ICRA has revised the outlook for Adani Total Gas Limited (ATGL) and Adani Ports and Special Economic Zone Limited (APSEZL) to Negative on account of the deterioration in the Adani Group’s financial flexibility, following a sharp decline in share prices and an increase in the yield of international bonds raised by the Adani group entities.

This followed a report published by US-based short seller Hindenburg. ICRA notes that while ATGL has staggered some of the capex plans over the next two years considering progress achieved in projects awarded in ninth and tenth rounds. Further, ATGL has funding tie-ups to meet the capex requirements in the near term, it has large capex requirements over the longer term which need significant debt funding. Hence, the Adani Group’s reduced financial flexibility can impact ATGL’s ability to raise funds from the domestic and international markets and result in higher cost of capital.

“ICRA will be monitoring the Adani Group’s ability to raise funds from the domestic/global market as equity/debt at competitive rates. Further, ICRA also sees an increased risk of regulatory/legal scrutiny on the Adani Group entities and its impact on the credit quality of ATGL will be monitored,” the rating agency said.

ICRA noted that any review of investment in ATGL by Total, in the backdrop of current developments leading to any weakening of linkage remains a sensitivity factor and the developments will be monitored.

ICRA noted that the Group’s strong financial flexibility and APSEZL’s track record of refinancing a large part of its debt with borrowings (mostly from overseas debt capital markets) of longer tenures at lower interest rates were the key credit strengths, which have been adversely impacted. ICRA will be monitoring the Group’s ability to raise funds from domestic/global market as equity/debt at competitive rates. Further, ICRA sees an increased risk of regulatory/legal scrutiny on the group entities and its impact on the credit quality of APSEZL will be monitored. However, ICRA notes that the APSEZL’s liquidity profile remains robust and a large repayment of international bond of $650 million is due only in FY2025. 

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