Shares of Adani Group’s flagship firm Adani Enterprises Ltd fell after six consecutive sessions of gains today after CARE Ratings downgraded the outlook on Gautam Adani’s flagship entity from stable to negative while considering the ongoing regulatory and legal scrutiny. India Ratings too has downgraded the outlook on Adani Enterprises Ltd (AEL) along with Adani Green Energy Ltd (AGEL) from “stable” to “negative” while affirming the long-term issuer rating for both at “A+”.
The ratings agency said AEL’s 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. Adani Enterprises plans to raise up to Rs 1,000 crore via non-convertible debentures (NCDs).
Adani Enterprises shares slipped up to 6.66% to Rs 1903.85 against the previous close of Rs 2039.65 on BSE. Later, Adani Enterprises shares closed 4.24% lower at Rs 1953. Earlier, the stock opened higher at Rs 2044.10 on BSE.
The stock is down 49.39 per cent this year. In a year, the Adani Enterprises stock has risen 18%. Adani Enterprises’ market cap slipped to Rs 2.22 lakh crore in the current session. Total 13.33 lakh shares changed hands amounting to a turnover of Rs 262.66 crore on BSE.
In terms of technicals, the relative strength index (RSI) of Adani Enterprises stands at 52.4, signaling it’s trading neither in the overbought nor in the oversold zone. Adani Enterprises stock has a one-year beta of 1.8, indicating very high volatility during the period. Adani Enterprises shares stand higher than the 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.
The stock hit a 52 week high of Rs 4189.55 on December 21, 2022 and a 52 week low of Rs 1017.10 on February 3, 2023. At the current level, the stock is down 53.39% from its yearly high.
“The negative outlook is due to expected moderation in financial flexibility of the Adani Group in case of any adverse outcome or observations in on-going regulatory and legal scrutiny directed by Honourable Supreme Court of India in connection with various allegations against Adani group companies,” CARE said in a report.
Conversely, if the outcome is satisfactory, then the financial flexibility of the Adani group may be restored and may lead to a revision of outlook to stable.
Any adverse outcome or observation on corporate governance practices shall impair the Adani group’s access to capital, both debt and equity at envisaged rates or quantum, and are viewed as potential downside risks and thus continue to be key rating monitorable, the ratings agency said.
CARE said the company’s strengths continue to be tempered by the incubation risk associated with large-sized projects in diverse areas wherein AEL does not possess prior experience, large capex envisaged in the airport segment and continued dependence on subcontractors for road project execution.
“Besides, the inherent regulatory risk with respect to the timely receipt of tariff order in the airports segment and traffic risk in the toll roads projects are continued rating weaknesses. Volatility in commodity price movements, foreign exchange rate fluctuations and working capital intensive nature of operations for coal trading, solar module manufacturing and mining services segment respectively are other credit weaknesses,” it added.
The Hindenburg Research report that jolted the Adani Group’s fortunes and future plans came on January 24 just before Adani Enterprises’ Rs 20,000 crore follow-on-public offer (FPO) opened. The Hindenburg report accused the Adani Group of accounting fraud and stock manipulation.
The Adani Group has denied Hindenburg’s allegations as being “malicious”, “baseless”, and a “calculated attack on India.”
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