Adani Ports and Special Economic Zone Limited (APSEZL), part of the Adani Group, has issued an important update regarding recent actions taken by Moody’s and Fitch concerning its credit rating. This comes in response to BSE Limited’s request regarding the rationale for the rating agencies’ decision. Below are the key developments:

Credit Rating Outlook Change

Recently, both Moody’s and Fitch revised their outlooks on seven entities within the Adani Group, including Adani Ports, following ongoing legal proceedings against Gautam Adani and other senior executives. Here’s a breakdown of the reasons provided by the agencies:

Moody’s Perspective:

Moody's revised the outlook to negative for these entities. The rationale included:

• Legal Proceedings: The indictment of Mr. Gautam Adani and senior executives on charges such as bribery could significantly affect the Group's financial stability.
• Impact on Funding: The legal issues may limit the Group’s ability to access funding, potentially increasing the cost of capital.
• Governance Concerns: There are concerns about possible weaknesses in governance structures within the Adani Group, which could lead to operational disruptions and delay in capital spending plans, depending on how the legal issues evolve.

Fitch’s Perspective:

Fitch emphasized monitoring the financial flexibility of the rated entities, particularly with regard to:

• Access to Credit: The potential impact on the Group’s ability to roll over existing credit lines or access new facilities.
• Higher Funding Costs: The ongoing investigations could lead to increased borrowing costs, making it more difficult for the Group to manage its capital needs effectively.

Clarification from Adani Group

In its disclosure, Adani Ports referred to the submissions made by Adani Green Energy Limited (AGEL) on November 27, 2024. These submissions aimed to clarify that Mr. Gautam Adani, along with two other directors of AGEL, has not been charged under the U.S. Foreign Corrupt Practices Act (FCPA) in relation to the indictment by the U.S. Department of Justice or the civil complaint by the U.S. Securities and Exchange Commission (SEC). This clarification was provided to ensure that there is no misinterpretation regarding the legal standing of Mr. Adani and his involvement in the ongoing investigations.

Impact on Financial Position and Monitoring

Despite the negative outlook from Moody’s and Fitch, Adani Ports has assured its investors that the financial implications of the ongoing legal proceedings will be closely monitored. The company has stated that it will continue to assess the potential risks and how they might affect its funding access and capital costs. However, there are no immediate indications of significant financial distress.

The Adani Group is committed to transparency and will keep all stakeholders updated on any further developments related to the legal proceedings and their potential impact on the business.

Conclusion

Adani Ports' disclosure highlights the company’s proactive stance in managing investor relations and maintaining transparency amidst ongoing legal challenges. While the outlook from rating agencies reflects concerns over governance and funding, the company's clarification about the legal status of its executives aims to reassure investors. Going forward, Adani Ports will continue to monitor the situation and ensure that its financial position remains stable despite these external challenges.

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