The bank loan facilities of Adani Power Limited have been upgraded by Crisil Rating Limited from the “Crisil A-/” Stable rating to the “Crisil AA-/” Stable rating. This is done mainly because of the improvements made by Adani Power in its business and financial risk profile. Crisil Rating officials have mentioned that there has been a big improvement in the business operation and financial risk profile of Adani Power, which is why the loan facilities were rated AA.
Reasons for The Improved Ranking:
There are multiple reasons which caused the Crisil Rating of Adani Group to improve:
Enhanced business operations: Adani Power has always been one of the most actively operating subsidiaries of the Adani Group. The company has taken up numerous ventures mainly aimed at driving profitability and ensuring a smooth power supply for residential and industrial purposes. Better-than-expected operating performance by Adani Power mainly drives the rating update. This was also backed by the timely commissioning of the Godda Power Plant, which has a capacity of 1.6 GW, and the Mahan Power Plant, which has a capacity of 1.2 GW.
Recovery of pending dues: A full recovery of the pending regulatory dues was made by Adani Power within a short tenure. These dues were mainly related to the claims for fuel costs as pass-through under change-in-law clauses of existing power purchase agreements (PPAs). Continuous improvement was seen in the business receivables as well. All these factors caused Crisil Rating to increase its confidence in the company. The cash accrual in FY24 has been greatly utilised to prepay a large portion of the external debt. The company also recovered from the time when Adani shares overleveraged.
Improved business profile: The improved business risk profile is supported by sustaining healthy operations performance over a continuous period led by extraordinary business strategies. This paved the path to a more-than-expected correction in leverage and a healthy improvement in the liquidity of the business operations. Because of the remarkable business risk profile, the conglomerate was able to drive a lot of investors. The funding received again helped the company carry out its various business operations.
The Dismissal of the Hindenburg Case:
The rating also factors in completing the investigations into the Adani Group. Hindenburg Research, a US-based short-seller, had earlier filed a report accusing the Adani Group of stock manipulation and fraud. They even claimed that the Adani shares overleveraged. The event caused the Supreme Court to appoint SEBI to investigate the various operations of the Adani Group. SEBI has been continuing its investigation for over a year now. However, no such strong evidence was found against the Adani Group. 22 out of 24 cases have already been investigated. The regulatory investigations into the remaining allegations are underway and are expected to be completed within the next three months.
The Supreme Court also dismissed the need to appoint a special team to investigate the proceedings of the Adani Group. This again led to a significant improvement in the credit rating of the Adani Group. APL has also recovered most of its pending regulatory dues. This again acted in favour of the company. APL has also received its monthly receivables regularly, including recurring regulatory claims. This has supported its operating cash flow. The operational performance of APL has also been extremely strong, with a robust plant load factor and healthy operating margin.
Adani Power’s Performance:
Adani Power Limited’s consolidated operating EBITDA will be quite likely to remain healthy at over INR 12,000 crores per annum for the fiscal FY24 and FY25. However, any modernisation in the power demand leading to lower-than-expected profitability and volume for APL will again be closely monitored. Adani Power has acquired significant capital expenditures in the pipeline with both inorganic and organic routes. This has allowed the company to carry out all its business operations smoothly and effectively. Even though the Adani shares overleveraged for a while, the stock values were back to normal all over again.
Conclusion:
The upgraded rating for Adani Power reflects the company’s resilience in this dynamic business world. Over the past few months, the shares of Adani Power have been continuously on the rise owing to the various business ventures being taken up by the conglomerate in different sectors. With time, we can observe further improvements in the business operations. This will help the company increase our hold over the power sector and maintain a smooth transmission of power.
