Moody's turns negative on 7 Adani companies amid bribery allegations
What's the story
Moody's Ratings has changed its credit rating outlook for seven Adani Group companies from 'stable' to 'negative.' The revision comes amid concerns over governance and the possibility of disruption after bribery and fraud charges were leveled against chairman Gautam Adani and others. The companies include Adani Ports and Special Economic Zone Limited, two limited restricted groups of Adani Green Energy, among others.
Risk factors
Adani Group's funding access and operational challenges
The negative outlook from Moody's stems from heightened risks to the Adani Group's access to funding and possible operational challenges. The firm said the allegations against Gautam Adani could undermine the conglomerate's access to funding, raise capital costs, and disrupt operations. "The charges and allegations could have a broader credit impact on all rated Adani Group issuers," Moody's warned in its statement.
Warning signs
Moody's warns of governance weaknesses and operational disruptions
Moody's has flagged possible governance weaknesses across the Adani Group. It also warned of operational disruptions that could impact capital spending plans while legal proceedings are underway. The warning comes a week after S&P Global Ratings revised its outlook on three Adani entities to negative over concerns about governance practices and potential impact on cash flows if allegations are proven or funding access weakens.
Market impact
Adani Group's market value plunges amid allegations
The latest developments have triggered a massive sell-off in Adani Group stocks and bonds. This comes after US prosecutors charged Gautam with orchestrating a $250 million bribery scheme to secure solar energy contracts in India. On November 21, the group's listed firms lost ₹2.2 lakh crore in market capitalization, one of the steepest single-day declines in its history.