[ad_1]
Mumbai: S&P on Monday revised its outlook on two Adani Group companies to stable from negative citing low downside risk as regulatory investigations into the group have so far uncovered no wrongdoing.
S&P reaffirmed its BBB- rating for Adani Ports and Special Economic Zone (APSEZ) and Adani Electricity Mumbai (AEM).
However, the rating agency said it viewed governance as a relative weakness at the group given high promoter control and related party transactions.
The development comes just days before the one-year anniversary of the Hindenburg report that levelled several allegations against the Adani Group including stock price manipulation. The report sparked a rout in Adani stocks and dried up the group’s access to external capital in the following months.
Stock prices have since partially recovered for some Adani stocks and have even surpassed the pre-Hindenburg levels in some cases. With that the group’s access to funding has also improved. In fact, the group’s “restored access to funding” was one of the triggers for S&P to revise its outlook on the two Adani companies.
The repayment of $2.15 billion of share-backed financing by Adani Group promoters in March last year has also aided the revision of outlook, as per the S&P analysts. “We understand that the promoters have not raised any fresh share-backed loans since, which reduces the risk of sharp share price declines and margin calls.”
Giving the rationale for their revised outlook, S&P analysts led by Cheng Jia Ong noted in their report that the conclusion of most regulatory investigations into the group without evidence of wrongdoing has reduced downside risk.
“Investigations have not uncovered any specific wrongdoing related to allegations in the report of non-compliance of minimum public shareholding, non-disclosures of related party transactions, or stock price manipulation,” the analysts said.
Earlier this month, in a judgement the Supreme Court said that the Securities and Exch-ange Board of India (Sebi) had conducted a thorough investigation into the allegations levelled by the Hindenburg report and no more probes were needed. The capital markets regulator has so far completed its investigation of 22 of the 24 allegations against the Adani portfolio entities.
The apex court has given Sebi three months to complete its investigation of the two remaining allegations, which relate to Foreign Portfolio Investors (FPI).
The S&P analysts also noted that the Supreme Court-appointed independent panel of experts did not find any instance of regulatory failure or breach in its report submitted in May 2023. “We are not aware of any foreign regulators with oversight of Adani Group’s overseas business who have initiated any investigations to date,” they noted.
But S&P continued to flag concerns around governance at the Adani Group.
“We continue to assess governance as a relative weakness in our rating analysis of Adani Group entities, with a focus on promoter control, related-party transactions, and aggressive growth appetite,” noted the analysts.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 22 Jan 2024, 10:40 PM IST
[ad_2]
Source link