Stable cash flows to aid Adani Group's debt commitments: Rating firms

Adani Group companies have been affirmed by both international and domestic rating agencies, including Fitch and Moody’s, as well as CRISIL, India Ratings & Research (Ind-Ra), CareEdge, and ICRA, due to stable cash flows from its operating companies, the group said about its credit profile.

This comes despite a recent change in S&P’s outlook on Adani Ports and Special Economic Zone and Adani Electricity Mumbai.

On Adani Green Energy’s (AGEL’s) cash flow, Moody’s said its cash flows are stable, given the geographic diversification of its generation fleet that reduces its exposure to potential fluctuations in the availability of solar and wind resources.

“Most of AGEL’s projects have long-term power purchase agreements (PPAs) with either central government-owned or state government-owned utilities, with predefined tariffs for the duration of the contract. As of June 2021, AGEL’s PPAs for operating projects had an average remaining life of around 20 years, which provides visibility over the company’s long-term cash flow,” said Moody’s, while rating the firm’s debt instruments as ‘stable’.

S&P said its rating action does not impact the rated debt issued by four Adani entity project finance companies: AGEL (BB+/stable), Parampujya Solar Energy (BB-/stable), Adani International Container Terminal (BBB-/stable), and North Queensland Export Terminal (BB-/stable).

“These debts are fully secured and have cash flow waterfalls that prioritise operating expenditure and debt service over distributions. Given the ring-fenced assets, in our view the structure of these financings currently sufficiently protects investors,” said the rating firm.

Ind-Ra said there is no immediate impact on the ratings of Adani Group entities, following the recent short-selling report.

“Ind-Ra sees limited impact on the cash flows of the underlying business and also takes note of the liquidity available with the respective entities in the form of cash on the balance sheet, unused working capital limits, and debt tied up for the ongoing under-construction projects. The management has confirmed to Ind-Ra that large capital expenditure (capex) plans across entities would be moderated/deferred in line with the capital management plans of the group. There exists modularity to the capex, and at the same time a significant amount of capex can be deferred in line with capital availability,” said Ind-Ra.

While giving ‘BBB-’ with a ‘negative’ outlook, S&P said the Adani companies have long-established infrastructure assets with strong fundamentals and cash flows.

Fitch has reaffirmed its ‘BBB-’ rating, sovereign equivalent to Adani Transmission, citing the company’s regulated asset base and payment pooling mechanism for transmission assets.