India Ratings Lowers Outlook of Adani Enterprises, Adani Green Energy to ‘Negative'

The rating agency revised the outlook of Adani Enterprises' proposed non-convertible debentures to 'negative' from 'stable'. The firm has proposed to raise up to Rs 1,000 crore via NCDs.

New Delhi: India Ratings and Research on March 7 lowered the outlook of Adani Enterprises’ proposed non-convertible debentures (NCDs) to ‘negative’ from ‘stable’. It affirmed the long-term issuer rating at ‘A+’ (negative).

Adani Enterprises has proposed to raise up to Rs 1,000 crore via NCDs.

NCDs are issued by a company to the public to raise long-term funds. They can’t be converted into shares or equities. They pay interest either on a periodic basis or at maturity.

The interest rates on NCDs is comparatively higher than fixed deposits, however, as per experts, a risk-averse investor should invest in the latter.

The rating agency has also revised the outlook of Adani Green Energy’s fund-based and non-fund based limits, and proposed term loans, to ‘negative’ from ‘stable’. It affirmed the long-term issuer rating at ‘A+’ (negative).

Fund-based facilities are term loan, cash credit and overdraft, and that of non-fund based facilities are letters of credit, bank guarantees, letter of comfort, etc.

According to Business Standard, the rating agency said Adani Enterprises’ negative outlook reflects uncertainty about cash flow mismatches resulting from the revised capex plans and the possible sources of funding available which may keep the equity cover lower than 2x.

It said the negative outlook on Adani Green reflects the risks regarding the terms of refinancing upcoming debt maturities, interest rate risks, access to capital markets for raising equity. It also flagged risks about leveraging the existing unlevered assets through fresh borrowings.

Also read: Modi Government Gave Adani Special Privileges to Boost Coal Business: Report

Last month, news reports said that Adani Group was likely to buy back a part of its commercial paper borrowings ahead of its maturity. Commercial papers are unsecured, short-term debt instruments issued by companies to finance short-term liabilities.

The move is, however, one of the ways to convey that all is well in the company. Otherwise, buying back CPs doesn’t make much sense, an executive at a fund house with exposure to Adani Group’s CPs told the Morning Context.

The news outlet also reported that while the group is buying back commercial papers, there’s no clarity on the position of debentures, which are due to mature only by the end of next year.

The report added that the mutual fund industry had a debt exposure of Rs 3,700 crore to the group companies. Of this, Rs 3,500 was due in the form of commercial papers, and the remaining was due as debentures.

As on March 9, only two stocks of the Adani Group ended in the red on the BSE.

Adani Enterprises was down by 4.24% and Adani Ports and Special Economic Zone was down by 2.18% on the BSE.

Adani Green Energy was up by 5%, Adani Power (4.98%), Adani Transmission (4.99%), Adani Total Gas (4.99%), and Adani Wilmar (2.89%).