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Fitch Ratings cut the outlook on Adani Energy Solutions Ltd. to negative on concerns that US investigations could reveal that the group’s corporate governance practices are weaker than its expectation. The US indictment may lead to “negative rating action in the near to medium term” for Adani Energy, according to a statement by Fitch dated March 9.
Adani Electricity Mumbai taken off negative list Separately, the assessor removed Adani Electricity Mumbai Ltd. from negative watch, but said the probe could put pressure on its rating. Fitch affirmed ratings for both the firms at BBB-, just a notch above "junk" rating.
Junk rating A junk rating for a corporate refers to a credit rating below investment grade, indicating a higher risk of default. These bonds or debt instruments are considered high-yield, speculative investments with greater risk but potentially higher returns. “Fitch will monitor the investigations for any evidence of weakness in the Adani entities’ governance practices and internal controls as well as the impact on the financial flexibility,” of Adani Electricity and Adani Energy, analysts including Girish Madan said.
The rating agency’s comments underscore challenges facing the Adani Group as it grapples with fallout among foreign investors in the wake of a probe by the US Department of Justice. A spokesperson for the Adani Group didn’t immediately reply to an email seeking comment on Monday. US federal prosecutors in November alleged that Gautam Adani, one of the world’s richest people, and his associates promised to pay more than $250 million in bribes to Indian government officials to win solar energy contracts, and concealed the plan as they sought to raise money from US investors.
The Adani Group has denied the allegations as baseless and said it would seek legal recourse. To be sure, Fitch said risks associated with the group’s liquidity and funding requirements have moderated. The dollar bond of an Adani Energy unit due in 2036 fell to the lowest level in a week, while Adani Electricity’s 2030 note was steady after declining for three weeks in a row, according to data compiled by Bloomberg.
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