Adani Green’s debt maths: Why leverage may fall below 4x as capex cycle matures

Adani Green Energy’s debt burden is set to remain elevated as the company continues to fund one of India’s biggest renewable energy expansion programmes. But management expects the leverage curve to bend lower once its construction pipeline begins converting into operating assets.

AGEL’s net debt-to-run-rate EBITDA currently stands at around 5.6 times and is expected to remain broadly at that level through FY28 and FY29. As more renewable, pumped storage and battery projects become operational, the ratio could ease to 4.5–5 times by FY30 before moving towards 4 times and below over time.

The shift will be driven by the changing composition of the portfolio: fewer assets under construction, a larger base of operating projects generating EBITDA and the continued repayment of project loans.


“After ’29, ’30, as the more and more operating assets starts to increase as a percentage of under-construction assets, the leverage profile will start to be in the range between 4.5 to 5x, and then moving towards 4x and below 4x also,” AGEL CFO Saurabh Shah said at a recent analyst call.

AGEL remains committed to a ₹2.4 lakh crore capital expenditure programme through FY30 to fund solar and wind capacity, battery energy storage systems and pumped storage projects.

The company currently has 20.8 GQ of operational renewable capacity and 6.6 gigawatt-hours of installed battery storage capacity. It expects to build a portfolio of about 45 GW of renewable energy capacity, 5 GW of pumped storage capacity and 40–50 GWh of battery storage by FY30.

That expansion will keep leverage elevated in the near term. Construction stage assets require capital and add to debt before contributing fully to EBITDA. Management said the under construction portfolio currently accounts for about 30% of the overall portfolio. Once operating capacity reaches 30 GW, that share could fall to around 10–20%.

The company’s consolidated net debt rose 37% year-on-year to ₹1.1 lakh crore in the second quarter, according to Emkay Research. Finance costs increased 30% year-on-year to ₹2,120 crore, while consolidated EBITDA rose 46% to ₹3,797 crore.

For the first half of FY27, EBITDA stood at ₹8,276 crore and could have been close to ₹9,000 crore without the impact of curtailment, according to the management.

The eventual reduction in leverage, therefore, will not necessarily come from a sharp reduction in capital expenditure. It will come from the point at which the existing investment programme starts producing a larger EBITDA base relative to debt.

AGEL’s borrowings have been raised largely on a project-finance basis. Management said the financed projects have been able to service their interest and repayment obligations.

As these loans amortise and the underlying projects continue generating cash, debt will gradually decline while EBITDA expands. This creates the operating mechanism for leverage to fall without requiring the company to abandon its growth plans.

“Project loans are amortizing, and financed projects continue to service interest and repayments,” Emkay Research said in its assessment of the company’s leverage trajectory.

Management also said short-term transmission delays and curtailment should not materially alter the long-term leverage profile. Curtailment may affect earnings over a three- to six-month period, but the company’s projects are structured around operating lives of about 25 years.

AGEL’s first-half EBITDA was affected by lower grid availability, particularly at Khavda. The company has accelerated battery-storage deployment to reduce the impact of evacuation constraints and use power that could otherwise remain unsold.

“AGEL’s EBITDA rose at a 25% CAGR over FY23-26 and should see 30% CAGR as per our estimates in FY26-30E. While the recent RBI rate hike has raised some concerns around impact on earnings, strong power demand, higher utilisation levels, and execution at Khavda should help cushion the impact and limit the earnings drag relative to what the headline rate increase may imply,” Jefferies said.

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