The 'governance weaknesses' at the sponsor level and other Adani group entities expose even the group's stable cash-generative companies like Adani Transmission and Adani Ports and Special Economic Zone Limited (APSEZ) to higher contagion risks, according to Fitch Ratings.

This, according to Fitch, could affect financial flexibility, if not addressed properly. "Our lower governance assessment now constrains their ratings at 'BBB-'," the ratings agency says.

Fitch, however, says that '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," the ratings agency says.

This comes days after Fitch Ratings affirmed 'BBB-' rating to Adani Ports and Special Economic Zone Limited's (APSEZ) long-term foreign currency Issuer Default Rating with a 'stable' outlook. Fitch had also affirmed the 'BBB-' rating on the $400-million senior secured notes issued by the restricted group of Adani Transmission. The restricted group consists of six issuing special purpose vehicles (SPVs), and one non-issuing SPV. It includes six co-issuers — Barmer Power Transmission Service, Chhattisgarh-WR Transmission, Hadoti Power Transmission Service, Raipur-Rajnandgaon-Warora Transmission, Sipat Transmission, and Thar Power Transmission Service — and one non-issuing SPV, Adani Transmission (Rajasthan).

"Most of the senior debt at the Adani group's rated Indian entities as of December 2022 is offshore and largely secured, with US dollar bonds that will mature only from mid-2024," says Fitch Ratings.

"The liquidity position at all rated entities or restricted groups would benefit from cash flow generation from January 2023 to March 2024, adding to the cash balances at end-December 2022," it adds.

Meanwhile, Gautam Adani-led Adani Group on Wednesday refuted a report published by news website The Ken, calling its claim that the conglomerate has not completed repayment of $2.15 billion in share-backed debt as 'baseless' and 'deliberately mischievous'.

"Adani has completed full prepayment of margin linked share backed financing aggregating to $2.15 billion and all corresponding shares pledged for those facilities have been released," Adani Group says in a stock exchange filing.

"All share backed facilities availed by the promoters have been paid off," the filing says.

"After such repayment, ListCo pledge positions for Adani Green, Adani Ports, Adani Transmission & Adani Enterprises have reduced substantially, and only residual share pledges corresponding to Operating Company (OpCo) facilities remained outstanding," it says, adding that no new OpCo facilities have been availed since the release of Hindenburg report.

"As per the present rules, any share pledge or release is automatically reported by system driven disclosure (SDD) mechanism of the depository participant, and no separate filing is required to be made. The same has already been updated and is reflected on the NSE website. However, the BSE website has not been updated to reflect the same," the Adani group says.

contagion risk

Adani Ports, Adani Transmission at 'higher contagion risk': Fitch