JP Morgan gives 'overweight' rating to four Adani bonds

JP Morgan gives 'overweight' rating on Adani group bonds, citing strong cash flows and growth potential.

U.S. investment banker JP Morgan has given 'overweight' rating on four Adani group bonds, comforted by ability to scale and grow using internal cash flows which reduces the scope for credit stress.

Also read: Fitch places some Adani bonds on negative watch after U.S. bribery charges

In a report, JP Morgan gave 'overweight' rating on three bond issues of Adani Ports & SEZ and one by Adani Electricity Mumbai Ltd (a subsidiary of Adani Energy Solutions Ltd). It has taken neutral stand on other five Adani bonds and is underweight on one bond issued by Adani Green Energy Ltd.

JP Morgan gives three kinds of ratings for bonds - 'Overweight' rating which falls into a buy rating category; Neutral rating which falls into a hold rating category; and 'Underweight' which rating falls into a sell rating category.

Under the risks section, it said that Adani bonds could do well than anticipated if there is a quick resolution of the US SEC and Department of Justice indictments of founder chairman Gautam Adani and key aides on bribery charges, successful refinancing of the upcoming bonds and credit facilities; and improved operating performance.

Adani group has denied as baseless the charges brought against it by the US authorities.

After initial volatility, "spreads of the group's bonds, (since action by US authorities), seem to have settled, widening by about 100-200 basis points, with short tenor seeing more spread widening due to higher dollar prices," JP Morgan said.