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Why Adani Power Share Price is Falling

Oct 29, 2024

Why Adani Power Share Price is FallingImage Source: pictafolio\www.istockphoto.com

The Indian power sector plays a critical role in supporting the country's infrastructure and economic growth. With increasing demand from both residential and industrial sectors, power companies in India are seeing opportunities as well as challenges.

Factors like regulatory shifts, fuel availability, and power tariffs significantly affect their performance, making the sector both lucrative and volatile.

Adani Power is a leading player in the Indian power industry, operating across various segments, including thermal and renewable power. The company is part of the Adani Group, known for its extensive presence in infrastructure and energy.

Recently, Adani Power has drawn investor attention due to its share price taking a downward turn following the release of its quarterly results.

To understand why Adani Power's share price is declining, let's take a closer look at its quarterly results and the factors driving this fall.

Disappointing Quarterly Results

On Monday, Adani Power reported its Q2 results. The results revealed a sharp 50% drop in consolidated net profit to Rs 3.3 billion (bn) for Q2 FY25. In comparison, the company had earned Rs 6.6 bn in profit in the same period the previous year.

This decline in profit is attributed to rising operational costs and lower margins, which weighed on overall earnings despite some growth in revenue.

Revenue from operations rose by 3% to Rs 13.3 bn for Q2 FY25, up from Rs 13 bn in the same quarter last year. This slight increase reflects stable power demand, but challenges in fuel costs and operational efficiency limited stronger growth.

The company's earnings before interest, tax, depreciation, and amortisation, (EBITDA) representing core operational earnings, rose 24.6% year-on-year (YoY) to Rs 5.4 bn for Q2 FY25.

Despite the EBITDA growth, profitability issues persisted due to higher costs. The EBITDA margin stood at 39.6% in the reporting quarter compared to 39.8% in the corresponding period in the previous financial year.

What Next?

Adani Power is strategically expanding its capacity to capture opportunities in India's rapidly growing power sector. Recently, the company's operational capacity grew to 17.6 gigawatts with the acquisition of an additional 2,300 megawatts.

India's largest private thermal power producer, is set to significantly expand its capacity to meet rising energy demand. The company plans to triple the capacity of its Kawai power plant in Rajasthan, increasing it from the current 1,320 megawatts (MW) to 4,520 MW.

This expansion will be completed in two phases of 1,600 MW each over the coming years, with an investment of up to Rs 180 bn. It has awarded Bharat Heavy Electricals Ltd (BHEL) a Rs 100 bn contract to manage the expansion at Kawai.

As part of a broader strategy, the company plans to increase its total thermal power capacity to about 31 gigawatts (GW), doubling its current capacity of 15 GW. This includes both organic growth and acquisitions.

To support its large-scale expansion, Adani Power has secured extensive domestic fuel tie-ups through long-term and medium-term contracts, ensuring a steady fuel supply for its enhanced capacity.

The company also secured a 25-year power supply agreement with Maharashtra discom, ensuring stable revenue through a 1,600-megawatt ultra-supercritical thermal project. This long-term contract boosts Adani Power's capacity, supporting its target of 3 gigawatts in secured capacity.

Looking ahead, India's power demand is projected to surge to 296 gigawatts by FY27 and further to 388 gigawatts by FY32.

This anticipated growth, alongside government plans to add 80 gigawatts of thermal capacity by FY32, positions Adani Power favourably to benefit from increased demand in both long-term contracts and the merchant market.

How Adani Power Share Price has Performed Recently

In the last month Adani Power share price has slipped 10.1%.

The stock price has surged 12.7% in the 2024. Additionally, it has rallied 64.8% in the last year.

The stock touched its 52-week high of Rs 896.8 on 3 June 2024 and a 52-week low of Rs 345.2 on 30 October 2023.

Adani Power Share Price - 1 Year Performance

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.

Adani Power vs Tata Power

Adani Power vs CESC

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

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