Fitch Ratings has placed several foreign currency bond ratings of Adani Group entities under 'negative watch' following the indictment initiated by the US Securities and Exchange Commission and the Department of Justice against Gautam Adani, the group chairman, and board members of Adani Green Energy Ltd.
The ratings affected include the Long-Term US dollar senior unsecured bonds of Adani Ports and Special Economic Zone Ltd (APSEZ), the Australian dollar senior secured bonds of North Queensland Export Terminal Pty Ltd (NQXT), and the US dollar senior secured bonds of Mumbai International Airport Ltd (MIAL). Fitch explained that the Rating Watch Negative (RWN) reflects heightened corporate governance risks and potential contagion effects that could affect funding access and liquidity for these entities if the governance concerns materialise as a result of the US indictment.
Fitch further noted that while the indictment primarily involves key leadership at Adani Green Energy Ltd (AGEL), the outcome could indicate significantly weaker corporate governance across the Adani Group. This, they stated, might lead to additional negative rating actions. The agency pointed out that two of the indicted board members are part of the founding shareholders of the Adani Group, which owns a majority stake in all rated entities, and these directors also serve on the boards of other rated entities, amplifying the risk of contagion and governance concerns across the group.
The agency has also revised the outlook from 'Stable' to 'Negative' for the ratings of Adani International Container Terminal Private Ltd (AICTPL), Adani Green Energy Ltd Restricted Group 1 (AGEL RG1), Adani Green Energy Ltd Restricted Group 2 (AGEL RG2), and Adani Energy Solutions Ltd Restricted Group (AESL RG) US dollar senior secured bonds. Fitch clarified that the ratings of these entities were affirmed due to the ring-fencing structure of their restricted groups, stable operating cash flows, and nearly fully amortising debt, which minimise potential contagion impacts. However, the Negative Outlook reflects risks of higher funding costs and weaknesses in governance and internal controls.
Fitch acknowledged that while the rated entities currently have sufficient near-term liquidity, the medium-term funding outlook could be adversely impacted by these developments. The group may face challenges in securing offshore funding, increasing reliance on onshore sources, which could heighten refinancing risks and reduce operating cash flows due to higher funding costs. Fitch warned that such developments could significantly affect growth plans for entities like APSEZ, although the company has some flexibility in its capital expenditure plans.
According to the indictment, between 2020 and 2024, Gautam Adani and other executives allegedly agreed to pay over $250 million in bribes to Indian government officials to secure lucrative solar energy supply contracts.
