that the allegations come on top of scrutiny the Adani group has faced since the Hindenburg Research report earlier this year, which led to investigations by the Indian Supreme Court and the capital markets regulator. "The allegations could renew questions over the group’s governance practices and damage its reputation," S&P said, adding that it would monitor for any signs of weakened funding access or concerns from lenders, including reduced funding limits, nonrenewal of facilities, or higher credit spreads.

Adani Green Energy’s AGEL RG2, though ring fenced from the parent, was included in the outlook revision because it remains linked to the allegations against the broader group. S&P stated that its negative outlook reflects the potential for materially weakened cash flows due to higher funding costs, governance risks, and reputational damage.

The group’s ability to execute its large growth plans, in addition to regular refinancing, hinges on retaining investor confidence and access to capital. If the allegations of illegal activities or misleading statements are proven, S&P said it could further downgrade its assessment of the group’s governance, citing its concentrated ownership structure involving promoters, family entities, and trusts. “If allegations of illegal activities prove true, we could reassess Adani Group’s governance more negatively," it said.

The Adani Group has already faced significant fallout, with its listed entities losing Rs 2.2 lakh crore in market value on November 21. Shares of Adani Enterprises extended losses on November 22, after falling 23 percent the previous day; Adani Green Energy and Adani Energy Solutions too, fell further after dropping 20 percent, each. International bonds issued by Adani entities have also seen record declines.

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