Adani Total Gas Ltd. (ATGL) has successfully raised $375 million in a major funding initiative, marking the largest global financing ever secured by a city gas distribution (CGD) company in India. This funding comes as part of an overall financing framework agreed upon with global lenders, which will help ATGL secure additional funding for future business plans.
As part of this agreement, the company has initially secured a commitment of $315 million, with international lenders like BNP Paribas, DBS Bank, Mizuho Bank, MUFG Bank, and Sumitomo Mitsui Banking Corporation participating in the financing.
Confirmation of Growth Potential in City Gas Distribution
According to Parag Parikh, CFO of ATGL, the participation of global lenders highlights the strong potential of city gas distribution as a transition fuel. He stated, “This financing framework will support ATGL’s growth and provide a foundation for future capital management and financing based on our business plans.”
Expansion Plans Across India
The financing will enable ATGL to expand its gas distribution network across 34 authorized geographic areas (GAs) in 13 states, covering approximately 20 crore people, or about 14% of India’s population. This expansion is expected to drive the growth of PNG (piped natural gas) and CNG (compressed natural gas) infrastructure, reaching deeper into India’s interior regions. The increased use of PNG and CNG will have positive environmental effects, supporting India’s goal to increase natural gas’s share in its energy basket from 6% to 15% by 2030.
Improved Credit Ratings
The company’s long-term rating has been upgraded to ‘AA’ by ICRA, with a ‘stable’ outlook. The agency cited ATGL’s continued sales volume growth and financial improvements as reasons for the upgrade. Additionally, ICRA reaffirmed the company’s short-term rating of A1+, emphasizing its strong financial profile and the competitive advantage of the CNG-PNG segments.
Challenges Ahead
However, challenges remain for ATGL, including investment risks and project execution for contracts awarded in the 9th, 10th, and 11th CGD auction rounds. Additionally, ensuring the availability of gas resources to supply industrial PNG at competitive prices, as well as meeting commitments related to its joint venture with Indian Oil Adani Gas, are seen as potential hurdles.
Strong Financial Performance
Adani Total Gas reported a 71.54% year-on-year rise in profit for the fourth quarter of FY24. Revenue increased by 5.09% to ₹1,165.95 crore in the quarter ending March 2024, driven by growing demand in its traditional geographic areas and its entry into new markets.
This financing deal is expected to bolster ATGL’s ability to continue expanding and strengthening its city gas distribution network, helping it capitalize on the long-term demand for natural gas in India.
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