Sunday, June 23, 2024

Adani Power’s Powerpacked Performace: Books ₹1 T m-cap

Adani Power has become Adani Group’s sixth company to cross a market capitalisation of Rs 1 trillion (lakh crores) as the company’s shares reached an all-time high of Rs 270.80, up 5% from the previous closing.

The company’s stocks jumped over 165 per cent in a year, with a 46 per cent gain this month. As a result, the company has joined the elite club of the top-50 -valued companies in terms of market capitalisation.

Adani Power has surpassed its seniors, such as Tata Power, Dabur, Britannia, and BPCl, to secure the 49th position in the country’s bourses.

Adani Group’s Adani Green Energy, Adani Transmission, Adani Total Gas, Adani Enterprises, and Adani Ports & Special Economic Zone are the first companies to reach this milestone. While the stock market has witnessed a remarkable growth in power equities since the beginning of the year, experts suggested the solid fourth-quarter profits in 2021-22. Experts also speculated that these enterprises might have had greater cash flows due to power discoms paying their dues.

India’s Power Sector suffers loss 

As per the Economic Survey for 2020-21, India’s transmission and distribution (T&D) losses were alarmingly high compared to the other nations. i.e., the power generated did not reach its customers.

Even though losses in India’s T&D have substantially declined over a decade, the losses in the opening of the new decade were over 20 per cent of generation, which is two times more than the global average.

Adani Power

Experts suggested the losses were due to cash strapped discoms that failed to make electricity supply payments to power generation companies.

Amidst the central government’s additional efforts to bring transparency in payments between discoms and gencos through PRAAPTI portal, state-run electricity discoms’ unpaid dues to the gencos continue to rise. According to the data available on the Ministry of Power’s website, the total overdue amounted to Rs 102.154 Cr earlier this month.

However, Adani Power’s share prices spiked after the Supreme Court verdict ordering the Rajasthan Government to pay its outstanding dues to the power generator. As a result, the company has recently received dues with interest totalling Rs 3,000 crore from the state-run discom in Rajasthan.

Moreover, experts believe that the overall improved performance of energy companies is due to the centre’s reforms that focus on bringing efficiency and discipline to the sector.

Rise of Adani Power

Yet, Rome was not built in a day. So, while the above two reasons may have boosted the company’s capital, CorpIndiaNews analyses the other variables that helped Adani Power become a Rs 1 trillion company.

Adani Power

1 Onset of the Summer Season

As India is experiencing one of the hottest summers of the decade, people tend to use more electrical appliances such as coolers, air conditioners, refrigerators and other cooling devices to beat the heat.

At present, Adani Power has seven power projects running in Gujarat, Maharashtra, Rajasthan, Karnataka and Chhattisgarh. The power generator’s business will flourish further with the increased power consumption due to summers. Hence, the company’s shares are likely to remain up going to remain on the top for this period.

2 Reopening of Industries

After long covid-induced restrictions, India’s manufacturing sectors are returning to work. Not only are the industrial areas reopening, but also is India’s service sector. As a result, people are returning to their workspaces, directly increasing the energy demand. At this time, Adani Power plants are most strategically placed as Gujarat and Maharashtra are best known for their industrial areas in India. At the same time, Karnataka has a more services-based economy. Moreover, with the Government of India’s push to ‘Make in India’ given the recent geopolitical development, the country’s energy consumption tends to increase. All these factors are directly affecting the rise of Adani Power.

3 Registering Profits

Adani Power’s net profits jumped 175 per cent to Rs 218 Crore in the previous year’s third quarter, while the company had incurred a loss of Rs 288.74 crore in the year-ago period. The company suffered a loss due to covid-related restrictions that changed work dynamics, and industry operations came to a halt. However, as covid-restrictions eased up, the company’s performance improved.

The company’s profits helped it change its overall market outlook. Its shares surged 109 per cent in a month, and the company broke the upper ceiling.

4 Adani buys Low-Efficiency Power Plants

Another strategy that Adani Power uses is to buy low-efficiency power plants and turn them into full-fledged energy powerhouses. The readymade plants are well-positioned and can yield good money for the company. Hence, Adani Power is taking advantage of buying low-efficiency units and generating electricity out of it.

5 Settlement of dispute with Gujarat Discom

Adani Power settled its longstanding case against Gujarat Urja Vikas Nigam (GUVNL) for terminating the PPA of February 2, 2007.

Adani Power

The case was about an agreement between Adani Power and GUVNL in which the former would supply of 1,000-MW power at the rate of Rs 2.35 per Kwh from its power project at Korba, Chhattisgarh, to GUVNL. The agreement had a clause of GMDC providing 4 million tonne of coal to generate electricity. However, when the GMDC failed to supply coal, Adani terminated the contract.

As a result, GUVNL challenged the termination before the Commission, which asked Adani to supply power at the rate determined in the PPA. However, with no provision of coal, Adani could not afford to supply power at fixed rates. Hence, Adani Power reached the court of law.

6 Adani’s ‘pit to plug’ strategy

Adani’s plan doesn’t stop producing energy, but the group is working on a rather comprehensive approach of Gautam Adani’s famous ‘pit to plug’ concept. The concept is an integrated plan to extract coal from Mines in Australia, import it to India, generate power in its power stations and then distribute it as a discom.

Recently, many states faced a power crunch amidst hot summers, leaving citizens questioning authorities. Adani is set to take over discoms in the coming years with the necessary bandwidth to suffice India’s energy needs. Hence, the group is on its way to becoming India’s largest energy generator and supplier.

Adani Wilmar, too, crosses Rs 1 Trillion Mark

Adani Wilmar was listed in India’s bourses in February this year. The company has surpassed Rs 1 trillion market capitalisation in just two months.

Adani Power

Adani Wilmar’s stock rose to another 5 per cent, breaking the daily circuit limit to a new high of Rs 802.80. On Monday, it finished at Rs 764.60. Due to this meteoric rise, it has risen to become one of India’s top 50 most valuable companies. Adani Power NSE 5 per cent surpassed the Rs 1 lakh crore market valuation last week.

With two of Adani Group’s companies joining the Rs 1 trillion club within two days, Gautam Adani too surpassed Warren Buffet to become the world’s 5th richest person. Gautam Adani’s net worth has surged to $123.7 billion, whereas Warren Buffet’s net worth stood at $121.7 billion.

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