Adani Green Energy gets AA rating with ‘Stable’ outlook; here’s how stock reacted

India Ratings and Research (Ind-Ra) has upgraded Adani Green Energy Limited’s (AGEL) long-term issue rating to ‘AA’ from ‘AA-’, while maintaining a "stable" outlook. Reacting to the news, AGEL's shares were trading 0.35% higher at ₹990.15 apiece on the BSE. The stock hit an intraday high of ₹998.35 today, with a market capitalisation of ₹1.6 lakh crore.

"Ind-Ra continues to fully consolidate AGEL and its subsidiaries to arrive at the ratings and has analysed the cash flow upstreaming available to AGEL from its subsidiaries as per the bond documentation," the report stated. The company can upstream its funds after meeting the respective restricted payment conditions.

The upgrade reflects the underlying changes in the debt profile of the entity, with no debt at the holding company, and a change in the loan structures to project life-linked tenor structures against the earlier practice of having large bullet maturities, allowing AGEL to have a lower cost of debt.

AGEL's refinancing obligations have reduced drastically to ₹20.0 billion during FY26, ₹54.6 billion during FY29, and ₹54.6 billion during FY30. The rating agency stated that even in case of market dislocations, the fund flow from operations generated by AGEL should be sufficient to meet the debt repayment obligations, thus lowering the need for constant refinancing.

As per the report, the upgrade also factors in the strong execution capability of the company, as demonstrated in the continuous growth in commissioning. Furthermore, annual additions to capacity, now being less than one-third of the operational capacity (around 16 GW), lowers the volatility induced by the leverage of AGEL's under-construction portfolio.

The upgrade reflects the comfortable level of operational debt to run-rate EBITDA of 5.3x at end-FY25 (FY24: 6.0x; FY23: 7.5x), which aids the generation of adequate free cash flow sufficient to fund the equity requirement of the under-construction book.

As per the report, even if incremental projects (limited to less than one-third of the operational capacity) were to come at 6.5x–7x debt/run-rate EBITDA, the impact on AGEL's leverage will remain moderate, given the large proportion of operational projects which will have a declining leverage profile.

"Given the above, Ind-Ra notes AGEL's operational debt to run-rate EBITDA will remain below 5.5x over the medium term, as against the earlier envisaged band of 6x–7x," the report said.

Furthermore, the cash flow from operating projects after debt service will be sufficient to meet the equity requirements of under-construction projects without a need to approach equity markets for funding. "The debt service coverage ratio (DSCR) and project life coverage ratio (PLCR) at project levels also remain comfortable," the report suggested.

Ind-Ra said that the resolution of the criminal indictment and the civil complaint filed by the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) will remain a key monitorable. As of now, the management of the company does not expect any material implication of the ongoing investigation by the U.S. authorities on AGEL's operations or financial flexibility, as the matter relates to key management personnel and promoters.

"Ind-Ra derives comfort as the merchant capacity could be tied up at healthier rates, given the transmission grandfathering available to those projects," the report said. Additionally, lender concentration is an industry-wide phenomenon given the long tenor, large ticket size, and amortising schedule that banks/financial institutions can provide against the capital markets.

The ratings agency highlighted the strengths of the Adani-led renewable energy arm as being the largest renewable developer in India, with sound operating parameters of operational assets and healthy free cash flow to equity. Promoter infusion covers equity commitments, along with improvement in leverage.

The report also noted the company's weaknesses, including a large under-construction (UC) portfolio—which provides growth visibility but also risk—lender concentration, the U.S. indictment, and forex exposure.