Rationale

 The rating reaffirmation takes into account the satisfactory operating track record of Adani Energy Solution Limited’s (AESL) power transmission projects, with the line availability remaining above the normative level, and the associated low demand risks for these projects due to the long-term transmission service agreements (TSAs) with beneficiary customers with availability-linked tariff payments. Moreover, the cost-plus tariff for the five major operational transmission lines housed under the three wholly-owned subsidiaries of AESL - Adani Transmission India Ltd. (ATIL), Maharashtra Eastern Grid Power Transmission Company Ltd. (MEGPTCL) and Adani Energy Solutions Mahan Ltd. (AESML; formerly known as Essar Transco Limited ) - as well as for the Mumbai licence area under Adani Electricity Mumbai Limited (AEML) provides regulated returns (15.5% post tax), subject to the cost and availability remaining within the normative parameters, as per the approved tariff orders. Further, the counterparty credit risk for the company is mitigated by the significant diversification and the strong payment security mechanism for the underlying inter-state power transmission assets. The Central Transmission Utility (CTU) is responsible for collecting the transmission charges from the beneficiary users and disbursing the same to the inter-state transmission licensees. The CTU’s function is managed by the Central Transmission Utility of India Limited, a subsidiary of Power Grid Corporation of India Limited (PGCIL). At present, the proportion of revenue from projects under the national pooling mechanism with the CTU as the counterparty comprises 60-65% of AESL’s overall transmission revenues. The rating takes into consideration the company’s favourable customer profile in the Mumbai licence area for AEML’s distribution business with around 50% of the units sold to domestic/residential customers in FY2025 (similar to FY2024) and the healthy operational profile with good collection efficiency, low distribution loss levels and high supply reliability. Also, the tariff order is in place for the distribution business in Mumbai under AEML for the control period from FY2026 to FY2030, enabling a reduction in the regulatory asset position in FY2026. The rating also considers the satisfactory execution track record of the company, with many greenfield transmission assets commissioned over the past few years, taking the operational capacity to ~19,100 ckm as of December 2025 (excluding the network under Mumbai and Mundra distribution businesses). While the company’s leverage level remains high due to the largely debt-funded expansion, the coverage metrics are expected to be comfortable with the debt service coverage ratio (DSCR) likely to remain above 1.3x, supported by stable revenues from the transmission assets and the cost-plus operations for the distribution business. AESL, however, is exposed to the execution risk associated with the sizeable under-construction portfolio of the transmission assets (through 12 subsidiaries) at a cumulative investment of ~Rs. 75,000 crore. The company has completed the debt funding tie-up for majority of these projects, apart from two projects awarded in the current fiscal. The equity funding for majority of the 10 under-construction projects (apart from the two projects awarded in the current fiscal) would be supported by the successful qualified institutional placement (QIP) of Rs. 8,373 crore in August 2024. Funding for the other two projects will be tied up in due course. These two projects comprise 21% of the under-construction project value as of January 2026 and are likely to be funded through a mix of cash balances, internal accruals and debt. A timely tie-up of debt funding for the projects remains important. Moreover, for the bid-based under-construction projects, the company’s ability to keep the cost (both capital and operating) within the tariff assumption post commissioning remains critical, given that the tariff is competitively bid and fixed in nature. Nonetheless, comfort is drawn from the execution track record of the company in the transmission segment. Further, the company has ventured into smart meter installation with income on an annuity basis. The company has won nine contracts for installing 24.6 million smart meters. The total capex for these projects is estimated at ~Rs. 14,000-14,500 crore, which will be funded through debt, lumpsum income as allowed under the contract and internal accruals. The rating also factors in the refinancing risk associated with the debt having bullet repayments (primarily the $500-million bond maturing in FY2027) and the foreign exchange movement risk on the dollar debt, which constituted around 54% of the consolidated debt as of December 2025 (~69% in September 2024). While the refinancing risk is partially mitigated by the long residual TSA tenure of the transmission assets, ICRA would continue to monitor the impact of any regulatory development on the financial flexibility of the Group and the cost of debt financing. Also, the forex risk is managed by the hedging strategy followed by the company for coupon payments and principal exposure. While some of the exposure has been hedged for the entire tenure of the bonds through swaps, the remaining has been hedged through rolling one-year forward contracts. The rating also takes into consideration the moderate counterparty credit risk emanating from the exposure to the stateowned power utilities (STU) of Maharashtra, Rajasthan, Uttar Pradesh and Madhya Pradesh. However, the payments have remained largely timely so far from the utilities in these states. The counterparty risk is also offset to some extent by the stipulation of a payment security mechanism (one month of LC), the right of power regulation available with CTU/STU in case of any significant delays by the system users and the small share of transmission charges in the overall cost structure of the discoms. However, in the smart meter business, the company’s receivable position remains elevated at present due to delays in the invoice approval process with some discoms. Hence, a timely realisation of payments against smart meter business invoices will remain a key monitorable, going forward. ICRA also notes that the Group has pending investigations, filed by the US Department of Justice and the US Securities and Exchange Commission, against AESL’s chairman, in November 2024. ICRA would continue to monitor these developments and their impact on the availability of funding for AESL.