Adani Power is one of the leading private power producers in India, with a total installed capacity of 12,450 MW across six power plants in Gujarat, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh. The company is part of the Adani Group, which is a diversified conglomerate with interests in ports, airports, logistics, mining, gas, renewables, and agribusiness. Adani Power is also the largest solar power developer in the world, with a portfolio of over 14 GW of solar projects.
Adani Power share price has been on a strong uptrend since the beginning of 2021, rising from Rs 132.40 on January 1 to Rs 377.45 on September 29, a whopping gain of 185% in nine months. The stock has outperformed the Nifty 50 index, which has gained 25% in the same period. The stock has also hit its 52-week high of Rs 409.70 on September 13.
Acquisition of Essar Power
One of the major news that boosted the Adani Power share price was the acquisition of Essar Power’s 1,200 MW coal-fired power plant in Madhya Pradesh for Rs 3,450 crore. The acquisition was completed on March 16, 2022. The deal increased Adani Power’s installed capacity by 10% and enhanced its presence in the central region. The acquisition was also expected to be value accretive for Adani Power as Essar Power had a long-term power purchase agreement (PPA) with Madhya Pradesh state utility at a tariff of Rs 3.85 per unit.
Expansion of Renewable Energy Portfolio
Another factor that contributed to the Adani Power share price rally was the expansion of its renewable energy portfolio. Adani Power is aggressively expanding its renewable energy portfolio to align with the government’s target of achieving 450 GW of renewable energy capacity by 2030. The company has won several bids for solar and wind projects in India and abroad. Some of the recent wins are:
- In July 2021, Adani Green Energy, a subsidiary of Adani Power, won a bid for setting up a 300 MW wind power project in Gujarat at a tariff of Rs 2.77 per unit.
- In August 2021, Adani Green Energy also signed a power purchase agreement with Torrent Power for supplying 150 MW of solar power at a tariff of Rs 2.22 per unit.
- In September 2021, Adani Green Energy announced that it has acquired SB Energy India, a joint venture between SoftBank and Bharti Enterprises, for $3.5 billion. The acquisition added 4.9 GW of renewable energy capacity to Adani Green Energy’s portfolio.
The expansion of renewable energy portfolio not only enhances Adani Power’s growth prospects but also improves its environmental sustainability. The company has a clear vision to become a leader in sustainable energy solutions and achieve carbon neutrality by 2050. The company aims to increase its renewable energy capacity to 25 GW by 2025 and 50 GW by 2030.
Read more about Adani Power Share: A High-Growth Stock with a Sustainable Vision
Positive Outlook for the Power Sector
The third factor that supported the Adani Power share price was the positive outlook for the power sector in India. The power sector in India is expected to witness strong growth in demand and supply in the coming years, driven by economic recovery, urbanization, industrialization, electrification, and digitalization. According to a report by CRISIL Research, India’s power demand is expected to grow at a compound annual growth rate (CAGR) of 6% between FY22 and FY27. The report also forecasts that India’s power generation capacity will increase by 60 GW in the next five years, with renewable energy accounting for more than half of it. This will create ample opportunities for power producers like Adani Power to increase their market share and profitability.
Moreover, recent geopolitical events in Europe have resulted in a sharp increase in global fuel prices, including coal, petroleum, and natural gas. This has in turn affected the ability of a number of thermal power plants in India to generate power at viable costs, restricting their output. As a result of supply constraints in face of a growing demand for power, average market clearing price of electricity on exchanges rose to Rs. 8.23/kWh in the Day Ahead Market in March 2022. This has benefited Adani Power as it has higher plant load factor (PLF), lower fuel costs, and higher merchant sales compared to its peers.
Adani Power is a high-growth stock for long-term investors who are looking for exposure to the power sector in India. The company has a proven track record of delivering strong financial performance and growth, and has a clear strategy to become a leader in sustainable energy solutions. The company also enjoys a favorable outlook for the power sector, which will support its future growth and profitability. The stock is currently trading at a price-to-earnings (PE) ratio of 10.06, which is lower than the sector average of 16.79. This indicates that the stock is undervalued and offers an attractive entry point for investors.