Adani Power ‘Non-Cooperative’ For Rating Exercise, Crisil Says
Crisil reaffirmed its ratings on the stock with a stable outlook.
Crisil Ratings assigned a non-cooperator tag to Adani Power Ltd. after the energy company failed to provide the necessary information needed to conduct a rating exercise, despite repeated attempts.
"Crisil has been consistently following up with Adani Power for information through letters and emails, apart from telephonic communication," the rating agency said in a statement issued late Thursday.
Crisil, however, reaffirmed its stable outlook and BB- rating on Rs 6,559 crore of the company’s credit facilities which reflects adequate liquidity, financial flexibility and low offtake risks, somewhat offset by an " unviable tariff structure and weak financial risk profile".
It warned investors that the rating is based only on the data available with the agency as of now and lacks a forward looking component as it was arrived at without any management interaction.
The investors, lenders and all other market participants should exercise due caution while using the rating assigned/reviewed with the suffix ‘issuer not co-operating’.Crisil Ratings Statement
The reaffirmation factors in the order of the Supreme Court in April 2017, disallowing relief in the form of compensatory tariff due to change in Indonesian coal regulations, leading to continued under-recoveries in Adani Power’s revenue, the rating company said in its statement. This order had led to a write-off of more than Rs 3,600 crore in receivables from the power distribution companies, Adani Power said while reporting its fourth quarter earnings.
Notably, nine out of 14 analysts tracked by Bloomberg have a sell rating on the stock and have estimate a potential negative return of 7 percent. Only five analysts recommending holding the stock.
Unviable projects combined with aggressive capacity addition in the past 7-8 years have weighed on the financials of the company. The company has added 11,000-12,000 MW of capacities in the past 8 years which has taken its net debt-to-equity ratio to seven times in FY17 from around two times in FY08, thereby straining the balance sheet. The company has been signing PPAs below the cost of power generation and running plants at an average utilisation rate as low of 50-60 percent.Rupesh Sankhe, Senior Research Analyst, Reliance Securities
Adani Power Ltd. reported Rs 4,960 crore quarterly loss as the power producer was forced to account for the apex court’s order barring the company from charging compensatory tariff for its Mundra Ultra-Mega Power Project. For the full year, the company reported a net loss of Rs 617.01 crore compared to a profit of Rs 581.77 crore in FY16.