Moody’s Investors Service has downgraded 11 Indian infrastructure companies including NTPC Limited, NHPC Limited, National Highways Authority of India, Power Grid Corporation of India Limited, Gail (India) Limited, Adani Green Energy Restricted Group (RG-2) and Adani Transmission Restricted Group.

At the same time, Moody's has affirmed the baseline credit assessments (BCAs) for NTPC and NHPC at Baa3, and downgraded the BCAs for Power Grid and GAIL by one notch to Baa3 from Baa2.

The outlook on all companies remains negative.

Moody's has also affirmed the ratings of the following four issuers and revised their outlooks to negative from stable: Adani Ports and Special Economic Zone Limited, Adani Transmission Limited, Adani Electricity Mumbai Limited, Azure Power Solar Energy Private Limited.

These rating actions follow Moody's decision to downgrade India's sovereign rating to Baa3 from Baa2 with a negative outlook, as announced on 1 June 2020.

Downgrade of PSUs

Under Moody's joint default analysis approach for government-related issuers (GRIs), government support is one of the key considerations in GRIs' ratings. The ratings and BCAs of these five GRIs are very sensitive to a decline in the rating of their government owner given their close links with the Government of India.

As a result, each GRI has been downgraded by one notch, consistent with the downgrade of the sovereign rating.

The BCAs of Power Grid and GAIL have also been downgraded by one notch to Baa3 for the same reason. The negative outlooks for the five GRIs reflect the negative outlook on the sovereign rating.

Covid-19 impact

The downgrade of Adani Green Energy Restricted Group's ratings reflects the group's dependence on sovereign-owned entities, such as Solar Energy Corporation of India, for more than 70 per cent of the offtake from its power projects. As a result, the ratings are constrained by the weakening credit profiles of the group’s offtakers. The negative outlook reflects the negative outlook on the sovereign rating.

The downgrade of Adani Transmission Restricted Group's ratings reflects the fact that all of the restricted group's operations are based in India and thus its ratings are constrained by the sovereign rating. The negative outlook reflects the negative outlook on the sovereign rating.

The affirmation of APSEZ's issuer rating reflects its ability to withstand the temporary reduction in trade volume and revenue as a result of the coronavirus outbreak, taking into account the port's moderate financial profile and robust liquidity position heading into fiscal 2021, as well as its ability to postpone capital expenditure.

The affirmation of ATL's senior secured bond ratings reflects its predicable revenue profile that is underpinned by its portfolio of quality regulated and contracted assets, good operating track record and high financial leverage after taking into account its substantial capital expenditure program over the next 2-3 years.

The affirmation of AEML's senior secured bond rating reflects the predictable revenues from its regulated utility business in Mumbai and its solid liquidity profile. It also reflects management's commitment to maintaining appropriate financial metrics supportive of its credit profile through managing its capital spending over the current tariff control period.

The negative outlook on APSEZ, ATL and AEML's Baa3 rating reflects (1) the fact that virtually all of their business operations are based in India, and (2) their ratings are constrained by the Baa3 rating and negative outlook on the sovereign.

The affirmation of the rating on Azure Power Solar Energy's backed senior unsecured bonds considers the group's long-term power purchase agreements with fixed tariffs and Moody's expectation of support from Caisse de depot et placement du Quebec (CDPQ, Aaa stable), the largest shareholder of its parent, in the case of need.

The change in outlook reflects the weakening credit profile of the group's government-related off-takers.

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