S&P Global Ratings places ESG evaluation of Adani Transmission under review

S&P Global Ratings has placed its ESG Evaluation of 63 for India-based Adani Transmission (ATL) under review, it said in its press note.

When monitoring ESG Evaluations, S&P Global Ratings has the option to use the term ‘Under Review’ (and the label ‘UR’) to identify certain ESG Evaluations as being potentially affected by changing events.

Also read: Index of Adani group stocks lost 60% in value after Hindenberg Report

“This (the review) follows recent allegations of significant governance issues at the Adani group of companies,” the statement added, pointing to the Hindenberg Research report. Adani Transmission stocks had rebounded earlier today, along with other group stocks, on reports that index provider MSCI would postpone implementation of updates to weightages of two Adani companies including Adani Transmission. The other was Adani Total Gas.

On January 24, 2023, a US short seller Hindenberg Research had claimed that there were significant governance issues for the Adani group and many of their allegations related to disclosures and actions at the shareholder level. Since then, equity and bond prices have plummeted for the group’s entities, including for ATL, S&P Global’s statement noted.

“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 in supporting ATL’s growth,” stated the press release.

“This may raise financial and operational risks for the company,” it added.

Also read: MFs lap up these two Adani group stocks in the midst of the rout

The rating agency’s 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,” it added.

The press release said that the review of ESG Evaluation is expected to be completed in the coming months. They will also assess the implications of the allegations on their ESG Evaluation.

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 March 31, 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.