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Why is Adani Power Share Price Rising

May 31, 2022

Why is Adani Power Share Price Rising

Indian share markets have witnessed a sharp rally in the last three days on the back of positive global cues and the early arrival of monsoon giving hopes of a slowdown in inflation.

The BSE Sensex is up 3.4% in the last week alone.

Yet there are many stocks that are far below their 52-week highs. The selloff in equities has not spared even the most stable bluechip stocks.

However, there have been a couple of companies that have escaped the bloodshed.

One of them is Adani Power. The stock is up over 20% in the last month. Why?

Let's dig deeper to understand what has led to the stock's rally.

Inclusion in the MSCI Index

The stock of the utilities company has shot up by over 20% in the past month after index provider MSCI (Morgan Stanley Capital International) included Adani Power in its global index.

Adani Power wasn't the only company to be added to the index.

From India, MSCI added 3 more stocks - AU Small Finance Bank, Jindal Steel and Power, and Tata Elxsi. It also remove HDFC AMC.

MSCI announced the list of additions and deletions for the May 2022 rejig on 13 May. The global index provider MSCI rebalances its indices semi-annually and quarterly.

To be eligible for inclusion in a MSCI index, a security's Foreign Inclusion Factor (FIF) must reach a certain threshold.

The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the public equity markets by international investors.

The changes announced by MSCI will be effective from 1 June, while index funds are likely to realign their portfolios on 31 May.

What does the future look like for Adani Power?

The company said that electricity demand continues to grow strongly in India, driven both by economic growth and a heatwave in the north-western parts of the country.

As a result, in the recent quarterly results, it reported a 93% YoY increase in revenue.

The company's total revenue for the quarter stood at Rs 133 bn against Rs 69 bn in the same quarter last year. The revenue included prior period revenue of Rs 29.5 bn and prior period other income of Rs 19.8 bn.

During the quarter, the company's wholly-owned subsidiary, Adani Power Rajasthan, received payments towards domestic coal shortfall claims, along with carrying cost and late payment surcharge from Rajasthan DISCOMs pursuant to Supreme Court's order dated 27 February.

Due to the increase in revenue, the company's operating profit rose 271% YoY to Rs 79.4 bn from Rs 21.4 bn in the same quarter last year.

Consequently, the company reported a multifold rise in net profit at Rs 46.5 bn compared to Rs 130 m in the March 2021 quarter.

For the financial year 2022, it reported a 68% YoY increase in revenue. Net profit also grew by 50% from the financial year 2021, driven by volume growth and price increases.

How have the shares of Adani Power performed recently?

Like stocks in the Adani Group, the shares of Adani Power have had a phenomenal run.

The stock is up 240% in 2022 as compared to a 5.5% decline in the BSE Sensex.

Over the last year, the company's shares have gone up even higher at 270% while the BSE Sensex is up only 7.7%.

chart

About Adani Power

Adani Power is a subsidiary of the Indian conglomerate Adani Enterprises.

The company is in the business of power generation, accumulation, distribution and supply of power.

It's a private thermal power producer, with capacity of 12,450 MW. It also operates a mega solar plant of 40 MW at Naliya, Bitta, Kutch, Gujarat.

It's India's first company that synchronises the supercritical technology.

The company has signed long term power purchase agreements of about 9,153 MW with government of Gujarat, Maharashtra, Haryana, Rajasthan, Karnataka, and Punjab.

To know more about the company, check out Adani Power's fact sheet and quarterly results.

For a sector overview, read our power sector report.

You can also compare Adani Power with its peers.

Adani Power vs Tata Power

Adani Power vs CESC

For a more detailed comparison, you can check out our article on - Adani vs Tata Power: Which Power Stock is Better?

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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