NEW DELHI: In a significant boost to the Adani Group, Fitch Ratings has upgraded its stance on Adani Energy Solutions Ltd (AESL), marking the first positive move by an international ratings agency since the US indictment of key group executives.
The agency removed Adani Energy Solutions Ltd (AESL) from its ‘Rating Watch Negative’ list, signaling confidence in the company’s financial position and funding access.
Fitch also affirmed AESL’s long-term foreign and local-currency issuer default ratings (IDRs) at ‘BBB-‘ and assigned a Negative Outlook.
The upgrade follows Adani Group’s ability to secure funding despite the US indictment of certain board members of Adani Green Energy Ltd (AGEL) on November 20, 2024.
“We believe the risks associated with the group’s liquidity and funding requirements have moderated,” Fitch said.
However, the agency maintained a cautious stance, stating that the ongoing US investigations could expose weaknesses in the group’s corporate governance, potentially leading to negative rating action in the future.
Fitch noted that AESL has demonstrated strong funding access, having raised Rs5,100 crore from onshore and offshore banking facilities since the indictment.
Refinance
Additionally, Adani Energy refinanced its $1.1 billion construction-linked facility due in March 2025 through onshore funding.
Despite the upgrade, Fitch warned that an increased reliance on domestic funding sources could elevate refinancing risks over the medium term.
It also highlighted AESL’s ambitious expansion plans, with capital expenditure projected to rise sharply to Rs17,500 crore annually in FY25 and FY26 from Rs4,000 crore in FY24.
The company is set to benefit from India’s stable regulatory environment and growing smart metering business, which is expected to contribute over 25 per cent of EBITDA by FY26. AESL has won contracts to install 22.8 million smart meters across five states, with revenue generation beginning once at least 25,000 meters are installed.
While AESL’s cash flow remains exposed to financially weak state-run power distribution companies, Fitch noted that direct debit mechanisms for bill payments would help mitigate risks related to payment recovery.
