Rating agency Fitch warned of governance weaknesses at the sponsor level of Adani group companies whereby its unrestricted entities like Adani Transmission (rated BBB-) and Adani Ports and SEZ (rated BBB-) are exposed to higher “contagion risks” despite stable cash-generation. Any contagion impact could affect these entities’ financial flexibility despite the overall stable outlook across these companies given that they do not have restricted subsidiaries. Fitch however said that contagion risk was lower at Adani Group’s six other rated companies that have restricted subsidiaries (Term of the Day, explained below). This is because these companies’ restricted subsidiaries have a credit profile supported by “structural enhancements” like defined “cash waterfalls and limits on the incurrence of additional debt”. Fitch noted that most senior debt at the Adani Group’s rated Indian entities was offshore and largely in the form of dollar bonds maturing only from mid-2024. On this front, the liquidity position at all rated entities or restricted groups would benefit from cash flow generation from January 2023 to March 2024.

Thus, despite cashflow generating abilities in Adani Transmission and Adani Ports, their ratings are capped at BBB- while other restricted group entities do not have any rating cap if credit factors support a rating higher than BBB-.

Adani Group companies’ dollar bonds were trading flat.

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