Adani Group: Investment Grade to High Yield risks

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Since our update on Adani Group, following Hindenburg Research’s critical report on the Indian conglomerate, its bonds have fallen further in cash price terms. Its equities have to some degree caught up.

Adani bonds are now pricing at levels associated with single-B credits or even lower. Given their ratings and large size, many investors will have benchmark exposures to various issuers in the Group.

We expect rating agencies are looking at the case, which could be significant as the main debt stock in US dollars sits on BBB- level; a one-notch downgrade would move the names from investment grade to high-yield, with index flow implications.

We note that MSCI is soliciting for feedback on index inclusion/exclusion of Adani companies on the equity side; index changes had substantial effects on pricing in June last year. The credit rating could also affect bank line costs and relationships.

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