Adani Power stock hits all-time high on DB Power deal; up 30% in 8 sessions

Shares of Adani Power continued their gaining momentum on Monday, with the share price hitting a fresh all-time high in early trade as investors cheered the Adani group company’s deal with DB Power. Billionaire Gautam Adani-led company has agreed to acquire the thermal power assets of DB Power for an enterprise value of nearly ₹7,017 crore.

Extending its gaining streak for the eighth consecutive session, Adani Power shares opened higher at ₹420.20, against Friday’s closing price of ₹412.20 on the Bombay Stock Exchange (BSE). In the early deals so far, the largecap stock rose as much as 3.83% to hit a record high of ₹428, breaching its previous high of ₹418.85 touched on August 19. In contrast, the BSE benchmark Sensex was trading 561 points, or 0.94%, lower at 59,084 levels at the time of reporting.

The share of the private power producer has risen around 30% in the last eight sessions and surged 46% over a month period. The multibagger stock has given a massive return of 451% to its shareholders in the past one year and 328% in the calendar year 2022. The stock has zoomed 511% from its 52-week low of ₹69.95 touched on August 24, 2021. In the long term horizon, the counter delivered 650% returns in 3 years, 1,434% in 5 years, and 920% in the past ten years.

The recent rally in Adani Power shares can be attributed to strong financial performance and recent acquisitions. Adani Power on Friday announced the acquisition of DB Power, which owns and operates a running 2x600 MW thermal power plant at District Janjgir Champa in Chhattisgarh. DB Power is engaged in the business of establishing, operating, and maintaining thermal power generating stations. 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 proposed transaction is subject to receipt of approval from the Competition Commission of India (CCI) and any other approvals as may be identified following the due diligence exercise to be conducted with respect to DPPL and DB Power,” it said in the exchange filing.

As per the company, the acquisition will help Adani Power expand its offerings and operations in the thermal power sector in the state of Chhattisgarh. Adani Power is the largest private thermal power producer in India, 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.

On the financial front, the power company reported multi-fold growth in June quarter earnings as a nation-wide heatwave and broadening of the recovery in economic activity boosted electricity demand growth during the period under review. However, high import coal prices in the backdrop of domestic coal shortage impacted the earnings.

For the April-June quarter of the current fiscal (Q1 FY23), the power major reported a 17-fold year-on-year (YoY) jump in consolidated profit at ₹4,780 crore, aided by strong revenue, other income, and operating performance. On a sequential basis, the profit rose 2.9% from ₹4,645.5 crore in the March quarter of 2022 (Q4 FY22). The consolidated revenue from operations soared by 109% YoY and 29.5% sequentially to ₹13,723 crore during the quarter under review. The consolidated EBITDA for Q1 FY23 was at ₹7,506 crore as against ₹2,292 crore in the year-ago period, up 227%, which includes prior period revenue recognition of ₹4,212 crore versus ₹657 crore during the respective periods.