In a fresh setback to the embattled Adani group, S&P Global Ratings on February 3 revised the outlook on its ratings on Adani Ports and Special Economic Zone and Adani Electricity Mumbai to negative from stable.
Adani Ports and Adani Electricity are both rated BBB- by S&P.
"There is a risk that investor concerns about the group's governance and disclosures are larger than we have currently factored into our ratings, or that new investigations and negative market sentiment may lead to increased cost of capital and reduce funding access for rated entities," S&P said in a statement.
"As a result, we revised the rating outlook to negative from stable on Adani Electricity and Adani Ports. We affirmed our issuer and issue ratings on the entities as their business fundamentals remain intact, short-term liquidity is adequate, and debt maturities in the next 12 months are manageable. The negative outlook reflects the risk of a deterioration in the credit profile of Adani Ports and Adani Electricity Mumbai due to governance risks and funding challenges for the larger Adani Group," it added.
The downward revision in the outlook on the ratings of the two companies comes after the entire Adani group was plunged into a crisis following a report by US-based Hindenburg Research, which alleged gaps in the group's financials, high debt burden, and overvaluation. The result has been a collapse in the share prices of the group's companies which forced the Group to cancel its Rs 20,000-crore follow-on share sale.
In its statement released on February 3, S&P said the allegations may hit Adani group's ability to raise fresh equity or borrow.
S&P's own statement closely followed that from the Reserve Bank of India, which said the Indian banking sector remains resilient and stable amid speculation of potential risk to system from banks' exposure to the Adani group.
"Negative news flow about the Adani Group could hurt investor perceptions of rated entities. Governance concerns, and regulatory scrutiny on the group may create challenges in securing fresh funding. The domestic banking system, as well as some international banks and bond market investors, look at the risk of Adani entities as a group, and many set group limits on their exposure," S&P said.
"We assess governance as a relative weakness in our rating analysis of Adani Group entities, with a focus on promoter control, related-party transactions, and aggressive growth appetite," it added.
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