Adani Power Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Strong quarter, capacity-led story: Revenue grew 10.8% YoY and EBITDA 24.6% YoY, driven by higher sales volumes and lower fuel costs, even as tariffs softened on fuel price pass-through.
• The build-out is now concrete: Management placed advance equipment orders for 11.2 GW of new capacity and won a 25-year PPA for 1,496 MW, converting the 30 GW by FY30 ambition from a vision into a committed, phased execution plan.
• Acquisitions are a near-term drag, not a thesis-breaker: The two newly acquired entities posted negative EBITDA for their first month, but management frames this as a fixable operational problem, not a structural one, and expects a visible improvement path next year.
• The balance sheet is being positioned for the cycle: A credit rating upgrade to AA/Stable and an explicit debt-light funding strategy signal that management intends to fund the 30 GW build-out primarily from internal cash flows, not leverage.
• What to watch next quarter: Whether the acquired entities show any sequential EBITDA improvement, progress on the refloated Rajasthan PPA, and any update on the Godda receivables situation.

The 30 GW Build-Out: From Ambition to Execution

• Advance orders placed: The company has given advance orders to a Main Plant Supplier for 11.2 GW of capacity, locking in equipment and delivery timelines for projects to be commissioned phase-wise by FY30.
• PPA secured for new capacity: A Letter of Award from Maharashtra DISCOM for 1,496 MW (net) under a 25-year PPA from a new 1,600 MW ultra-supercritical project in Chhattisgarh provides a visible, contracted offtake anchor for part of the pipeline.
• Project pipeline taking shape: Developmental steps are ongoing for Raipur, Raigarh, Kawai, Mahan, and Mirzapur, with ordering already started, while the 1,320 MW Lanco Amarkantak (Korba) expansion is under construction and expected ready in the next two years.
• Mahan Phase 2 timeline: Expected operational in two phases, by December 2026 and June 2027, with Reliance having taken a 5.6% equity stake in Mahan Phase-1, representing 26% of Unit-1.
• Capex trajectory: Current-year capex, apart from concluded acquisitions, is guided at approximately INR 6,000 crores, stepping up sharply to around INR 20,000 crores next year as the build-out accelerates.
• Funding philosophy: Management is explicit about a debt-light strategy, stating that existing operations will generate sufficient cash flows to reach the 30 GW target without excessive leverage.

Acquired Entities: The Turnaround Bet

• What was acquired: The company added 2,300 MW of capacity through three acquisitions: 500 MW from Adani Dahanu, 600 MW from Lanco Amarkantak, and 1,200 MW from Coastal Energen.
• The near-term P&L hit: Both Coastal Energen and Korba Power (Lanco Amarkantak) posted negative EBITDA for the one month they were accounted for in Q2, dragging consolidated results.
• Why management is not worried: These entities were under the control of resolution professionals for several years, and management believes the negative performance reflects operational neglect, not irreparable asset quality. The turnaround playbook relies on deploying Adani's in-house capabilities in plant operation, maintenance, fuel management, logistics optimization, and power sales management.
• The improvement timeline: Management expects Korba Power's EBITDA to be on a visible improvement path next year, citing a track record of turning around acquired assets and the application of its own systems, processes, and efficiency improvements.

Nishit Dave: "These were companies that were under the control of the resolution professionals in the last few years. And now our job is to actually turn their fortunes around."

Quarterly Performance: The Mechanics

• Revenue growth decomposed: The 10.8% YoY revenue increase came from higher sales volumes, partially offset by lower tariff realization as fuel price reductions were passed through to customers.
• EBITDA growth decomposed: The 24.6% YoY EBITDA growth was driven by higher continuing revenues and lower fuel and operating costs, indicating operating leverage and cost discipline.
• Profit growth decomposed: Continuing PBT growth was driven by improved EBITDA and lower finance costs, reflecting the benefit of deleveraging and the credit rating upgrade to AA/Stable from CARE Ratings in August 2024.
• The optical PBT and PAT decline: Reported PBT and PAT declined YoY solely because the prior year included high non-recurring, one-time income from past period regulatory dues, most of which were already recovered. Tariffs now incorporate recovery of alternate fuel costs on an ongoing basis, so the base effect is a one-time distortion, not a signal of underlying deterioration.

Godda & Bangladesh: A Managed Risk

• Operations remain normal: The Godda plant is in sync with the Bangladesh grid and continues to supply power according to the counterparty's demand, with payments being received.
• Contingency thinking exists but is not activated: Management stated it will explore grid connection options if required, but as of now, it hopes for no further deterioration in outstandings, framing the situation as stable but monitored.

Dilip Jha: "We are very much in touch with the grid operators over there. We are in sync with the Bangladesh grid, and we are supplying power according to their demand. We are also receiving payments from them."

Regulatory & Bidding Environment

• Rajasthan PPA withdrawn temporarily: The company withdrew from the Rajasthan PPA bidding process but expects it to be refloated soon with changed conditions, suggesting the opportunity is deferred, not lost.
• Regulatory overhang resolved: The prior-period regulatory dues that inflated last year's profits are now substantially recovered, and the tariff structure has been reset to incorporate alternate fuel cost recovery on an ongoing basis, removing a source of lumpy, unpredictable income.

Guidance & Commitments

Key Metrics