Why Adani Energy Solutions Share Price is Rising

Adani Energy Solutions' recent quarterly results present a complex picture.

The company reported a net loss of Rs 8.2 billion (bn) for Q1 FY25. This is a stark contrast to the Rs 1.8 bn net profit in the same period last year.

This downturn was exacerbated by an exceptional item of Rs 1.5 bn linked to the divestment of the Dahanu thermal plant. However, the company's operational performance, as indicated by an EBITDA of Rs 1.6 bn, showed a commendable 29.7% year-on-year growth.

However, soon after the results, the company made another announcement which sparked a rally in Adani Energy Solutions share price.

The stark contrast between the company's financial performance and its subsequent share price surge is intriguing.

What specific announcement ignited this market rally?

Let's find out.

Big Fund Raising

Adani Energy Solutions' share price has been rising ever since the company announced its fundraising plans.

On 30 July 2024, the company launched a Qualified Institutional Placement (QIP) to raise funds, setting the floor price at Rs 1,027.1 per share. This was a nearly 10% discount to the previous day's closing price.

The QIP included a base deal of up to Rs 5.9 billion (bn) with a greenshoe option to upsize by up to Rs 2.5 bn. The company is issuing 60.1 million (m) equity shares as the base issue with an option to upsize to 25.7 m shares.

According to the term sheet, the dilution at the base deal is 5.4% of the pre-issue outstanding equity capital, and at the upsized deal, it is 2.3% at the indicative issue price. The two-day QIP opened on Wednesday.

Duquesne Family Office, founded by billionaire investor Stanley Druckenmiller, and two other US-based long-only funds, Driehaus Capital Management and Jennison Associates, invested in it.

Reports indicate that Adani Energy Solutions raised Rs 50 bn through the issue. These three funds invested in Indian equities for the first time. More than 125 institutional investors participated in the fundraising.

Other prominent investors included Blackrock, Abu Dhabi Investment Authority (ADIA), Jupiter Asset Management, Nomura, Eastspring Investments, GQG Partners, and Qatar Investment Authority.

Domestic mutual funds such as SBI, HDFC, Axis, Tata, LIC, WhiteOak, and 360 One WAM also participated.

The share price continues to rally as it received a strong response to the QIP.

What Next?

Adani Energy Solutions has laid out ambitious plans for the future.

The company is focusing on the expansion of its transmission and distribution networks, with a robust pipeline of projects worth Rs 900 bn. This includes the development of large-scale green energy corridors for the evacuation of renewable power.

A key part of the company's strategy is the deployment of smart meters. It aims to maintain its leadership position by securing more projects in this area, building on its existing installation of 22.8 m smart meters. This move is expected to enhance energy efficiency and reduce distribution losses.

Additionally, the company is committed to its environmental, social, and governance (ESG) goals. The divestment of the Dahanu thermal plant aligns with this commitment and helps the company move closer to its aspiration of ranking among the top 20 global companies in ESG ratings within the utility industry.

The company's revenue growth of 47% YoY, bolstered by new transmission lines and increased energy consumption, highlights its strong operational performance.

However, the exceptional item due to the Dahanu plant divestment had a significant negative impact on financial results. Despite this, Adani Energy Solutions remains confident about the future, focusing on recognising and tapping market opportunities in the energy sector.

Strong response from investors to the company's QIP, including major global and domestic funds, indicates robust confidence in the company's growth prospects. The funds raised will support ongoing and future projects, reinforcing Adani Energy's position in the market.

How Adani Energy Solutions Share Price has Performed Recently

In the past five days, Adani Energy Solutions share price has rallied 17%. In the last month, it is up 23.3%.

In 2024, so far its share price has surged 19.7% and it has rallied 41.1% in the last one year.

The stock touched its 52-week high of Rs 1,347.9 on 1 August 2024 and a 52-week low of Rs 686.9 on 26 October 2023.

About Adani Energy Solutions

Adani Energy Solutions (formerly Adani Transmission Limited) is a prominent player in India's power transmission sector.

As a subsidiary of the Adani Group, it has rapidly expanded its operations to become the largest private-sector power transmission company in the country. The company's primary focus lies in the transmission of electricity.

It owns and operates an extensive network of high-voltage AC and DC transmission lines and substations across various regions of India. This infrastructure plays a crucial role in ensuring the reliable and efficient delivery of electricity to consumers.

While transmission remains the core business, Adani Energy Solutions is diversifying its operations. The company is venturing into other areas of the energy value chain.

To know more about the company, check out Adani Energy financial factsheet and its latest quarterly results.

For a sector overview, read our power sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

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