The continuation of rating watch with positive implications for Adani Gas Limited (AGL or the company) factors in the share purchase agreement (SPA) entered into between Total Holdings SAS (Total) and certain existing promoters for acquisition of 37.4% stake by Total in AGL, subject to applicable statutory approvals and completion of the open offer. ICRA expects the operational synergies from this transaction to be significant. The indicative timeline for completion of the transaction is by March 2020. The rating reaffirmation continues to factor in the healthy financial risk profile of AGL characterised by adequate return metrics and debt protection metrics supported by stable cash generation from its ongoing business. The rating favourably factors in the significant improvement of 13% YoY and 8% YoY in AGL's marketed gas volumes in FY2019 and H1 FY2020 respectively, strong contribution margins and the balanced revenue mix of AGL amongst compressed natural gas (CNG) and piped natural gas (PNG) consumers, which together continue to lend stability to the revenue model. The rating also takes into account the healthy competitive advantage of CNG and PNG (domestic) over liquid fuels as well as the expected jump in gas volumes post operationalisation of the city gas distribution (CGD) network in the newly awarded geographical areas (GAs) in 9 th and 10th CGD bid rounds, which will drive the growth in scale, going forward. The rating, however, is constrained by execution and funding risks associated with the large ongoing capital expenditure (capex) planned over next eight years for operationalisation of CGD network in the 15 newly awarded GAs (13 GAs in 9 th round and two GAs in 10th round) to AGL, as well as the large planned equity commitment by AGL towards its joint venture (JV) - Indian Oil Adani Gas Private Limited's (IOAGPL's) newly awarded 10 GAs (nine GAs in 9 th round and one GA in 10th round). The rating is also constrained by the outstanding advances of Rs. 359 crore as on March 31, 2019 given out to former parent - Adani Enterprises Limited (AEL). ICRA notes that the company's management has plans to bring back the advances in full over the near to medium term to support the equity requirement towards the capex plans of AGL. The ratings factor in AGL's significant indirect exposure to JV company – IOAGPL in the form of corporate guarantees for its CGD operations. Further, any significant upward revision in domestic gas price or change in gas allocation policy could impact the competitive advantage over liquid fuels/liquefied petroleum gas (LPG) and would be a rating sensitivity