Contagion risks loom over Adani Transmission and Adani Ports, says Fitch

Ratings agency Fitch has said that two Adani Group subsidiaries are exposed to heightened contagion risks as a result of governance weakness at the conglomerate’s sponsor level. Adani Transmission Limited and Adani Ports and Special Economic Zone are prone to risks which could affect financial flexibility, said Fitch. The report further added that this could affect financial flexibility, if not addressed properly.

The governance weakness is at the sponsor level, noted the ratings agency, which is exposing the group’s stable cash-generative corporate-like issuers like Adani Transmission and Adani Ports to high contagion risk.

Most of the senior debt at the Adani group’s rated Indian entities as of end-December 2022 is offshore and largely secured, says Fitch Ratings.

Fitch believes contagion risk is lower for restricted groups. “The restricted group’s credit profile is supported by structural enhancements, such as a defined cash waterfall and limits on the incurrence of additional debt. Hence, the ratings of restricted groups would not be constrained at ‘BBB-’ at this stage if other factors driving their credit quality improve.”

Meanwhile, Adani stocks were back in focus on Wednesday after the exchange sought clarification from the group after some media reports. Adani Transmission, Adani Total Gas, and Adani Green hit a lower circuit of 5 per cent each, whereas Adani Power and Adani Wilmar mere slightly down. However, Adani Enterprises and Adani Ports were trading higher
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