Fitch revises outlook on Azure Power Energy to negative; affirms 'B' rating

Fitch Ratings has revised the Outlook on Azure Power Energy Ltd's US dollar bond from “Stable” to “Negative” while affirming the rating at 'B'. This follows the bribery and corruption investigation under the Foreign Corrupt Practices Act. The rating action also factors in the indictment of certain former board members and former executives of Azure Power Global Limited (AGPL) by the US Securities and Exchange Commission and Department of Justice.

 

AGPL is the holding company of Azure RG3.

 

The agency, in a statement, said the Negative Outlook reflects the heightened refinancing risk of Azure RG3's US dollar bond due August 2026 should there be further developments relating to the ongoing charges and indictment against AGPL's former executives and board members.

 

The charges and indictment do not cover APGL or its current board members or employees, but any charges or penalties could disrupt APGL's funding plans and liquidity, including the refinancing of Azure RG3's bullet maturity.

 

The rating affirmation reflects that the rating already captures the corporate governance risks relating to the ongoing investigation. APGL made necessary disclosures in January 2023 as well as in its subsequent filings and annual reports.

 

The company says it is committed to strengthening its financial disclosure, corporate governance, and internal control framework and has demonstrated improvements following the release of its and Azure RG3's audited financial statements for the financial year ended March 2022.

 

On November 20, 2024, the US Securities and Exchange Commission and Department of Justice charged five former AGPL executives and board members in relation to the alleged involvement in concealing bribery and obstructing the government's investigation. The company has confirmed that it has been cooperating with the investigation.

 

APGL's weak internal controls and compliance issues have resulted in management's failure to anticipate and manage timely regulatory financial disclosures, leading to the company's delisting from the New York Stock Exchange. Timely submission of the group's and Azure RG3's financial reports is a key covenant, according to the US dollar note indenture. There has also been multiple key management and board member turnover at the group level, the agency added.