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The outlook on all seven issuers remains negative. (Mint)
The outlook on all seven issuers remains negative. (Mint)

Moody’s downgrades NTPC, NHAI, Adani group firms

  • On Monday, Moodys’ downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to 'Baa3' from 'Baa2'
  • The agency also affirmed the ratings of the following four issuers and revised their outlooks to negative from stable

MUMBAI : The day after downgrading India’s sovereign credit ratings to just a notch above junk status, global credit ratings agency Moody's followed this up this up with downgrading seven major Indian infrastructure companies. These include public sector and private sector energy companies and several group firms promoted by billionaire Gautam Adani.

In a ratings action taken on Tuesday, Moody’s announced that it was downgrading NTPC, NHPC, National Highways Authority of India, Power Grid Corporation, GAIL, and certain subsidiaries of Adani Green Energy and Adani Transmission. At the same time, Moody's affirmed the baseline credit assessments (BCAs) for NTPC and NHPC at baa3, and downgraded the BCAs for Power Grid and GAIL by one notch to baa3 from baa2.

The outlook on all seven issuers remains negative.

The agency also affirmed the ratings of the following four issuers and revised their outlooks to negative from stable - Adani Ports and Special Economic Zone Ltd; Adani Transmission Ltd; Adani Electricity Mumbai Ltd and Azure Power Solar Energy Pvt Ltd.

In its ratings rationale, Moody’s said that under its joint default analysis approach for government-related issuers, government support is one of the key considerations in ratings for public companies. The ratings of these five PSUs are very sensitive to a decline in the rating of their government owner given their close links with the Government of India.

“The downgrade of Adani Green Energy Restricted Group's ratings reflects the group's dependence on sovereign-owned entities, such as Solar Energy Corporation of India, for more than 70% of the offtake from its power projects. As a result, the ratings are constrained by the weakening credit profiles of the group's off-takers," Moodys’ said. The outlook for all 11 infrastructure issuers could change to stable from negative if the outlook on the sovereign rating changes to stable from negative, the agency added.

On Monday, Moodys’ downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to “Baa3" from “Baa2" while the outlook fell from stable to negative. The latest downgrade reduces India to the lowest investment grade of ratings and brings Moody’s — which is generally the most optimistic India among the top three global credit ratings agency — ratings for the country in line with the other two main rating agencies in the world — Standard & Poor’s and Fitch. Expectations of the GDP shrinking in FY21, a widening fiscal deficit and a weak financial sector were the primary reasons Moodys’ chose to turn pessimistic about India’s prospects.

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