Fitch affirms Adani Transmission's restricted group notes at 'BBB-'; outlook stable

Singapore/Hong Kong, February 23 : Fitch Ratings has affirmed the 'BBB-' ratings on the USD 400 million senior secured notes issued by the restricted group of India-based Adani Transmission Ltd (ATL, BBB-/Stable).
The outlook is stable, the statement from Fitch said. The restricted group includes six co-issuers -- Barmer Power Transmission Service Limited, Chhattisgarh-WR Transmission Limited, Hadoti Power Transmission Service Limited, Raipur-Rajnandgaon-Warora Transmission Limited, Sipat Transmission Limited and Thar Power Transmission Service Limited - and one non-issuing SPV, Adani Transmission (Rajasthan) Ltd (ATRL).
The credit assessment of the restricted group reflects the project companies' availability-based revenue under a supportive regulatory framework, with low technical complexity, reflected in high availability levels and operating performance that the rating company said it expects to remain stable.
However, Fitch said the project companies have a longer-term residual exposure to inflation in light of the mismatch between the operating and maintenance (O&M) cost escalation rates and the largely unindexed revenue base. The Hadoti Transmission Company Limited (PPP-8), Barmer Transmission Company Limited (PPP-9) and Thar Transmission Company Limited (PPP-10) projects are also exposed to heightened payment delay risks associated with long-term transmission customers in the Indian state of Rajasthan, which could result in increased working-capital requirements.
Fitch projects an average debt-service coverage ratio (DSCR) of 1.48x, with a profile DSCR of 1.30x between the financial years ending March 2027 (FY27) and FY33 under its rating case. The restricted group's financial profile is stronger than that commensurate with a 'BBB-' rating for this portfolio of assets, reflecting considerable rating headroom at the current level. The credit assessment is constrained by India's (BBB-/Stable) 'BBB-' Country Ceiling.
According to Fitch, ATL RG1's credit assessment is not directly affected by the alleged malpractices at India's Adani group highlighted in Hindenburg Research's report due to the ringfenced nature of these assets. The offshore bondholders benefit from a robust cash flow waterfall mechanism and covenants that restrict cash upstreaming to shareholders and limit indebtedness. Moreover, ATL RG1 has a 30-year largely amortising bond. There are no material short to medium-term debt maturities reducing near-term liquidity and refinancing risks. The shareholder loan at ATL RG1 level is also minimal, Fitch said.