Did rating agencies' outlook trim take a jab at Adani stocks? Group's m-cap crosses ₹9 lakh cr
4 min read . Updated: 12 Mar 2023, 02:28 PM IST
Premium- Rating agencies such as ICRA, CARE, and Ind-Ra have reduced their outlook on some Adani firms to Negative.
- In the week that ended March 10, except for Adani Ent and cement stocks, all other Adani stocks posted an upside.
Many major rating agencies have lowered their outlook in some Adani Group-backed companies to 'Negative' from 'Stable' in recent times. The reason behind lowering the outlook is due to risks in the financial flexibility of the Group after the Hindenburg report which led to a relentless selloff in these stocks in February. However, the rating actions could not tame the bulls in the majority of Adani stocks. In the week that ended March 10th, except for Adani Enterprises and the cement business, the rest of the Adani-led stocks surged in the week.
On Friday, Adani stocks saw a mixed sentiment. The flagship firm Adani Enterprises stock dropped by nearly 3%, while Adani Wilmar tumbled by at least 4.5%. Adani Ports closed on a flat note. Also, in cement stocks, Ambuja Cements dipped by 2%, and ACC shed nearly a percent. Media stock NDTV was also down by nearly 5%.
On the positive side were Adani Transmission, Adani Total Gas, and Adani Green Energy as they touched 5% upper circuit. Adani Power also gained by nearly 5% on BSE.
But by end of March 10th, Adani Group's total market value stood around nearly ₹9.3 lakh crore. This is higher compared to the start of the week.
On March 6th, the group's market value together was near ₹8.85 lakh crore. During the end of February month, the market cap was around ₹6.82 lakh crore.
From March 6th to 10th, Adani Enterprises' stock plunged by nearly 4.4% on BSE. While Ambuja and ACC stocks dipped by nearly 2% and 1% respectively.
Rest all have recorded an upside!
In the week, Adani Transmission, Adani Total Gas, and Adani Green Energy posted a nearly 16% surge each in their stock prices on BSE. Their market cap also regained over ₹1 lakh crore mark.
Also, Adani Power climbed by over 15% during the week. While Adani Ports and NDTV stock jumped over a percent. Lastly, Adani Wilmar climbed over 3%.
As of March 10, 2023, Adani Enterprises' m-cap is around ₹2,16,195.51 crore, while Adani Ports' m-cap stood at ₹1,50,745.3 crore. These two are the most valued firms of the Adani Group in terms of market share.
Further, Adani Transmission's m-cap is currently at ₹1,00,823.81 crore, Adani Total Gas at ₹1,04,498.46 crore, and Adani Green Energy at ₹1,08,197.34 crore. Also, Adani Power's m-cap is at ₹79,163.67 crore, Adani Wilmar's at ₹58,914.43 crore, Ambuja at ₹75,126.89 crore, ACC at ₹34,687.12 crore, and NDTV at ₹1,507.02 crore.
Moody's-backed ICRA was among the first to trim its outlook to Negative on two Adani companies on March 3rd. These were Adani Ports and Adani Total Gas. Earlier, their outlook was stable. However, ICRA reaffirmed its rating.
According to ICRA, the reason behind the lowering in the outlook of these two Adani companies was due to a deterioration in the group's financial flexibility.
Adani Group's financial flexibility has deteriorated after Hindenburg's report on January 24. The short seller's critical report led to steep declines in share prices and an increase in the yield of international bonds raised by the group's entities.
While last week, India Ratings also assigned a Negative outlook on Adani Green Energy and Adani Enterprises from their previous 'Stable'. Also, CARE Edge trimmed its outlook to Negative on Adani Enterprises.
In regards to Adani Enterprises, Ind-Ra's negative outlook on the company is due to the uncertainty on the 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.
While CARE Edge's rating action on Adani's flagship company was due to the expected moderation in the financial flexibility of the Adani group in case of any adverse outcome or observations from the ongoing regulatory and legal scrutiny directed by the Honourable Supreme Court of India in connection with various allegations against the Adani group of companies.
After the apex court's direction, market regulator Sebi is expected to complete the examination pertaining to the lapses in reporting mechanisms, disclosure adequacies, and manipulation of stock prices amidst other aspects of investigation in a time-bound manner.
However, both Ind-Ra and CARE believe that the latest fundraising of ₹15,446 crore from GQG Partners alleviates the risk to some extent in these companies and could aid in liquidity to a certain degree.
Meanwhile, the cement stocks were under pressure after a report stated that Gautam Adani, the chairperson of the Adani Group, is planning to sell a stake in the cement business for $450 million with the aim to reduce debt. Adani is looking to sell a 4-5% stake in Ambuja Cement to international lenders, reported Financial Times quoting sources.
Overall, Adani stocks were in the green due to the mega block deal by GQG Partners which sort of brings some comfort among investors.