S&P Places Adani Transmission's ESG Evaluation under Review on Potential Governance Issues

Moneylife Digital Team/ IANS 16 February 2023

Economy & Nation

Credit rating agency S&P Global Ratings on Thursday placed its ESG (environment, social and governance) evaluation for India-based Adani Transmission Ltd (ATL) under review.

This follows recent allegations of significant governance issues at the Adani group of companies.

"We aim to complete our review of the ESG Evaluation in the coming months. We will assess the implications of the allegations on our ESG Evaluation," S&P Global said.

On 24 January 2023, a short-seller report claimed there are significant governance issues for the Adani group. Many allegations relate to disclosures and actions at the shareholder level. Since then, equity and bond prices have plummeted for the group's entities, including for ATL, the credit rating agency said.

"We will closely monitor developments, including any investigations by the Indian regulators and any additional disclosures by the Adani group. The allegations related to group governance and disclosures may affect the appetite of fund providers and business partners to support ATL's growth. This may raise financial and operational risks for the company," S&P Global said.

"Our current assessment of ATL's governance factors in some controlling shareholder's weight in decision-making, including on related-party transactions. Common parentage and name-sharing also expose ATL to reputational risks from the wider Adani group," the statement added.

ATL is the largest private power transmission and distribution company in India. The Adani family controls the company with a reported 75% stake, with the balance in free float. In the fiscal year ended 31 March 2022, ATL operated 18,795 circuit kilometers of electric transmission lines. The company had a total transformation capacity of 40,001 megavolt amperes. It owns a 500-megawatt coal-fired power plant.

Meanwhile, Adani group flagship Adani Enterprises Ltd has clarified that a news report saying the group has hired accountancy firm Grant Thornton for independent audits of some of its companies is not true.

In a regulatory filing, the company says, "We would like to clarify that the said news item appears to be a market rumour and hence it would be inappropriate on our part to comment on it."

Quoting two people familiar with the matter, a report from Reuters has said that the Adani group had appointed Grant Thornton for independent audits of some of its companies in a bid to discredit claims by short-seller Hindenburg Research that have battered its stocks and bonds.

Quoting sources, a report from PTI also says the audit is primarily to show to regulators like the Reserve Bank of India (RBI) that the group has nothing to hide and it is in compliance with relevant laws.

"The audit will specifically look into if there was any misappropriation or repatriation of funds and if loans were used for any purpose other than the one they were intended for," the report says.

Since 24 January 2023, when Hindenburg published its report, shares of all Adani group companies have fallen 25% to nearly 70%.

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