Hindenburg Effect: S&P Global downgrades outlook on 2 Adani cos to 'negative'

S&P Global Ratings downgraded the outlook on Adani Ports and Special Economic Zone and Adani Electricity to “negative” from “stable”, citing that the risks and concerns triggered by Hindenburg Research report have not been factored into its ratings.

"There is a risk that investor concerns about the group's governance and disclosures are larger than we have currently factored into our ratings, or that new investigations and negative market sentiment may lead to increased cost of capital and reduce funding access for rated entities," S&P said in a statement.

"We affirmed our issuer and issue ratings on the entities as their business fundamentals remain intact, short-term liquidity is adequate, and debt maturities in the next 12 months are manageable," it added.

The US-based short seller alleged major wrongdoings at the group, including stock price manipulation, burgeoning debt, among others. This triggered a massive sell-off in stocks of the Adani Group companies, as more than $100 billion in value got eroded in 7 trading days.

There has been a chain reaction of the 106-page long negative report by the American whistleblower.

Taking note of Hindenburg Research’s report and the consequent crash in stock prices, CRISIL Ratings on Thursday said it is keeping all its outstanding ratings on the group entities under “continuous surveillance”.

Earlier today, Adani Group’s flagship company Adani Enterprises was removed from the Dow Jones Sustainability Indices.

Fitch Ratings, however, said there is no immediate impact on the ratings of Fitch-rated Adani entities and their securities. The ratings agency said it expects no material changes to its forecast cash flow.

The negative report had challenged the success of the mega follow-on public offer (FPO) of Adani Enterprises. Although the FPO managed to sail through, the sharp fall in share prices forced billionaire Gautam Adani to withdraw the FPO and return the money to the shareholders.

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