Why Adani Power Share Price is Falling

Adani group's growth plans started off well when the conglomerate announced five upcoming IPOs in the next couple of years.

In the next few days, the group also announced India's largest ever follow on public offer by Adani Enterprises.

All of these plans became standstill when US-based shortseller Hindenburg came out with its long report, alleging Adani group of stock manipulation, among other things.

Adani group stocks were in a free fall for the next couple of days. Some stocks from the group even fell around 60%.

There was a little relief when Adani promoters announced that they will prepay loans to free pledged shares. So Adani stocks started to rise.

While all this was happening, one Adani group stock was caught in the middle. Adani Power share price saw a fall of 42% in 2023.

Let's find out why...

#1 Weak quarterly results

For the quarter ended December 2022, Adani Power reported total sales of Rs 77.6 billion (bn). Sequentially, sales were down by 54%. However, on a YoY basis, sales were up by 44%.

Along with a fall in revenues, Adani Power also reported a surprise drop in its net profit this quarter.

Adani Power's quarterly net profit came in at Rs 88 million (m). Sequentially, the net profit is down 99% and on a YoY basis, it is down 96%.

Rising petrol prices and coal prices took a hit on the company's net profit margins. The net profit margin stood at 0.1% for the quarter ending 31 December 2022.

Dull quarterly results hurt investor sentiment.

Along with this, foreign investors (FIIs) also reduced their stake during the quarter under review. FIIs reduced their stake by 0.4% in the said quarter. Total FIIs stake as of 31 December 2022 is 12.9%.To know more, check out the company's latest shareholding pattern.

#2 Changes in the MSCI index

MSCI (Morgan Stanley Capital International) is an investment research firm that provides stock indices, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.

Last month, after the Hindenburg report was released, MSCI sought feedback from market participants on Adani Group's situation. It was closely monitoring any information that would prevent the conglomerate's securities from being eligible for its gauges.

MSCI received feedback from a range of market participants concerning the eligibility and free float determination of specific securities associated with the Indian conglomerate.

The index provider was reviewing the number of shares linked to the group that were freely tradable in public markets. This after determining that the characteristics of certain investors have sufficient uncertainty that they should no longer be designated as free float according to its methodology.

On 10 February 2023, MSCI announced that for four stocks of the group, Adani Enterprises, Adani Total Gas, Adani Transmission, and ACC, their free floats will be reduced.

MSCI defines free float as a proportion of shares outstanding that are available to investors for purchase in the public equity markets.

Adani group stocks are now free from the fear of getting removed from the MSCI index. However, a reduction in free float indicates it will result in fund outflows.

Adani Power is not directly impacted by changes in the MSCI index, but the sentiment took the company's share price down. This has been going on for the past few weeks now.

How shares of Adani Power have performed recently

Adani Power share price is down 42% in 2023 so far. In the past one year, it is up 61%.

Adani Power touched its 52-week high of Rs 432.8 on 22 August 2022. Its 52-week low of Rs 106.1 touched on 10 February 2022.

About Adani Power

Adani Power is a subsidiary of the Indian conglomerate Adani Enterprises. The company is in the business of power generation, accumulation, distribution, and supply of power.

It's India's first company that synchronises supercritical technology.

The company has signed long-term power purchase agreements of about 9,153 MW with the government of Gujarat, Maharashtra, Haryana, Rajasthan, Karnataka, and Punjab.

To know more about the company, check out Adani Power's fact sheet and quarterly results.

You can also compare Adani Power with its peers.

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