Adani-Hindenburg saga: S&P places Adani Transmission's ESG evaluation 'under review' on governance issues

S&P Global Ratings on Thursday placed its ESG evaluation for Adani Transmission Ltd (ATL) 'under review' following a US short-seller raising governance issues at the group helmed by billionaire Gautam Adani.

When monitoring environment, social and governance (ESG) evaluations, S&P uses the term 'under review' (and the label 'UR') to identify certain ESG Evaluations as being potentially affected by changing events. "We will closely monitor developments, including any investigations by the Indian regulators and any additional disclosures by the Adani group," S&P Global Ratings said in a statement.

Adani group has been under pressure since the Hindenburg Research on January 24 accused it of accounting fraud and stock manipulation, allegations that the conglomerate has denied as "malicious", "baseless" and a "calculated attack on India". 

Listed companies of the group lost over USD 125 billion in market value in the last three weeks. Stocks of most group firms were up on Thursday. "The allegations related to group governance and disclosures may affect the appetite of fund providers and business partners in supporting ATL's growth. This may raise financial and operational risks for the company," the rating agency said.

ATL is India's largest private electricity transmission and distribution company. The Adani family controls 74.19 per cent. It operates 18,795 circuit km of transmission lines and also owns a 500-megawatt coal-fired power plant. "S&P Global Ratings today placed its ESG Evaluation of 63 for India-based Adani Transmission Ltd (ATL) under review," the statement said. "This follows recent allegations of significant governance issues at the Adani group of companies."

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

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