Motilal Oswal initiates coverage on Adani Power with Buy call, sees 20% upside. Time to hold or sell?

Motilal Oswal has initiated coverage on Adani Power with a Buy rating and a target price of Rs 250, implying a potential upside of 20% from the report’s reference price of Rs 208. The brokerage valued the company at 16 times its estimated FY29 EBITDA.

On Thursday, Adani Power shares were trading at Rs 211 on the National Stock Exchange, up Rs 3.43, or nearly 2%, from their previous close of Rs 207.70.

Adani Power shares declined 2.58% on the NSE over the past week, underperforming the benchmark index’s 1.71% fall. Trading volume stood at 1.03 crore shares during the session, while the company’s market capitalisation was Rs 4.05 lakh crore.


The brokerage cited Adani Power’s capacity expansion plans, track record of turning around distressed assets, and potential entry into nuclear power as its key investment arguments.

Capacity expansion

Adani Power is India’s largest private thermal power producer, with an operational capacity of about 18 GW. The company plans to more than double its capacity to 42 GW by FY32 through a 23.7 GW project pipeline backed by an estimated investment of Rs 2 lakh crore.

Around 95% of its operational capacity and 56% of its upcoming capacity are tied to power purchase agreements, providing long-term revenue visibility.

Earnings outlook

Motilal Oswal expects Adani Power’s EBITDA and adjusted profit to grow at compound annual rates of 21% and 9%, respectively, between FY26 and FY29. Revenue is projected to rise from Rs 66,640 crore in FY27 to Rs 90,450 crore in FY29, while EBITDA is estimated to increase from Rs 22,240 crore to Rs 35,310 crore.

Operational capacity is expected to reach 24.5 GW by FY29, while net debt-to-EBITDA is projected to remain at around 2.4 times despite elevated capital expenditure.

Thermal power upcycle

Motilal Oswal said delays in renewable, hydro and nuclear capacity additions could create demand for an additional 6.5-19.5 GW of thermal capacity. It also expects solar power’s tariff advantage over thermal generation to narrow by 15-20% over the next three to four years.

Distressed-asset strategy

The brokerage believes limited private-sector competition should support project economics. Adani Power has acquired distressed plants at an average cost of around Rs 3.5 crore per MW, well below the Rs 10-12 crore per MW required for greenfield projects.

Its Raigarh, Raipur and Mahan plants have generated cumulative EBITDA equivalent to about 3.1, 2.7 and 2.5 times their respective acquisition costs.

Future optionality

Adani Power has indicated scope for another 3 GW of capacity through organic expansion or acquisitions. It has also outlined plans to develop 10 GW of nuclear capacity by 2035, subject to the government permitting private-sector participation.

Motilal Oswal estimates that EBITDA could reach around Rs 80,000 crore once the current expansion cycle is complete.

The brokerage, however, flagged that 44% of the upcoming capacity remains without PPAs. Project delays, cost overruns, slower tendering and stricter environmental regulations are among the other key risks.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)