ICRA Update on Adani Total Gas Limited

The outlook for Adani Total Gas Limited (ATGL/the company) has been revised to Negative on account of the deterioration in the Adani Group's financial flexibility, following a sharp decline in share prices and an increase in the yield of international bonds raised by the Adani group entities. This followed a report published by a US-based short seller. ICRA notes that while ATGL has staggered some of the capex plans over the next two years considering progress achieved in projects awarded in ninth and tenth rounds. Further, ATGL has funding tie-ups to meet the capex requirements in the near term, it has large capex requirements over the longer term which need significant debt funding. Hence, the Adani Group's reduced financial flexibility can impact ATGL's ability to raise funds from the domestic and international markets and result in higher cost of capital. ICRA will be monitoring the Adani Group's ability to raise funds from the domestic/global market as equity/debt at competitive rates. Further, ICRA also sees an increased risk of regulatory/legal scrutiny on the Adani Group entities and its impact on the credit quality of ATGL will be monitored. While, the presence of TotalEnergies SE (Total; rated A1(Stable)/P-1 by Moody's) as a co-promoter in ATGL, mitigates the risk to some extent, ICRA notes that any review of investment in ATGL by Total, in the backdrop of current developments leading to any weakening of linkage remains a sensitivity factor and the developments will be monitored.

The ratings continue to factor in ATGL's healthy financial risk profile, characterised by adequate return and debt protection metrics because of the robust cash generation from its ongoing business. The company continued to witness a healthy growth in volumes in the current fiscal, backed by increased demand from legacy GAs1 as well as revenue addition from the new GAs. The higher volumes and elevated gas prices have resulted in healthy revenue growth. While the contribution margin had moderated in FY2022, there has been some recovery in the current fiscal and the operating profits continued to grow due to the improved volumes.

Link to the report

Shares of Adani Total Gas Limited was last trading in BSE at Rs. 781.85 as compared to the previous close of Rs. 744.65. The total number of shares traded during the day was 563255 in over 10546 trades.

The stock hit an intraday high of Rs. 781.85 and intraday low of 756.00. The net turnover during the day was Rs. 439283218.00.

Source : Equity Bulls

Keywords

AdaniTotalGas INE399L01023 ATGL OutlookRevision Negative AdaniGroup