Adani Power’s deal to acquire DB Power expires; stock hits upper circuit

The shares of Adani Power shed their five-day losing streak on Thursday even though the company said its planned deal to acquire the thermal assets of DB Power Ltd has expired. Despite the negative development, investors resorted to buying the beaten-down stock that has lost over 45% in market value in less than a month.

"We wish to inform that the long stop date under the memorandum of understanding dated August 18, 2022, has expired," Adani Power said in a stock exchange statement.

The Gautam Adani-led company's deal has fallen through at a time when the group has been hit by the allegations of irregularities by a U.S.-based short seller, Hindenberg Research.

The Adani Power stock opened a gap-up at ₹141 and hit the upper price band of 5% to rise to the intra-day high of 147.90 on the BSE. At the time of filing the report, a total of 39.5 lakh shares exchanged hands on the counter as compared to a two-week average of 21.79 lakh.

The stock surged after losing value for five days, falling more than 10% in the past week. In the past month, the stock has lost 45% of its value, falling sharply after the Hindenburg Research report hit the public domain on January 24, 2023. The stock has dipped 59.21% in the past six months and 50.43% in the year-to-date period. Additionally, the Adani group companies have lost a cumulative market capitalisation of more than $110 billion since the report came out.

Adani Power had agreed to acquire the thermal assets of DB Power Ltd in August 2022. The company, which is in the business of establishing, operating, and maintaining thermal power generating stations, owns and operates a running 2x600 MW thermal power plant in Chhattisgarh.

It has long and medium-term power purchase agreements for 923.5 MW of its capacity, backed by fuel supply agreements with Coal India, and has been operating its facilities profitably.

The initial timeline of the MoU for carrying out the transaction was October 31, 2022, which was later extended four times -- to November 20, 2022, December 31, 2022, January 15, 2023, and February 15, 2023.

The acquisition could have helped Adani Power expand its offerings and operations in the thermal power sector in Chhattisgarh. Adani Power had logged a 96% decline in its consolidated net profit for the October-December quarter for FY23, while its revenue surged 45% year-on-year (YoY) to Rs 7,764 crore.

Adani Power is India's largest private thermal power producer, with an installed thermal power capacity of 13,610 MW spread across seven power plants in Gujarat, Maharashtra, Karnataka, Rajasthan, Chhattisgarh, and Madhya Pradesh, apart from a 40 MW solar power plant in Gujarat.

In a new development, the Adani group flagship company Adani Enterprises Ltd today clarified that media reports regarding the company hiring Grant Thornton for audits of the Hindenburg report "appears to be a market rumour". "Hence, it would be inappropriate on our part to comment on it," the company added.