An Adani Group Firm May Soon Have Higher Rating Than The Sovereign

The Adani Group CFO further said that an announcement will soon be made of one of the group firms becoming the first Indian firm with all its business in the country, to be rated higher than the sovereign.

However, the company is yet to be named.

The move comes amid lower debt and rapid growth in business for the ports-to-energy conglomerate helmed by Gautam Adani, Asia's richest man.

Most firms including public sector giants are rated at par or below the sovereign rating.

Global credit rating agencies including S&P and Fitch have assigned the lowest investment grade rating of 'BBB-' to India.

In June 2021, Fitch Ratings had upgraded rival industrialist Mukesh Ambani's Reliance Industries Ltd to a notch above India's sovereign rating citing an improving debt profile.

But RIL, some may believe, has business outside India as well. And Singh at the investor meeting made it a point to say that Adani Group company will be the first Indian firm with all its business in the country to achieve that kind of rating.

Currently, Adani Transmission Ltd, one of the six listed firms of the Adani Group, is rated at par with the sovereign.

It enjoys BBB- (negative outlook) rating by Fitch, BBB- rating by S&P and Baa3 (stable outlook) rating by Moody's Investors Service. These are the same ratings that the three agencies have assigned to India as well.

Adani Transmission’s S&P rating withdrawn

Earlier today, S&P Global Ratings withdrew its rating for Adani Transmission, ending an assessment of barely investment grade at the firm's request.

The withdrawal of the BBB- rating follows a restructuring at the company, part of the conglomerate of Gautam Adani. The revamp didn’t weaken the protection for bondholders, S&P said.

S&P still rates Adani Ports and Special Economic Zone Ltd at BBB- with a stable outlook, according to a spokesman.

The shift comes just a few weeks after a report by CreditSights, which called the group “deeply overleveraged." The research firm later revised its label, though stuck to its main conclusion that the conglomerate, which owns India’s largest private-sector port and airport operator, has too much debt.

In a rebuttal to CreditSights, Adani Group termed the leverage ratios of its companies “healthy."

'Conglomerate isn't over-leveraged

During the investor meeting, Singh said contrary to popular belief, the conglomerate isn't over-leveraged and its expansion has been equally funded by equity.

Adani Green Energy Ltd - the group's renewable energy arm - too has ratings equivalent to the sovereign.

The group, which was once a medium-sized trading outfit based out of Ahmedabad - has seen a meteoric rise in recent years. The market capitalisation of Adani group companies has surpassed that of Tatas, India's largest conglomerate, and Reliance Industries.

Adani started off as a commodity trader in 1988 and expanded rapidly into ports, airports, roads, power, renewable energy, power transmission, gas distribution, real estate, FMCG, cement, data centres and media business.

The stunning share price rises of Adani's six listed firms have helped propel him to become the country's richest and the world's third-richest man.

The report further quoted Singh as saying that the group wants to increase its share free float in a move that could improve trading liquidity.

The six group firms have a small free float - the number of shares actually available to be traded by the public - leading to greater share price volatility, some analysts say.

Adani Enterprises, the Adani Group's new business incubator, has a free float of 19.6%. In contrast, the free float of Reliance, India's biggest listed company, is 50.4%, and that of Tata Consultancy Services is 27.7%.

The Adani Group CFO said the group was working on a plan to increase the free float but did not share details.

For the rating upgrade, Singh cited growth in business volume and cash profits that are enough to service debt.

With agency inputs

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.