There is no "immediate impact" on Adani entities and their securities under its coverage following a short-seller report alleging malpractices, according to Fitch Ratings.
Fitch expects "no material changes" to its cash flow forecast.
"There are also no near-term significant offshore bond maturities—earliest in June 2024 for Adani Ports and Special Economic Zone Ltd. and December 2024 for Adani Green Energy Ltd.; and 2026 or beyond for all other entities—reducing refinancing risks and near-term liquidity risks," it added.
Fitch currently has ratings on eight entities/restricted groups within the Adani group:
Adani Transmission Ltd. (BBB-/Stable)
Adani Electricity Mumbai Ltd. (Senior secured U.S. dollar notes rated at ‘BBB-')
Adani Ports and Special Economic Zone Ltd. (BBB-/Stable)
Adani International Container Terminal Private Ltd. (Senior secured US dollar notes rated at ‘BBB-'/Stable)
Adani Transmission Restricted Group 1 (RG1, BBB-/Stable)
Adani Green Energy Restricted Group 2 (RG2, senior secured U.S. dollar notes ‘BBB-'/Stable)
Mumbai International Airport Ltd. (Senior secured U.S. dollar notes ‘BB+'/Stable)
It said the rated businesses have relatively stable cash flow, with the founding shareholders of Adani Group effectively owning the majority of shares. "Some of the rated businesses (Adani Electricity Mumbai and Adani Green Energy) have strategic investors with board representation. Furthermore, the offshore bonds of all rated entities except Adani Ports incorporate a cash flow waterfall mechanism and covenants which restrict cash upstreaming to shareholders and limit indebtedness," it added.
It said that related-party transactions at these entities outside of the normal course of business are also limited, with only some of these businesses having received loans from related parties which have been repaid over time with investment proceeds from the Qatar Investment Authority and Abu-Dhabi based IHC.
"The credit profiles of other entities with meaningful related-party loans—such as Adani Green Energy and Mumbai International Airport—benefit from deep contractual subordination of these loans through both a cash flow waterfall mechanism and security."
It added that credit ratings at ‘BBB-' for Adani Ports, Adani International Container Terminal, Adani Transmission and Adani Green are constrained by India's country ceiling of BBB-. "Barring this constraint, the entities' credit profiles would be commensurate with a ‘BBB' rating."
On Adani Ports, Fitch said its underlying credit assessment reflects its status as India's largest commercial seaport operator. "The credit assessment is also supported by efficient operations, resilient volumes throughout economic cycles, almost 50% of steady cargo, and flexibility in its investment plans."
It said that even if one discounts all cash balances, Fitch's gross leverage estimate is about 3.6x over the period, still within its underlying credit assessment trigger.
It said it is monitoring the group's credit profile and will be "looking closely" at changes to the rated entities' access to financing or cost of financing on a long-term basis, unfavourable regulatory developments or ESG-related matters that could affect credit profiles.
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.
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