The agency has reaffirmed the company’s short-term rating at “[ICRA] A1+”.

ICRA stated that the long-term rating upgrade of Adani Total Gas (ATGL) takes into account its improving financial risk profile, backed by continued growth in sales volume which in turn has resulted in a higher scale of operations and better profitability.

The overall contribution margins have been on an uptrend amid a favourable gas allocation policy for the city gas distribution (CGD) sector as well as robust growth in compressed natural gas (CNG) volumes.

The ratings also factor in the rising revenue share from the new geographical areas (GAs) awarded in the recently concluded ninth and tenth CGD bid rounds.

The ratings continue to factor in ATGL’s healthy financial risk profile, characterised by adequate return and debt protection metrics on the back of the robust cash generation from its ongoing business.

The company continued to witness a healthy growth in volumes in FY2024, backed by increased demand from the legacy GAs as well as revenue addition from the new GAs.

The ratings are constrained by the execution and funding risks associated with the large ongoing capex planned over the next seven to eight years for the operationalisation of the CGD network in the 29 newly awarded GAs.

Adani Total Gas is involves in the CGD business, which involves the marketing and distribution of natural gas (piped and compressed). At present, ATGL is one of the largest CGD players in India with presence in 33 GAs, including the 14 GAs won under the eleventh-round bid. ATGL has also entered into a 50:50 JV with Indian Oil Corporation, with the joint venture, IOAGPL, engaged in the implementation of CGD network in several other GAs across India. IOAGPL is present in 19 GAs across the country.

The scrip shed 0.13% to end at Rs 950.65 on the BSE today.