ICRA Upgrades Adani Total Gas Long-Term Rating To 'AA'

ICRA Ltd. has upgraded the long-term rating of Adani Total Gas Ltd. to 'AA' with a stable outlook citing improved financial risk profile, backed by continued growth in sales volume that has led to a higher scale of operations and better profitability.

"The ratings continue to factor in ATGL’s healthy financial risk profile, characterised by adequate return and debt protection metrics on the back of the robust cash generation from its ongoing business. The company continued to witness a healthy growth in volumes in FY24, backed by increased demand from the legacy GAs1 as well as revenue addition from the new GAs (geographical areas)," the agency said.

ICRA also reaffirmed the short-term rating of the company to 'A1+'.

The agency counted strong promoter profile, favourable long-term demand prospects, backed by competitive advantage of CNG and PNG (domestic) segments and the company's healthy financial profile as key drivers.

Among challenges are project execution and funding risks associated with contracts awarded in ninth, 10th and 11th CGD bid rounds, ability to tie up gas sources for industrial PNG at competitive prices and equity commitments towards its joint venture, Indian Oil Adani Gas Pvt.

ICRA also noted Adani Total Gas' debt levels are expected to increase because of the large, committed capex plans, which would moderate the leverage and coverage metrices to a certain extent. However, the CGD contracts are long-gestation projects, funded using long tenor loans and thus the leveraging can remain high in the initial phase of commissioning of the GAs.

Long-term demand prospects remain favourable and the company will benefit from the operationalisation and ramp-up of the CGD network in the newly awarded contracts, which will drive the growth in scale, ICRA said.

Adani Total Gas reported a 71.54% jump in profit from the year-ago period, in the fourth quarter of fiscal 2024.

The city gas distribution company's bottom line rose to Rs 167.96 crore in the quarter-ended March, as compared with Rs 97.91 crore over the same period last year. Revenue was up 5.09% to Rs 1,166.95 crore, while margin expanded 717 basis points to 24.68%.

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