Domestic brokerage firm JM Financial has initiated coverage on Adani Power with a 'Buy' rating, setting a target price of ₹178 per share. This implies a potential upside of 22.8% from the current market price of approximately ₹145. The brokerage's optimism stems from the company's strong execution capabilities, dominant position in the thermal power space, and robust demand outlook for power in India.

Strategic Capacity Expansion Plans

JM Financial highlights that Adani Power has strategically built capacities to become India's largest private sector thermal power producer. The company's expansion trajectory shows significant ambition in scaling operations.

The brokerage notes that Adani Power has demonstrated strong execution capabilities, being the first to synchronize critical assets like the 4,620MW Mundra project within a 36-month timeline. The company has also strategically pre-ordered key equipment to avoid potential delays in project implementation.

Thermal Power's Critical Role in India's Energy Future

JM Financial emphasizes the indispensability of thermal power in meeting India's projected peak power demand of over 700GW by 2047. With increasing penetration of variable renewable energy sources such as solar and wind, the brokerage believes grid reliability will depend on dependable base load thermal generation.

India's coal-fired generation capacity is estimated to reach 340GW by 2047, requiring incremental additions of 137GW to meet this goal. In this context, Adani Power's early positioning and aggressive capacity build-out offer a significant competitive edge.

Financial Projections and Performance Metrics

JM Financial has outlined robust financial expectations for Adani Power, projecting strong growth across key metrics.

The debt profile shows a temporary increase during the expansion phase, with Net debt/EBITDA projected to climb from 1.6x in FY25 to 3.0x by FY29, driven by incremental debt for capital expenditure of ₹2 trillion over FY25-32. However, this ratio is expected to moderate back to 1.6x by FY31 as operational capacity comes online.

Operational Excellence Indicators

Adani Power's operational performance metrics strengthen the case for sustained earnings growth. The company demonstrates superior operational efficiency with a 71% plant load factor (PLF) and 91% plant availability factor (PAF). These metrics, combined with secured project components, support JM Financial's optimistic outlook on the company's ability to deliver consistent performance during the anticipated capacity expansion phase.

The Supreme Court has delivered a significant ruling in favor of Adani Power, determining that the company will not be required to pay customs duty for electricity supplied from Special Economic Zones (SEZ) to the domestic market. This decision provides crucial regulatory clarity for the power generation company's operations.

Supreme Court Decision Details

The apex court's ruling specifically addresses the customs duty obligations for electricity supply from SEZ facilities to domestic markets. The decision establishes that Adani Power is exempt from such customs duty payments, which could have significant implications for the company's operational costs and regulatory compliance.

Regulatory Impact

This Supreme Court decision provides important legal precedent regarding customs duty obligations for power companies operating through Special Economic Zones. The ruling clarifies the regulatory framework for electricity supply from SEZ facilities to domestic consumers, potentially affecting how similar cases are handled in the future.

The exemption from customs duty payments could result in cost savings for Adani Power's SEZ-based operations, as the company will not face additional duty obligations when supplying electricity from these zones to the domestic market. This regulatory relief may enhance the operational efficiency of the company's power generation and distribution activities.

Business Implications

For Adani Power, this favorable court decision eliminates potential customs duty liabilities associated with electricity supply from Special Economic Zones. The ruling provides certainty regarding the company's regulatory obligations and may positively impact its financial position by avoiding additional duty-related costs.

The decision also establishes clear guidelines for the power sector regarding SEZ operations and domestic electricity supply, contributing to better regulatory predictability for companies operating in similar business models.