Adani Stocks: Shares of Adani Power hit a new high of Rs 428.20, up 4 per cent on the BSE in Monday’s intra-day trade in an otherwise weak market. This came after the company announced that it has agreed to acquire the thermal power assets of DB Power for the enterprise value of nearly Rs 7,017 crore. BSE Sensex has dipped around 0.38 per cent but Adani Power’s share price has surged about 326 per cent.
“The acquisition will help to expand its offerings and operations in the thermal power sector in the state of Chhattisgarh. The proposed transaction is subject to receipt of approval from the Competition Commission of India and any other approvals as may be identified following the due diligence exercise to be conducted with respect to DPPL and DB Power," the company said.
Meanwhile, in the past one month, Adani Power has outperformed the market by surging 47 per cent against a 6 per cent rise in the S&P BSE Sensex. Over the past six months, the stock has zoomed 255 per cent as compared to 3 per cent gain in the benchmark index.
Why Is The Stock Rallying?
The sharp rally in the stock price was triggered after the company reported 17-fold jump in its consolidated profit after tax (PAT) at Rs 4,780 crore in the June quarter (Q1FY23). The Adani Group electric utility company had posted PAT of Rs 278 crore in Q1FY22.
Earnings before interest, taxes, depreciation, and amortization (ebitda) jumped 227 per cent YoY to Rs 7,506 crore. The growth was aided by prior period income recognition, improved tariff realisation, and change in sales mix, partially offset by impact of higher fuel cost, increased operating expenses owing to acquisition of Mahan Energen, unfavourable foreign exchange movement, etc.
“A number of reforms undertaken by the Indian government have strengthened the Indian power sector. These comprise fuel linkages under the Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI) and the Ujwal DISCOMS Assurance Yojana (UDAY) to catalyse the transformation of power distribution companies," Adani Power said in its FY22 annual report.
The complement of Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for rural electrification and Pradhan Mantri Har Ghar Sahaj Bijli Yojana (Saubhagya) initiatives has been directed to enhance electricity availability to the last person through a widening network and policies directed to enhance the viability of distribution companies, the company said.
Adani Power further said that the availability of reliable and economic power supply is a major driver of comprehensive growth. It is an essential factor for improvement in the human development index and industrial growth.
Power demand in India is expected to witness sustainable growth owing to the government’s thrust on Make-in-India, growth in disposable incomes and standard of living as well as growing industrialization. India’s peak electricity demand is expected to be around 340 GW by 2030 compared to a peak demand of 203 GW in 2021 as per the Central Electricity Authority (CEA), the company said.
Will the Share Rally Further?
Expecting further rally in Adani Power share price, Sumeet Bagadia, Executive Director at Choice Broking said, “The stock is already in an uptrend and it is looking further bullish on the chart pattern. Those who have this stock in their portfolio can hold the stock for a short-term target of Rs 475 per share maintaining stop loss at Rs 390 apiece levels."
Adani Power is a large cap company with an m-cap of Rs. 166,812 crore. The company is a holding company engaged in providing electric power generation by coal-based thermal power plants and coal trading.