New Delhi: Moody’s Investor Service on Friday revised downwards the rating outlook on four Adani Group companies to ‘negative’ from ‘stable’ after a significant and rapid decline in market value following a report by US-based short-seller Hindenburg Research. In a statement, Moody’s said the rating outlook for Adani Green Energy Ltd, Adani Green Energy Restricted Group, Adani Transmission Step-One Ltd and Adani Electricity Mumbai Ltd has been changed to ‘negative’ from ‘stable’.

“These rating actions follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the Group,” it said. Adani group companies have lost USD 100 billion in market value since the US short-seller Hindenburg Research came out with a damning report alleging fraud at the conglomerate helmed by Gautam Adani. Adani Group has denied all allegations and threatened to sue Hindenburg.

Moody’s said it has affirmed the ratings on eight Adani Group companies.

“At the same time, Moody’s has changed the outlook on four issuers to negative from stable, while maintaining the stable outlook on other four companies,” the statement said.

The rating outlook was downgraded for the group’s renewable energy firms Adani Green Energy Ltd (AGEL) and Adani Green Energy Restricted Group (AGEL RG-1) comprising Adani Green Energy (UP), Parampujya Solar Energy Pvt Ltd and Prayatna Developers Private Ltd. Its transmission unit Adani Transmission Step-One Ltd (ATSOL) and Adani Electricity Mumbai Ltd (AEML) too faced similar action.

However, the outlook for Adani Ports and Special Economic Zone Ltd (APSEZ) and Adani International Container Terminal Pvt Ltd was unchanged at stable. The outlook for Adani Green Energy Restricted Group (AGEL RG-2) comprising Wardha Solar (Maharashtra), Kodangal Solar and Adani Renewable Energy (Rj) as well as Adani Transmission Restricted Group 1 (ATL RG1) comprising Barmer Power Transmission Service, Raipur-Rajnandgaon-Warora Transmission Ltd, Sipat Transmission, Thar Power Transmission Service, Hadoti Power Transmission Service and Chhattisgarh-WR Transmission was also kept unchanged.

The change in AGEL’s outlook was considering “the company’s large capital spending program and dependence on sponsor support, potentially in the form of subordinated debt or shareholder loans, which will likely be less certain in the current environment,” Moody’s said. It further added that the negative outlook also factors in the company’s significant refinancing needs of around USD 2.7 billion in fiscal year ending March 2025 and limited headroom in its credit metrics to manage any material increase in funding costs.

The change in the outlook on AGEL RG-1 factors in the refinancing risk associated with USD 500 million of bonds maturing in December 2024. “Moody’s recognizes that the project finance structure of AGEL RG-1 provides protection from any contagion risk from the broader Adani Group,” it said. The change in the outlook on ATSOL considers the modest headroom in ATL’s credit metrics relative to the minimum tolerance level under Moody’s base case scenario, which limits the group’s ability to withstand a material increase in funding cost or reduced funding access.

The change in outlook for AEML reflects the likely reduction in its funding access and reduced ability to manage any material increase in funding costs given the limited headroom in its credit metrics under Moody’s base case scenario, the statement said. Moody’s said given the negative outlook, an upgrade in the ratings of the four firms was unlikely in the near term.

“However, Moody’s could change the rating outlook to stable, if the entities can demonstrate their access to the capital markets to meet their growth funding and refinancing requirements; and if their management can effectively implement timely and effective countermeasures to preserve the companies’ credit metrics – including a reduction in capital spending or financial leverage with support from the promoter. “A revision in the outlook to stable is further predicated on there being no material increase in related party transactions to provide funding support to other group entities,” it added.