New Delhi:

Backing embattled Adani Group, rating agency CRISIL Ratings on Friday said the conglomerate has sufficient liquidity and operational cash flows to meet debt obligations and committed capex and that there has been no negative actions so far by lenders and investors following the US indictment of group founder chairman.

The Adani Group, which has the flexibility to reduce certain discretionary capital expenditure (capex) depending on developments in financial markets and future capital availability, has a healthy Ebitda and cash balance that reduces its dependence on external debt to sustain operations, it said in a bulletin.

On November 20, 2024, the United States Department of Justice and the US Securities and Exchange Commission (SEC) issued an indictment and a civil complaint, respectively, in the United States District Court for the Eastern District of New York, against Gautam Adani, Sagar Adani and Vneet Jaain, key functionaries of Adani Green Energy Ltd (AGEL).

The charges relate to allegations of securities fraud, wire fraud and violation of the SEC guidelines that led to materially false and misleading statements in the bond offering documents of AGEL with respect to anti-bribery and anti-corruption policies.

“CRISIL Ratings has taken note of these developments and their likely impact on the financial flexibility of the group, including the fall in the market capitalisation of the listed companies of the group, movement in bond yields, and calling off the USD 600 million bond offering of AGEL,” the rating agency said.

The agency rates Adani group’s infrastructure and holding entities.

“These ratings are driven largely by the strength of their business and financial risk profiles. They, inter alia, factor in the steadiness of cash flows, the infrastructure nature of assets with long concession periods, and extent of cash flow cushions,” it said.

In certain cases, it also factors in the additional flexibility available to these entities through their association with, and criticality to, the larger Adani Group, which is one of the leading infrastructure groups in India.

“The Adani Group reported a healthy Ebitda (earnings before interest, taxes, depreciation, and amortisation) of Rs 82,917 crore for fiscal 2024 with a net debt-to-Ebitda ratio of 2.19 times.

“Cash balance was over Rs 53,000 crore across 8 listed operating entities as of September 2024 against long-term debt maturities of Rs 27,500 crore; and go-to market/construction facility of Rs 8,919 crore during October-March fiscal 2025 and Rs 2,137 crore during fiscal 2026,” Crisil said.

Based on management and select lender feedback, “CRISIL Ratings understands that these developments have not led to any negative actions so far by lenders/investors, such as acceleration of debt repayment or spread resets,” the agency said.

“Further, we understand the Adani Group has the flexibility to reduce certain discretionary capital expenditure (capex) depending on developments in financial markets and future capital availability,” it said adding all outstanding ratings were under continuous surveillance.

The issue at hand is sub judice and “Adani Group has sufficient liquidity and operational cash flows to meet debt obligation and committed capex plans over the medium-term,” Crisil said.

The rating agency said any adverse regulatory, judicial or government action may exacerbate the situation. “Thus, these actions will be monitored. Further, any fall-out of developments restricting the Adani Group’s access to domestic and international capital and hampering its ability to refinance upcoming bullet repayments as well as a significant increase in its cost of financing will also be key monitorables”. 

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Adani Power Limited’s bank loan facilities were rated ‘A’ with a stable outlook earlier.
| Photo Credit: Photo Credit: X/@CRISILLimited

Crisil Ratings has upgraded its ratings on Adani Power Limited’s (APL) ₹38,000 crore of bank loan facilities to ‘AA-‘, saying the business and financial risk profile of the company has seen “strong improvement”. The loan facilities were rated ‘A’ with a stable outlook earlier.

“The rating upgrade follows the strong improvement in the business and financial risk profiles of APL,” Crisil Ratings said in a report.

“The upgrade is driven by better-than-expected operating performance backed by timely commissioning and ramp-up of the Godda power plant (1.6 GW), Mahan power plant (1.2 GW), full recovery of pending regulatory dues related to claims for fuel costs as pass-through under change in law clauses of existing power purchase agreements (PPAs) and continued improvement in receivables,” it said.

“The rating also factors in the completion of most of the regulatory investigations into Adani Group. Regulatory investigations in two remaining allegations are under way and are expected to be completed over the next three months,” the ratings agency said.

It further said that APL has recovered a majority of pending regulatory dues, including carrying costs and late payment surcharge (LPS) between April and October 2023 from counterparties, post-resolution of the matter in APL’s favour through the order of Supreme Court of India in March and April 2023.

“The company has been receiving monthly receivables on a timely basis, including recurring regulatory claims, supporting its operating cash flow. The operating performance of APL has been strong with robust plant load factor (PLF) and healthy operating margin,” it said.

The company had better-than-expected operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of ₹10,041 crore for fiscal 2023 and ₹7,926 crore for the first half of fiscal 2024 (₹10,280 crore in fiscal 2022).

Unfortunately, ‘wise’ , ‘efficient’ and ‘government expenditure’ don’t usually feature in the same sentence. | Getty Images
| Photo Credit: Getty Images

“The Indian economy is expected to grow at an average rate of 6.7% per annum until the end of the decade,” CRISIL said in its latest report.

The economy will grow at this rate between the financial years 2024 to 2031, a notch above the pre-pandemic average of 6.6%. According to CRISIL, the key contributor to this trend will be capital.

“This is a result of the investment-driven strategy of the government when the private sector was shy of making investments.”

“The government increased capital expenditure significantly to support building expenditure and providing interest-free loans to states to bolster their own investment efforts,” the report said.

CRISIL said that after a robust 7.3% growth this fiscal, there will be moderation to 6.4% in the next financial year.

“There is also a need to monitor the impact of the escalation of the Middle East conflict on energy and logistics costs,” it said. “In India, the inflation level of 5.7% in December 2023 was driven solely by volatile vegetable prices and food-grain inflation,” according to the report.

“This will keep Reserve Bank of India cautious on the rate front as it eyes the four per cent inflation target,” CRISIL said.

“The continued softening of core inflation and deflation in fuel prices gives us hope, but the persistent high price levels of the food items, which has substantial weight in consumer price index (CPI), keep the risks of its transmission to non-food components,” the report said.

CRISIL said the Federal Reserve of the U.S. is expected to cut rates this year. The strong labour market data and higher-than-expected inflation have once more cast doubts on the timing and the extent of rate cuts expected to begin this year.