Weeks after it revised the rating outlook of two companies of embattled Adani group, S&P Global Ratings on Wednesday said it is watching for additional information on the conglomerate's governance and funding for any ratings action.

Investors, it said, seek clarity on the credit impact of a string of allegations against the group in a short-seller report published in late January, and on the findings of a recently launched Supreme Court investigation.

S&P Global published an FAQ-style commentary titled, "Adani Group: The Known Unknowns".

"Like much of the market, we are waiting for more information about the Adani Group before deciding the direction of our ratings. We believe further details on governance and funding risks over the next 12-24 months would drive the ratings," said S&P Global Ratings credit analyst Abhishek Dangra.

Last month, S&P Global Ratings revised outlook on Adani Ports and Adani Electricity to negative from stable after the report of Hindenburg Research alleged significant governance issues, many relating to disclosures. Adani group has denied all allegations.

"Downside risks (to rating) could stem not just from restricted access to funding, but also from our broader view on the quality of the group's governance," S&P said on Wednesday, adding that a negative rating action was possible should any investigation uncover serious wrongdoing. This may include previously undisclosed material related-party loans, cash leakage, or misreporting.

"Conversely, to revise the outlook to stable, we will need to be convinced that governance practices in the group and funding access will improve in line with an investment-grade credit profile," it said.

On next steps and watchpoints, it said, "The key will be additional information regarding Adani Group's governance and funding." Key watchpoints include a report of a Supreme Court-appointed independent panel of experts (comprising industry luminaries), which is investigating potential regulatory shortcomings in the oversight and disclosures of Adani Group.

The court has also directed capital markets regulator Securities and Exchange Board of India (Sebi) to submit its findings to the panel in two months.

"If the investigation proves illegal activities by the group or points to serious wrongdoing, we could revise our assessment of management and governance down to weak from fair. This could result in a downgrade, potentially of more than one notch, depending on the effect of such activities on the credit profile," S&P said.

Any significant adverse audit observations, qualified audit opinions for the year ending March 31, 2023, or significant reporting and disclosure weakness identified by any company-appointed independent external reviewers may also trigger a revision.

"We will also review the group's ability to raise equity and debt, both via private placement or through public debt markets," it said.

Adani Group has raised USD 1.9 billion in equity from GQG Partners Inc, some of which has been used to fully repay all share backed financing, totalling to USD 2.15 billion.

"Any fresh share-backed loans raised by promoters could pose funding risks for the larger Adani Group and rated entities," S&P said. "Similarly, its relationship with domestic and international banks will be critical to meeting the group's funding needs. Security and repayments terms will affect the group's financial flexibility." Management, it said, may review growth plans, capital expenditure (capex), leverage tolerance, and financial policies for group entities.

"Assessing the group's creditworthiness, leverage and liquidity position is difficult given our reliance on public information for unrated listed entities. We also rely on limited public disclosures of unlisted, private entities, and of funding or liabilities at the promoter level," said S&P Global Ratings credit analyst Richard Langberg.

"We already assess governance as a relative weakness in our rating analysis of Adani Group entities due to significant promoter control, frequent related-party transactions, lack of transparency of the credit position of the promoter-held entities, and aggressive growth appetite," added Langberg.

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