Adani Transmission's acquisition of transmission assets from RInfra is credit negative: Moody’s

MUMBAI: International rating agency Moody’s believes that Adani Transmission's acquisition of transmission assets from Reliance Infra is credit negative for the company but has left the ratings unaffected.

On Wednesday, Adani and Anil Ambani led-Reliance Infrastructure announced that they have signed an agreement for the latter’s power transmission assets. Billionaire Gautam Adani’s Adani Transmission will pay Rs 2,000 crore to acquire three projects from Reliance Infrastructure.

Moody’s said that the acquisition is manageable within Adani Transmission’s rating, and its ‘Baa3’ rating is not affected by the transaction.

“The transaction is however credit negative because the incremental debt that is associated with the acquired entity will weaken financial metrics and reduce the headroom within ATL's rating, as well as reduce cash liquidity which is being used to fund the transaction,” Moody’s said.

The three transmission lines are operational and do not carry construction risk.

"To the extent that the acquisition proceeds on the terms announced, we expect ATL's funds from operations/adjusted net debt over the next 12-18 months to be in the range of 9% -11%, which is within the rating

minimum tolerance of 7%",”said Abhishek Tyagi, vice president and senior analyst at Moody’s.

ATL's rating could be downgraded if it undertakes aggressive expansion, or if revenues from non-transmission business rise consistently above 25% of total revenues.