Adani Green Energy Ltd is undertaking significant investments in building its renewable generation capacity, aiming to quadruple it by 2029-30. But while the company has secured land bank to build mega solar plants, it would still need to win bids and find buyers to reach its target.
Adani Green currently has an installed capacity of 11.2 GW across solar, wind and hybrid energy, and is expected to commission another 6 GW in the ongoing financial year. Its target is to achieve a renewable energy capacity of 50 GW by FY30, including 5.5 GW of energy storage through pumped hydro.
Emkay Research expects Adani Green’s renewable energy capacity to expand at a compound annual growth rate of 30% between FY24 and FY30, and its improving capacity utilisation to boost sales by a CAGR of about 35%. Emkay projects Adani Green’s Ebitda to expand at a CAGR of 38% during this period.
The Adani group company has secured a huge land bank on lease, enough to build more than 65 GW of capacity, enabling faster project execution. Its projects would be fairly concentrated with its site in Gujarat having a potential for 30 GW generation capacity across solar and wind energy.
The location offers significant operating advantage with strong solar radiation and high wind speed, which, according to the company, would help it utilise up to 34% of its capacity. That would be a significant improvement over the domestic renewable energy industry’s average capacity utilisation of 20%.
The spot market gambit
While most of the electricity in India is sold through purchase agreements at a fixed rate, Adani Green plans to sell about 15% of its renewable energy in the spot market, which may fetch a higher price in case of robust demand, but it also runs the risk of finding no buyer.
Adani Green managed to commission its projects ahead of schedule last year, helping it sell this power on a merchant basis till the agreement starts. During the June quarter, it sold 21% of its power on a merchant basis, which contributed about 30% of its total revenue for the period.
But the company’s Ebitda growth of 23% in the first quarter was slower than the 48% rise seen in FY24.
Adani Green’s capital expenditure is expected to be ₹24,000 crore in 2024-25, per Emkay Research, after having spent around ₹17,000 crore in FY24. The company has said its total investment till FY30 would be in excess of ₹2.4 trillion.
Net debt-to-Ebitda ratio was rather high at 7.4x at the end of FY24. With the commissioning of new projects and rising profits, this ratio is likely to drop to 5.5x in FY25.
The fresh investment of $444 million by France-based TotalEnergies into Adani Green is also expected to help improve its finances.
The Adani Green stock has gained nearly 80% over the past year aided by its strong profit growth and outlook. The stock trades at an enterprise multiple (enterprise value by Ebitda) of 15.2x based on the company’s expected earnings for FY26, as per Bloomberg, which looks fairly priced.
But Adani Green would still need to deliver on its projects in the next couple of years to meet investors’ great expectations.
