ICRA revises outlook for two Adani companies to 'negative'

It reaffirmed the ratings for both companies.

The reason behind the revision in outlook is primarily attributed to the decrease in the Adani Group's financial flexibility, which has been impacted by a significant drop in share prices.

This decline in share prices was triggered by a negative report issued by Hindenburg, a US-based short seller, which had a damaging effect on the group's reputation and financial stability.

According to ICRA, Adani Ports' ability to refinance a significant portion of its debt with long-term borrowings at lower interest rates has been a major credit strength for the company. However, this strength has been negatively impacted following the attack by Hindenburg.

ICRA has also noted an elevated risk of regulatory and legal scrutiny on Adani Group companies, which could potentially impact the credit quality of Adani Ports. The agency has indicated that it will closely monitor any such developments and assess their potential impact on the creditworthiness of the company.

Explaining the rationale behind ratings reaffirmation for Adani Ports, ICRA said it continues to factor in the strong business profile of the company, marked by its favourable operating characteristics, geographically spread-out footprint, diversified cargo mix and long-term customer tie-ups.

ICRA has AA+ rating on NCDs of Adani Ports, long term-fund and non fund based instruments and an A1+ rating on the commercial paper programme.

On Adani Total Gas, ICRA said the company has large capex needs over the longer term which need significant debt funding.

The adverse sentiments surrounding the Adani Group may hinder Adani Ports' ability to raise funds from both domestic and international markets. Additionally, it may also lead to an increase in the cost of capital for the company.

ICRA has assigned AA- rating for Adani Ports' long-term fund-based limit instruments, and A1+ rating for its short-term fund and non-fund-based instruments.

"The ratings continue to factor in ATGL’s healthy financial risk profile, characterized by adequate return and debt protection metrics because of the robust cash generation from its ongoing business," ICRA said.