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Moody’s Investor Service said the acquisition by Adani Transmission (ATL) of the transmission assets of Reliance Infrastructure is credit negative for the former, as the incremental debt associated with the deal would reduce its cash flows. However, the rating agency has re-affirmed Adani Transmission its current rating of ‘Baa3’ with a stable outlook.
₹2,000-crore dealAnil Ambani-led Reliance Infrastructure on Wednesday agreed to sell its power transmission assets to Adani Group as part of its plans to exit non-core areas. Though both the companies did not disclose the deal size, analysts estimated it at ₹2,000 crore.
On the acquisition, Gautam Adani, Chairman, Adani Group, had said that ATL will enjoy substantial benefit of scale and is in sync with deep-rooted strategy to enhance the value for the stakeholders through organic as well as inorganic growth.
Moody’s Investor Service, in a press release said, Adani Transmission’s rating may be downgraded in the future if it continues with aggressive expansion through acquisitions or if revenues from the non-transmission business rise over 25 per cent of total revenues.
Upgradation unlikelyFinancial metrics that could prompt a downgrade include: FFO (fund flow from operations), interest coverage ratio falling below 1.75x, and FFO/ and net debt declining below 7 per cent on a sustained basis.
Moody’s, however, said, Adani Transmission’s rating is unlikely to be upgraded in the near term. “Over time, the rating could be upgraded if ATL assumes a prudent growth strategy that is underpinned by conservative financial leverage, while maintaining non-transmission business at the expected 15–20 per cent level,” it added.
ATL, based in Ahmedabad, is the largest private sector participant in India’s power transmission chain.
Wide networkThrough its two wholly-owned subsidiaries — Maharashtra Eastern Grid Power Transmission Company and Adani Transmission (India), ATL operates four transmission lines around the country with a network of more than 5,000 circuit kilometres.
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