Moody's upgrades outlook on Adani Transmission Step-One, Adani Electricity Mumbai to stable

Moody’s Ratings on Thursday (January 15) upgraded the outlook on Adani Transmission Step-One Ltd (ATSOL) and Adani Electricity Mumbai Ltd (AEML) to stable from negative, citing expectations that both companies will maintain solid access to liquidity and credit profiles consistent with their investment-grade Baa3 ratings over the next 12-18 months.

The ratings agency affirmed the Baa3 senior secured ratings on ATSOL and AEML and reaffirmed AEML’s (P)Baa3 senior secured medium-term note programme.

Moody’s said the outlook upgrade reflects its expectation that ATSOL and AEML will continue to sustain liquidity and financial metrics supportive of their ratings. The affirmation of ATSOL’s ratings also reflects its close credit linkages with parent Adani Energy Solutions Ltd (AESL), including guarantees on the bonds and default provisions tied to AESL’s credit profile.

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AESL’s diversified portfolio of regulated transmission and distribution assets underpins its stable operating performance, Moody’s said.

While the group faces substantial capital expenditure over the next two years, Moody’s expects AESL to implement timely countermeasures to preserve key credit metrics, with funds from operations to net debt remaining marginally above the 7.5% tolerance threshold.

Separately, Moody’s noted that Adani Ports and Special Economic Zone Ltd

(APSEZ) is expected to maintain solid access to liquidity and a credit profile in line with its Baa3 rating over the next 12-18 months. The agency said APSEZ’s robust financial profile is supported by the discretionary nature of its planned growth capital expenditure and continued access to funding.

For AEML, Moody’s cited predictable cash flows from its regulated electricity distribution business in Mumbai, alongside an improving financial profile following recent deleveraging. The agency expects AEML’s cash flow from operations pre-working capital to debt to remain in the 10.5-11.5% range over the next one to two years.

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Moody’s said it will continue to monitor ongoing US legal proceedings involving senior executives at another Adani group entity, warning that any material negative developments could still affect the group’s access to capital and its ability to deliver on growth objectives.

An upgrade of the ratings is unlikely without a sovereign rating improvement, Moody’s said, while a downgrade could follow sustained weakening in credit metrics or adverse outcomes from the legal proceedings that impair liquidity or operations.