Moody's Gives Thumbs Up To Adanis, Revises Outlook For Four Companies To 'Stable'
Moody's has said that the Adani Group has demonstrated financial strength and ability to raise funds.
Global rating agency, Moody’s, has revised the outlook for four Adani group companies to 'stable' from 'negative' while affirming the ratings of eight companies on Tuesday.
It has changed the outlook for Adani Green Energy Ltd., Adani Green Energy Restricted Group 1, Adani Transmission Step-On Ltd. and Adani Electricity Mumbai Ltd. to 'stable' from 'negative', the statement said.
For Adani Energy Solutions Ltd. Restricted Group 1, Adani Ports and Special Economic Zone Ltd., Adani International Container Terminal Pvt. and Adani Green Energy Restricted Group 2, the outlook was maintained at 'stable'.
Moody’s has highlighted the positive factors that led to the change in the outlook. It notes that the Adani Group has demonstrated financial strength and ability to raise funds while taking note of the Supreme Court verdict in the Hindenburg short-selling case.
The rating agency said that over the past year, the Group has completed a number of debt transactions, including refinancing as well as obtaining new loan facilities, demonstrating its continued access to debt capital at a reasonable cost.
"Several high profile equity transactions by large institutional and strategic investors, such as GQG and Qatar Investment Authority, also demonstrated the Group's continued equity market access," it said.
The rating agency noted that while an investigation by the Securities and Exchange Board of India is ongoing, the Supreme Court's decision to entrust SEBI to complete the investigation and the court's view that there is no apparent regulatory failure attributable to SEBI have curbed the potential tail risk in a downside scenario.
In February 2023, Moody's revised the outlook on four rated Adani Group companies to 'negative', reflecting concerns over their access to capital and a potential increase in capital costs.
Almost a year later, the rating agency has recognised and factored in the positives in its latest outlook report.
Following are the details:
Rating Rationale For Adani Green Energy
Rating Action: Outlook changed to 'stable' from 'negative', 'Ba3' ratings affirmed
Rating reflects its predictable cash flow backed by long-term power purchase agreements, and diversified portfolio of solar and wind generation projects.
Improved financial flexibility and reduced refinancing risk.
High financial leverage.
Rating Rationale For Adani Green Energy Restricted Group 1
Rating Action: Outlook changed to 'stable' from 'negative', 'Ba2' ratings affirmed
(Note: Adani Green Energy Restricted Group (AGELRG-1) comprises Adani Green Energy (UP) Ltd.,Parampujya Solar EnergyPvt. and Prayatna Developers Pvt.)
Rating considers its predictable revenue from a diversified set of projects in India.
Underlying credit quality reflects the uneven past performance of the restricted subsidiaries' projects.
High financial leverage.
Expects company will have continued market access to refinance the senior notes due December 2024.
Rating Rationale For Adani Transmission Step-One
Rating Action: Outlook changed to 'stable' from 'negative', 'Baa3' ratings affirmed
Reflects the company's close credit linkage with its wholly owned parent, Adani Energy Solutions Ltd., owing to the parental guarantee provided by AESL.
AESL's credit profile, in turn, reflects the predictable revenue from its diversified portfolio.
High financial leverage.
Expects AESL to be able to deliver its substantial planned capital expenditure.
Rating Rationale For Adani Electricity Mumbai
Rating Action: Outlook changed to 'stable' from 'negative', 'Baa3' ratings affirmed
Predictable revenue from its integrated utility business in Mumbai.
Rating affirmation considers AEML's elevated financial leverage partly due to its large capital spending in recent years.
Improved financial flexibility as a result of a recently completed bond buyback, management's decision to minimise the use of debt to fund capital expenditure.
Higher capital expenditure allowance approved by its regulator during the mid-term review process.
Rating Rationale For Adani Ports and Special Economic Zone
Rating Action: Maintained the 'stable' outlook, 'Baa3' ratings affirmed
Ratings reflect the company's strong market position as the largest port developer and operator in India.
Strong liquidity and financial profile.
Expects the company to continue to generate relatively steady cash flow over the next 12-18 months.
Rating Rationale For Adani International Container Terminal
Rating Action: Maintained the 'stable' outlook, 'Baa3' ratings affirmed
Reflects the company's strategic location and access to a large catchment area that generates strong origin-destination cargo demand.
Reflects the fully amortising fixed cost debt structure that helps to improve the company's credit profile.
Reflects the project finance features of the senior secured bonds.
These features ring-fence AITCPL from any contagion risk from the broader Adani Group, Moody's said.
Rating Rationale For Adani Green Energy Restricted Group 2
Rating Action: Maintained the 'stable' outlook, 'Ba1' ratings affirmed
(Note: Adani Green Energy Restricted Group 2 comprises Wardha Solar (Maharashtra) Pvt., Kodangal Solar Parks Pvt. and Adani Renewable Energy Ltd.)
Reflects the Group's predictable revenues from a diversified set of projects in India, operating under long-term PPAs with fixed tariffs.
Reflects the project finance features of the senior secured bonds, including restrictions on debt incurrence and distributions.
The absence of a growth capital spending requirement, and reserving of cash that supports debt servicing.
These features ring-fence AGELRG-2 from any contagion risk from the broader Adani Group, Moody's said.
Rating Rationale For Adani Energy Solutions Restricted Group 1
Rating Action: Maintained the 'stable' outlook, 'Baa3' ratings affirmed
(Note: Adani Energy Solutions Ltd. Restricted Group 1 comprises Barmer Power Transmission Service Ltd., Raipur-Rajnandgaon-Warora Transmission Ltd., Sipat Transmission Ltd., Thar Power Transmission Service Ltd., Hadoti Power Transmission Service Ltd and Chhattisgarh-WR Transmission Ltd.)
Reflects the Group's predictable revenues from a portfolio of transmission projects in India.
The essential nature of the transmission grid as part of India's decarbonisation plans.
Group's moderate financial leverage.
Reflects full amortisation structure and absence of growth capital spending requirements.
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