group’s two relatively small listed entities — Adani
Green Energy and Adani
Transmission — may be the perfect coming-off age story in the power
As thermal power
loses its sheen, transmission and renewables segment promise more stability. Adani
Transmission has taken over Adani Power
in market capitalisation and Adani
Green is catching up.
With Tuesday’s market close, Adani Power
had a market capitalisation of Rs 125.9 billion. In comparision, Rs 186.9 billion was the market capitalisation of Adani
Transmission and Rs 89.50 billion the figure for Adani
Green Energy. “Adani
Transmission is a steady cash-flow business, while Adani Power
faces issues like fuel risks, low plant load factor and low tariff. Both transmission and Green are in a better place in terms of business outlook and balance sheet strength,” said an analyst from a domestic brokerage firm.
An email sent to the Adani
group requesting a comment on the higher market capitalisation and on the company's strategy for the three businesses remained unanswered.
Transmission was listed on the exchanges in July 2015. “The decision to create a new company for the transmission assets were for regulatory reasons, while the listing decision was to unlock value,” said another analyst who tracks the company but did not wish to be identified.
Green is a relatively newer kid on the block, listed as late as June this year. According to annual reports for the three listed entities, Adani
Transmission reported an Ebitda margin of 71.64 per cent, while for Adani
Green it was at 81.15 per cent and Adani Power
at 29.27 per cent for 2017-18.
“The margin trend for the transmission unit should continue as it is a more stable business. It is difficult to say so for the renewable business, as the new capacity addition due to excessive competition may see some margin pressure,” said the first analyst quoted in the story.
Transmission also has a definitive binding agreement signed for 100 per cent stake purchase of R-Infra’s Mumbai Power
business in a deal valued at Rs 121 billion and regulatory assets approved so far of Rs 11.50 billion. This, most analysts agree, will prove to be a cash cow for Adani
Though the transmission business looks promising, not everyone is convinced about the growth rate. “The multiples for Adani
Transmission are several times over from that of Power
Grid Corporation of India, which is a larger company and is seeing a healthy growth. There is a market cap for Adani
Transmission, but I do not think the multiples are justified,” said a third analyst tracking the power
sector who did not wish to be identified.
For the April-June 2018 quarter, Adani Power
reported a net loss of Rs 8.25 billion, while Adani
Transmission saw a profit after tax of Rs 1.69 billion and Adani
Green reported a loss of Rs 742.6 million.
“Had the transmission assets been left with Adani Power
Green’s assets transferred to Adani
Power, it would have definitely worked as a cushion of the stress Adani Power
faces due to Mundra and other assets. The group has, however, taken the call to unlock value,” one of the analyst added.