Adani's Energy-To-Port Stocks: Moody's Upgrade Outlook On 4 Adani Firms; Has Hindenburg Shocks Faded?

In a major good news for Adani Group and a big comfort to investors, leading rating agency Moody's Investors Services affirmed the ratings on eight of the port-to-energy conglomerate companies. Of these, Moody's changed the outlook on four issuers to stable from negative and maintained the stable outlook on the other four companies. This comes as a big booster to Adani Ports, Adani Energy and Adani Green.

The eight Adani companies where Moody's took the latest rating actions:

1. Adani Green Energy Limited (AGEL) - Ba3 ratings affirmed; outlook changed to stable from negative.

2. Adani Green Energy Restricted Group (AGEL RG-1) comprising Adani Green Energy (UP) Limited, Parampujya Solar Energy Private Limited and Prayatna Developers Private Limited - Ba2 ratings affirmed; outlook changed to stable from negative.

3. Adani Green Energy Restricted Group (AGEL RG-2) comprising Wardha Solar (Maharashtra) Private Limited, Kodangal Solar Parks Private Limited and Adani Renewable Energy (Rj) Limited - Ba1 ratings affirmed; outlook remains stable.

4. Adani Transmission Step-One Limited (ATSOL) - Baa3 ratings affirmed; outlook changed to stable from negative.

5. Adani Electricity Mumbai Limited (AEML) - Baa3 ratings affirmed; outlook changed to stable from negative.

6. Adani Energy Solutions Limited Restricted Group 1 (AESL RG1) comprising Barmer Power Transmission Service Limited, Raipur-Rajnandgaon-Warora Transmission Ltd, Sipat Transmission Limited, Thar Power Transmission Service Limited, Hadoti Power Transmission Service Limited and Chhattisgarh-WR Transmission Limited - Baa3 ratings affirmed; outlook remains stable.

7. Adani Ports and Special Economic Zone Limited (APSEZ) - Baa3 ratings affirmed; outlook remains stable.

8. Adani International Container Terminal Private Ltd (AICTPL) - Baa3 ratings affirmed; outlook remains stable.

On Wednesday, Adani Ports' share price stood at Rs 1,267.35 apiece, marginally up on BSE. Adani Energy shares however dipped by 0.60% to Rs 1,038 apiece. On the contrary, Adani Green Energy emerged as the best performer compared to the other two, and ended at Rs 1,852.70 apiece, up by 2%.

Highlighting further, Moody's said, the change in outlook to stable from negative considers AGEL's improved financial flexibility and reduced refinancing risk after the company announced plans to repay the $750 million senior notes from financial reserves and equity proceeds from the sale of a stake in a joint venture to TotalEnergies SE (A1 stable) and a preferential allotment to the Adani family.

For Adani Transmission which is now traded as Adani Energy, Moody's said, AESL's credit profile, in turn, reflects the predictable revenue from its diversified portfolio of quality regulated or contracted transmission and distribution assets; exposure to execution risks associated with the group's aggressive debt-funded growth strategy; and high financial leverage.

The stable outlook reflects Moody's expectation that AESL will be able to deliver its substantial planned capital expenditure - including its material investment to roll out smart meters - on time and within budget, and would implement timely countermeasures as required to preserve financial metrics at a level consistent with its Baa3 rating, it added.

Moreover, the affirmation of APSEZ's issuer ratings considers the company's strong market position as the largest port developer and operator in India by cargo volume and its strong liquidity and financial profile. The stable outlook on the ratings reflects Moody's expectation that APSEZ would continue to generate relatively steady cash flow over the next 12-18 months.

Last year, in February, 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 following the release of a report from a short-seller highlighting concerns over the Adani Group's governance practices, which led to significant and rapid declines in the market value of the Adani Group companies securities.

In the latest note, Moody's said, the Group has completed several debt transactions, including refinancing as well as obtaining new loan facilities, demonstrating its continued access to debt capital at a reasonable cost. At the same time, 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.

On the latest verdict, Moody's said, that whilst an investigation by the Securities and Exchange Board of India (SEBI) - India's securities market regulator - is still ongoing, the Supreme Court's decision to entrust SEBI to complete the investigation on the Adani Group 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.