InvestorQ : How come CreditSights suddenly went from accusing Adani group of overleverage to toning down sharply?
Mahima Roy made post

How come CreditSights suddenly went from accusing Adani group of overleverage to toning down sharply?

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3 weeks ago
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Things have changed pretty fast in the CreditSights versus Adani group stand-off. How did this volte face come about? Some 2 weeks back, CreditSights, the research arm of Fitch, issued a scathing report on the Adani group as being dangerously overleveraged. They used a series of ratios to underline that the Adani group’s adopted strategy of inorganic growth via debt funding may compromise the financial stability per se. Just 2 days back, the Adani group issued a 15-page response, which triggered the volte face by CreditSights.

Adani group pointed out that contrary to concerns raised in the CreditSights report, the leverage of the Adani group had consistently been coming down with profits growing much faster than debt levels. The Adani group also pointed to some calculational errors in the CreditSights report wherein the projected debt had been overstated and the projected EBITDA had been understated. Surprisingly, CreditSights meekly accepted it had made errors in the Adani leverage story, although it did not withdraw the story or the view.

CreditSights admitted it had discovered calculation errors in its recent debt report on two Adani Group companies. CreditSights has accepted that they will reconcile their calculations with the Adani Group’s presentation. It is not clear, if they had already spoken to the Adani top management, why these points were missed out. There is perhaps more than what meets the eye. Big companies do put pressure on analysts and that seems to be the case. It looks like Fitch buckled under pressure. For Fitch, its research quality is at stake.

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