Why Adani Power Share Price is Rising

Adani Power is electrifying the Indian stock market with its sustained upward climb. Over the past year, the company's share price has skyrocketed by a staggering 176%.

This impressive trajectory hasn't shown any signs of slowing down in 2024. Year-to-date, Adani Power share price has already surged an impressive 35%, adding further momentum to its remarkable journey.

The excitement surrounding the company reached fever pitch in the last five days, with the stock rallying an additional 12%. This recent surge has further solidified investor confidence and fuelled speculation about what's driving this exceptional performance.

Let's explore the reasons behind this phenomenal rise.

#1 Rising Power Demand

India's power sector is experiencing a surge in demand, with consumption jumping a sharp 11% in April compared to last year. May is on track to meet projections of 235 GW, a significant increase highlighting the growing need for reliable electricity.

This surge can be attributed to several factors. The recent heatwave has undoubtedly increased demand for electricity for cooling purposes.

Additionally, the growing popularity of electric vehicles is adding another layer of demand to the power grid as more people switch to electric transportation.

While India is actively pursuing renewable energy sources like solar and wind, thermal power plants still represent 75% portion of the country's power generation.

The total installed power capacity is expected to more than double by 2032. Take a look at the table below.

Expected Rise in Indian Power Demand

It's clear that thermal power remains crucial for ensuring energy security, especially during peak demand periods.

The increased need for reliable electricity creates a favorable environment for companies like Adani Power to expand their operations and meet the growing energy requirements of the country.

#2 Strong Financial Performance

Adani Power reported a net profit of Rs 208.3 billion (bn) for FY24, a 94% increase compared to Rs 107.3 bn in FY23. This significant rise stemmed from a combination of factors.

Rising power demand across India created a favourable market for Adani Power's generation capacity. Additionally, the company benefited from a decrease in coal prices, a crucial expense for thermal power plants.

Adani Power's income also saw a healthy increase of 40.1% to Rs 602.8 bn in FY24, primarily driven by the surge in power demand.

The EPS of the company increased to Rs 51.6 in FY24 from Rs 24.6 in FY23.

#3 Steady Debt Reduction Strategy

Adani Power has been aggressively reducing its debt burden (deleveraging) in recent years.

Its debt reduction strategy involves not only making regular repayments, but also prepaying significant amounts of senior debt on their balance sheet. Even with acquisitions and project debt from the Godda plant, the company has managed this debt reduction.

The success of this strategy is reflected in an improved debt coverage ratio and reduced overall leverage. Take a look at the chart below.

Adani Power's Reducing Debt-Equity Ratio Over the Years

This positive financial health led to a credit rating upgrade for Adani Power to AA- during FY24.

What Next?

India's power sector is experiencing a surge in demand. This, coupled with government directives to ensure adequate fuel supply for thermal power plants and projections for increased thermal power installation (from 50 GW to over 80 GW), presents significant growth prospects for Adani Power.

Several DISCOMs have already announced plans for long-term purchase power agreements (PPAs), a market the company intends to tap into selectively. This will involve a ground fuel expansion strategy for existing power plants to ensure reliable and cost-effective operations.

Looking towards the future, all new capacity additions done by the power company will utilise ultra-supercritical technology. This advanced technology boasts both increased efficiency by reducing operating costs and lower emissions, aligning with India's growing focus on cleaner power generation.

Concrete steps are already underway to expand existing capacity. A 1,600 MW expansion project is currently underway at the Singrauli plant, and development has begun for a similar 1,600 MW expansion at the Raigarh plant.

Beyond organic growth, it is actively pursuing inorganic opportunities with announced progress on acquisitions like Coastal Energen and Lanco Amarkantak. NCLT approvals for these acquisitions are anticipated soon, potentially adding significant capacity to its portfolio.

Combining organic and inorganic growth strategies, the company has a clear roadmap to reach a generation capacity exceeding 24 GW in the coming years.

How Adani Power Share Price has Performed Recently

In the past five days, Adani Power share price has rallied more than 12%. In the last month, it is up 19%.

In 2024, so far it surged more than 36% and more than 176.7% in the last year.

The stock touched its 52-week high of Rs 720.1 on 24 May 2024 and a 52-week low of Rs 231 on 26 June 2023.

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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