India Ratings lowers outlook on Adani Enterprises, Adani Green to negative

Flags interest rate risks, uncertainty on cash flow mismatches

India Ratings has revised the outlook on Adani Enterprises Ltd (AEL) and Adani Green Energy Ltd (AGEL) from “stable” to “negative” while affirming the long-term issuer rating for both at “A+”.

The rating agency said AEL's negative outlook reflects uncertainty about cash flow mismatches resulting from the revised capex plans and the possible sources of funding available which may keep the equity cover lower than 2x. Adani Enterprises has proposed to raise up to Rs 1,000 crore via non-convertible debentures (NCDs).

India Ratings said the negative outlook on Adani Green reflects the risks regarding the terms of refinancing upcoming debt maturities, interest rate risks, access to capital markets for raising equity. It also flagged risks about leveraging the existing unlevered assets through fresh borrowings.

Adani Enterprises, being an incubator, has large, albeit reduced capital commitments across different businesses, including Adani New Industries Limited (ANIL), airports and roads.

Accordimg to the rating agency’s previous assessment, the total capex to be undertaken by Adani Enterprises over FY24 and FY25 was estimated at Rs 1,17,200 crore which the management says is being re-evaluated. Adani Enterprises has a committed capex of Rs 45,000 crore for which financial closure has been achieved. 

The agency said it would continue to monitor the ability of the group to borrow afresh at competitive rates on a sustained basis. Post the secondary market sale to GQG Partners Inc, an additional liquidity buffer is available at the promoter level, which alleviates the risk to some extent.

Last week, US global equity boutique GQG Partners invested $1.9 billion in Adani Ports and Special Economic Zone, Adani Green Energy, Adani Transmission and Adani Enterprises.

India Rating would continue to monitor the group ability to churn assets for equity release to fund new projects.