Fitch upgrades outlook on 4 Adani group cos; affirms ratings

Global ratings agency Fitch has upgraded the outlook on four Adani group companies -- Adani Ports and Special Economic Zone, Adani Green Energy, Adani International Container Terminal, and Adani Transmission -- to stable from negative and affirmed the ratings at 'BBB-'. The revision follows the revision of the outlook on India's long-term foreign-currency issuer default rating (IDR) to stable from negative on June 10, 2022, the agency report says.

On Jun 10, 2022, Fitch revised the outlook on India's long-term foreign-currency IDR to stable, citing that downside risks to medium-term growth have diminished due to the country’s rapid economic recovery and easing financial sector weaknesses. The rating also balances India's external resilience from solid foreign-exchange reserve buffers against some lagging structural indicators such as public finance and macros.

Fitch Ratings has revised the outlook on the long-term foreign-currency IDR of billionaire Gautam Adani-led Adani Ports and Special Economic Zone (APSEZ) and the U.S. dollar bonds issued by Adani Green Energy Restricted Group 2 (AGEL RG2), APSEZ, Adani International Container Terminal Private Limited (AICTPL), and Adani Transmission Limited's restricted group (ATL RG).

The report, however, noted that the revision in the outlook does not indicate a change in the agency’s view of these four companies’ underlying ratings, but rather follows the revision in India's outlook to stable. The ratings are constrained by the “sovereign's country ceiling, rather than the rating”, it says. “The country ceiling reflects the transfer and convertibility risk associated with foreign-currency obligations. Should the sovereign IDRs be downgraded, the 'BBB-' country ceiling may also be revised down in tandem, which would constrain these ratings to the new lower level. The revision in the Outlook on the Indian sovereign to stable indicates that the country ceiling is likely to remain at 'BBB-',” it adds.

Fitch Ratings has affirmed Adani Green Energy Limited Restricted Group 2's (AGEL RG2) U.S. dollar bonds at 'BBB-'. It assesses AGEL RG2's operation risk as 'midrange', revenue risk (volume) as 'midrange', drop revenue risk (price) as 'stronger' and debt structure as 'stronger'. The agency, however, cautioned that drop in average annual debt-service coverage ratio (DSCR) across the group's power-purchase agreement terms as a result of operational issues or actual solar resources may impact its rating.