FUNDAMENTAL ANALYSIS OF ADANI POWER

VIDYASAGAR UNIVERSITY

Report Submitted By:

Name – Dhruva Rai

Roll No:

Institute: Bengal Institute of Business Studies

Registration No.

Company Name: National Stock Exchange

Industry Mentor: Mr. Avik Gupta

College Mentor: Mr. Gautam Sinha

This Project Is Submitted For the Partial Fulfilment of Masters of Business

Administration from Vidyasagar University

1
 Preface

This Project Report Attempts to Bring Under One Cover the Entire Hard Work and Dedication Put
In By Us In The Completion Of The Project Work On Fundamental Analysis of Adani Power.
I Expressed My Experience in My Own Simple Way. We Hope Who Goes Through It Will Find
It Interesting And Worth Reading. All Constructive Feedback Are Cordially Invited.

2
 Acknowledgement

I Would Like To Take the Responsibility to Express My Heartfelt Gratitude towards My Project
Guide

Mr. Avik Gupta and My Faculty Guidance Professor Mr. Gautam Sinha for His Valuable
Guidance in My Project Work of MBA. Without Their Co-Operation It Would Be Very Difficult
For Me To Complete My Summer Internship Programmed Project.

I Would Also Like To Thank Them For Guiding Me All Through The Journey And For
Providing Me Necessary Information About The Company And The Project That I Undertook.

I Would Like To Thank Bengal Institute Of Bengal Studies And Vidyasagar University For
Availing Us Of Such An Enjoyable Experience In The Industry, Particularly With So Many
People.

I Would Like This Support And Warmth To Be Kept Continued With Me Not Only Until The
End Of The Project But Forever.

Thanking You,

Dhruva Rai

Bengal Institute of Business Studies

3
 Declaration

I Hereby Declare That The Project Work Entitled “Fundamental Analysis of Adani Power”
Submitted To Bengal Institute Of Business Studies, Kolkata And Is Representation Of My Work
Completed Under The Guidance Of Mr. Gautam Sinha.

Prepared By: Dhruva Rai

Batch: 2018-2020

Bengal Institute of Business Studies

This Is To Certify That This Report Is Submitted In Partial Fulfilment Of The Requirement Of
MBA Programmed Of Bengal Institute Of Business Studies, Kolkata.

This Report Documented Titled “Fundamental Analysis of Adani Power” Has Been Carried
Out By Dhruva Rai Part Of The Project Of NSE, Kolkata, During The Internship Programmed
Of 12 Weeks Under The Guidance Of Professor Mr. Gautam Sinha And Mr. Avik Gupta, Deputy
Manager, NSE.

NO PROJECT ON THE SAME LINES HAS BEEN SUBMITTED PRIOR TO ANY OTHER
COLLEGE OR INSTITUTION.

Signature of the Professor Signature of the Student

4
 TABLE OF CONTENT
1. EXECUTIVE SUMMARY 06
2. LITERATURE REVIEW 07
3. INTRODUCTION 10
4. COMPANY PROFILE 13
5. OBJECTIVES 21
6. INTRODUCTION 20
 ADANI GROUP 22
7. FUNDAMENTAL ANALYSIS 28
 COMPANY ANALYSIS 32
 INDUSTRY ANALYSIS 34
 ECONOMIC CONDITION OF INDIA 37
8. PEER COMPETITION OF ADANI POWER 40
 NTCP 40
 RELIANCE POWER 43
 TATA POWER 45
9. SWOT ANALYSIS 47
10. FINDINGS 49
11. CONCLUSION 56
12. BIBLIOGRAPHY 58

EXECUTIVE SUMMARY

5
Starting with the Company Profile of Adani Power, then towards Adani Group group. I have dicussed about
Fundamentals aspects mainly, about the Company then about the Power Industry along with Economic
Growth and steps taken by Government for Power Sector growth. A glimpse of all is added in this
summary.

INTRODUCTION TO ADANI POWER

Adani Power Limited, formerly Adani Power Private Limited is the Power Business subsidiary
of Indian conglomerate Adani Group with head office at Ahmedabad, Gujarat. The company is
India's largest private power producer, with capacity of 10,440 MW and also it is the largest solar
power producer of India with a capacity of 688 MW. Adani Power was ranked as the 73th largest
corporation in India in Fortune India 500 list of 2018.

Adani’s first power plant at Mundra was formed to cater to the Mundra port and SEZ business in
2006. Adani ports was already the largest importer of coal, supplying over 50% of the country’s
imported coal needs and at Mundra, managed the world’s largest import coal terminal.

Capitalizing on this foundation, they rapidly scaled up their operations despite no prior experience
in power generation. Today, Mundra is the largest private single location coal based power plant
in the world. In addition to Mundra in Gujarat, Adani Power has plants at Tiroda in Maharashtra,
Kawai in Rajasthan and Udupi in Karnataka.

ABOUT THE ADANI GROUP

The Adani Group commenced as a commodity-trading firm in 1988 and diversified into the import
and export of multi-basket commodities. With a capital of 5 lakhs, the company was established
as a partnership firm with the flagship company, Adani Enterprises Limited, previously Adani
Exports Limited. In 1990, the Adani Group developed its own port in Mundra to provide a base
for its trading operations. It began construction at Mundra in 1995. In 1998, it became the top net
foreign exchange earner for India Inc. The company began coal trading in 1999 followed by a joint
venture in edible oil refining in 2000 with the formation of Adani Willmar.

6
LITERATURE REVIEW
According to Vijay H. Vyas in his “Financial performance analysis of selected companies of power
sector in India” done under International Journal of Applied Research, Electricity is one of the
most important input factors for the economic development of the country. There is huge and
increasing demand of electricity in India and it is continuously increasing with the countries
corporate and economic growth. The Indian power sector has responded significantly and made
significant progress in reducing the gap between demand and supply. Indian power sector offers
one of the highest growth potential to players in this industry. However, this is subject to some
challenges like to generate more power and to generate and distribute power efficiently and at
minimum cost. Out of selected companies, NTPC performance is better than other companies are
but overall Indian power sector needs to reduce too much dependence on coal and needs to generate
more power availability, quality and reliability for successful future and growth of the country.

The Indian power sector has been facing serious functional problems during the past few decades.
In order to re-vitalize the sector and to improve its techno-economic performance, Government of
India has initiated restructuring process in 1991. This paper reviews the performance of the Indian
power sector in the last decade (1991 – 2001), while Undergoing the restructuring process. The
study also examines how far the restructuring process during this period has been effective in
realizing its set objectives and benefited the social development of the Nation. A critical evaluation
of the methodology and steps so far adopted for the restructuring process and a few suggestions
for re-framing the future course of reforms have been proposed in this paper.

Analysis of Power Sector in India: A Structural Pursepective

The inhibitors to growth in power sector were many – small and big but the main roadblock in
the growth path was government policy, which made it difficult or rather impossible for a private
player to enter. This further aggravated that Indian entrepreneurs didn’t have enough knowledge
and experience in developing power projects. To worsen the scenario, the SEBs and other
government agencies became financially weak to propel any future expansion or growth in the
sector. Electricity Act, 2003 was a major step in solving the above underlying problems of the
power sector. The whole new system is evolved where private players were invited to be active
participants. The system demanded financial, political and other infrastructural growth – with
major requirements in roads and communication. Some of the bold steps taken in the Act were
moving generation and distribution out of ‘License Raj’ regime, opening access to national grid

7
and demolishing the ‘Single Buyer’ model. The failure of the huge federal structure and
difference in the performance evaluation of equity price of selected companies on BSE power.

LISTED COMPANIES UNDER ADANI GROUP

 Adani Enterprises Limited

 Adani Ports & SEZ Limited
 Adani Power Limited
 Adani Transmission Limited

FUNDAMENTAL ANALYSIS

Fundamental analysis is about spending time going through numbers in a company’s balance sheet,
cash flow statement, and income statement, and the way they fit altogether. However, beyond
number crunching, fundamental analysis also gives great importance to the intangible aspects like
quality of management and market share. Also, having a comprehensive insight about the direction
of the market and industry trends would provide a more complete picture. To sum up, a company’s
fundamentals is grouped into two broad aspects – the qualitative and the quantitative. Many
analysts take into account both aspects when making decisions.

Analyzing the financial status, management, growth potential, market share and other
fundamentals is called fundamental analysis of a company. In simple words, Fundamental
Analysis of a company is study of basic fundamentals of a company that can decide its future and
growth.
COMPETITORS

1. NTPC has been operating its plants at high efficiency levels. Although the company has
15.56% of the total national capacity, it contributes 22.74% of total power generation due
to its focus on high efficiency.

2. RELIANCE POWER project portfolio also includes 3,960 MW Sasan Ultra Mega Power
Project (Madhya Pradesh). UMPPs are a significant part of the Indian government's
initiative to collaborate with power generation companies to set up 4,000 MW projects to
ease the country’s power deficit situation.

8
 3. Tata Power announced on 24 July 2012, commissioning of the second unit of 525 MW
capacity of the Maithon mega thermal project in Dhanbad. The first unit of identical
capacity was commissioned in September 2011.

FINANCIAL RATIO ANALYSIS OF ADANI POWER

 DEBT EQUITY RATIO

 CURRENT RATIO
 ASSET TURNOVER RATIO
 DEBTORS TURNOVER RATIO
 OPERATING PROFIT MARGIN
 RETURN ON CAPITAL EMPLOYED

9
INTRODUCTION

Adani Power Limited, formerly Adani Power Private Limited is the Power Business subsidiary
of Indian conglomerate Adani Group with head office at Ahmedabad, Gujarat. The company is
India's largest private power producer, with capacity of 10,440 MW and also it is the largest solar
power producer of India with a capacity of 688 MW. Adani Power was ranked as the 73th largest
corporation in India in Fortune India 500 list of 2018.

Adani’s first power plant at Mundra was formed to cater to the Mundra port and SEZ business in
2006. Adani ports was already the largest importer of coal, supplying over 50% of the country’s
imported coal needs and at Mundra, managed the world’s largest import coal terminal.

Capitalizing on this foundation, they rapidly scaled up their operations despite no prior experience
in power generation. Today, Mundra is the largest private single location coal based power plant
in the world. In addition to Mundra in Gujarat, Adani Power has plants at Tiroda in Maharashtra,
Kawai in Rajasthan and Udupi in Karnataka.

Being the largest private power producer in India with an installed capacity of 10,480 MW, they
are now moving towards our ambitious target of 20,000 MW by 2020 with the help of a world
class team of Operations and Maintenance and an expert team of Engineering, Procurement and
Construction.

The transmission team of Adani Power was set up to help support the state and central utilities in
evacuating power from our plants to benefit the end user. The team ended up creating over 5000

10
circuit Kilometres of transmission system in less than 3 years – yet another unmatched feat – and
went on to become a publicly listed business shortly afterwards.

The sheer dynamism of the Group has helped Adani Power grow tremendously since its inception
as well as incubate successful new businesses. As a result, the Power business today is one of the
largest businesses of the Adani Group.

Adani Power Ltd is engaged in power generation and setting up of power projects. The company
is a part of the Adani Group. The company is carrying on the business of generation, accumulation,
distribution and supply of power and to generally deal in electricity and to explore, develop,
generate, accumulate, supply and distribute or to deal in other forms of energy from any source
whatsoever. The company is currently operating an aggregate of 10,480 megawatts (MW)
generation capacity comprising of 4,620 MW at Mundra, Gujarat, 3,300 MW at Tiroda,
Maharashtra, 1,320 MW at Kawai, Rajasthan, 1,200 MW at Udupi, Karnataka and 40 MW (solar)
at Kutch, Gujarat. Adani Power was the first company to implement and commission 660 MW
supercritical technology units in India.

Adani Power Ltd was incorporated on August 22, 1996 and received a certificate of
commencement of business on September 4, 1996. The Company was originally incorporated by
Mr. Gautam S. Adani and Mr. Rajesh S. Adani, together with their relatives. The company became
a private limited company on June 3, 2002 and the name of the company was subsequently changed
to Adani Power Pvt Ltd.

In the year 2004, pursuant to internal restructuring amongst the Promoters, the entire shareholding
of the company was transferred to Mundra Port and Special Economic Zone Ltd (MPSEZL).
Subsequently, on May 29, 2006, MPSEZL transferred its entire shareholding in the company to
Adani Enterprises Ltd.

In December 19, 2006, the Government of India (GOI) granted approval to the company's proposal
for development, operation and maintenance of the sector specific Special Economic Zone (SEZ)
at Village: Tunda & Siracha, Taluka Mundra, Gujarat. In February 2, 2007, the company entered
into an agreement (PPA) with Gujarat Urja Vikas Nigam Ltd (GUVNL) for supply of power on
long term basis. In April 12, 2007, the company was, thereafter, converted into a public limited
company and the name of the company was changed to Adani Power Ltd.

11
During the financial year 2009-10, the company entered the Capital Market with initial public offer
(IPO) of 30,16,52,031 equity shares of Rs 10 each at a premium of Rs 90 per share. In August 20,
2009, the company's shares were listed on the Bombay Stock Exchange Ltd (BSE) and National
Stock Exchange of India Ltd (NSE). The company's power generating units (Unit 1 and Unit 2
each of 330 MW) of their phase I commenced commercial operations effective from October 1,
2009 and March 17, 2010 respectively. During the year, the company incorporated Adani Pench
Power Ltd (earlier known as Adani Power MP Ltd) as a wholly owned subsidiary company. The
company acquired Kutchh Power Generation Ltd and Adani Shipping PTE Ltd, Singapore by
purchase of all shares of respective companies at face value. Subsequently Adani Shipping PTE
Ltd, Singapore incorporated Rahi Shipping PTE Ltd, Singapore and Vanshi Shipping PTE Ltd,
Singapore as their wholly owned subsidiary companies.

12
COMPANY PROFILE: NATIONAL STOCK
EXCHANGE

National Stock Exchange Of India (NSE) Has Been Defining The Future Of The Indian Financial
Market Since Inception And Is Today One Of The Largest Stock Exchanges Globally.

NSE Was Set Up By Leading Institutions To Provide A Modern, Fully Automated Screen-Based
Trading System With National Reach. NSE Is Regarded As The Benchmark For Its Best Practices
And A Model For The Securities Industry In Terms Of Systems, Practices And Procedures.

Having Started Its Operations In June 1994, NSE Operates A Nation-Wide, Electronic Market,
Connecting Investors In Search Of Growth To The Corporate Issuers In Search Of Capital, By
Providing Innovative Trading Technologies And Products.

The Investor Community Gets Easy Access To Liquidity And Markets Through A Network Of More
Than 200,000+ NSE Terminals Across 600 Districts Through More Than 34000+ NSE Member
Branches. In Addition, Investors Can Also Access The NSE Platform Through Internet And Mobile
Applications. NSE Has Also Introduced Services Like DMA, FIX Capabilities And Co-Location
Facilities For More Evolved Categories Of Investors.

NSE Is Committed To Operate A Market Ecosystem Which Is Transparent And Efficient; And At
The Same Time Offers High Levels Of Safety, Integrity And Corporate Governance, Providing
Ever- Growing Trading & Investment Opportunities For Investors.

The NSE Purpose

Committed To Improve The Financial Well-Being Of People.

13
The NSE Vision
To Continue To Be A Leader, Establish Global Presence; Facilitate The Financial Well-Being Of
People.

NSE Values
NSE Is Committed To The Following Core Values:

 Integrity
 Customer Focused Culture
 Trust, Respect And Care For The Individual
 Passion For Excellence
 Teamwork

PRODUCTS AND SERVICES

The National Stock Exchange Of India Limited (NSE) Provides An Integrated Trading And
Clearing Platform For The Primary And Secondary Markets. NSE Introduced The Concept Of An
Electronic Trading Platform That Has Been Operational Since 1994. Since Then NSE Has Been
At The Forefront Of Technological Advancement In The Trading Platform Within The Regulatory
Framework Prescribed By The Securities Exchange Board Of India (SEBI).

Trading System: The NSE Trading System Called 'National Exchange For Automated
Trading' (NEAT) Is A State-Of-The-Artfully Automated, Screen-Based Trading System Which
Adopts The Principle Of An Order-Driven Market.

14
It Facilitates An Automated Online System Providing A Nationwide Anonymous, Order-Driven,
Screen-Based Trading Platform. In Addition To The NEAT System, NSE Has Provided A Web-
Based System, NOW (NEAT On Web) That Allows Its Users To Trade In All The Products
Being Offered By NSE.

For The More Sophisticated Traders, NSE Has Also Pioneered The Co-Location Facility That
Allows Traders To Put Up Their Algorithms On Rented Servers Placed Inside The Exchange
Premises. Financial Information Exchange (FIX Protocol), The Industry-Standard Messaging
Protocol for Equity, Derivatives and Currency Markets Is Achieved through NSE’s Own
Connectivity Software, TAP (Trading Access Point). NSE Started Trading In The Equities
Segment (Capital Market) On November 3, 1994 And Within A, Short Span Of One Year
Became The Largest Exchange In India In Terms Of Volumes Transacted. Trading Volumes In

15
The Equity Segment Have Grown Rapidly With The Average Daily Turnover Increasing From
`17 Crores During 1994-95 To `11,189 Crores (USD 2.03 Billion) As On March 2013.

According To WFE Statistics for the Year Ended 2012, NSE Is the Largest Exchange In
Terms Of Number of Trades in Equity Shares Globally.

TECHNOLOGY
NSE Is Always Switched On For Business. The NSE Network Is The Largest Private Wide Area
Network In The Country And The First Extended C- Band VSAT Network In The World. The
Unique IP-Based Solution Woven Around Points Of Presence (Pop) In Major Indian Cities Has
De-Risked The System And Made It Possible To Create Alternative Layers Of Support To
Facilitate Interruption-Free Trading.

NSE Trading Engines Are

Benchmarked To Manage
Throughput At Sub Millisecond
Response Time. The Member
Friendly Direct Market Access
(DMA) And Algorithmic (Algol)
Trading Facilitates The Algol
Markets Through Narrow Spreads,
Efficient Trades, Liquid Markets And
Growing Throughput.

NSE Provides Diverse

Baskets Of

Market Data for the Order Book Bid

In addition, Asks -
Every Second. The

Collocation (Cool) Services of NSE

16
Provide Same Latency To
The Matching Engine. All
Concerned Participants
Receive the Same
Bandwidth, Two Power
Supplies with A UPS
Generator and Air-
Conditioning

Over The Years, NSE Has

Reinforced Real-Time
Surveillance By
Dedicated Professionals,
Multiple Smart
Applications And
Multiple Models To
Track Trading Patterns
And Deviations In The
Shortest Time With The
Objective To Protect
Market Integrity.

The NEAT On Web (NOW) Application Provides Specific Solutions To Members Not Owning
Technical Sophistication Or Large Budgets, Hence Enabling Members To Focus On Their Core
Business, Enhance Access On The Move And Plug Into Toll-Free Support. Access to Multiple
Exchanges, Smart Order Routing, Historical and Real Time Intraday Charting Any Many More
User-Friendly Tools Help in Efficient Execution from a Single Access.

NSE Simple Syndication (RSS) Feeds Highlight Fresh Material on NSE Circulars, Corporate
Information, and Intermediate cum End-Of-Day Reports.

17
NSE Twitter Delivers To Subscribers, Market Information Displayed On The NSE Profile Page
Every Five Minutes On Nifty, Junior NIFTY, Currency Derivatives, And Interest Rate Futures.

The Cutting-Edge Technology Application Makes It Possible For NSE To Empower Members To
Strengthen Their Services, Widen The Investor Pool And Deepen The Investing Culture In India.

18
19
20
Objective of the Project
 To understand about the Adani Group
 To understand the history of Adani Power
 To comprehend the Financials of Adani Power
 To analysis the fundamentals
 To recommend re

21
INTRODUCTION TO ADANI GROUP
Adani Group is an Indian multinational conglomerate headquartered
in Ahmedabad, Gujarat, India. It was founded by Mr. Gautam Adani in 1988 as a commodity
trading business with the flagship company Adani Enterprises Limited (previously Adani Exports
Limited). Gautam Adani is the chairman. The Group's diverse businesses include energy,
resources, logistics, agribusiness, real estate, financial services, and defence and aerospace. The
group has annual revenue of over $11 billion with operations at 70 locations in 50 countries. The
Group is India's largest port developer and operator with ten ports and terminals including Mundra
Port, its largest. Through a joint venture with Wilmar International in Singapore, the Group co-
owns India's largest edible oil brand Fortune.

In April 2014, it added the fourth unit of 660 MW at its Tiroda Thermal Power Station,
making Adani Power India's largest private power producer. In 2015, Adani was ranked India's
most trusted infrastructure brand by The Brand Trust Report 2015. The Group operates mines in
India, Indonesia and Australia and supplies coal to Bangladesh, China, and countries in Southeast
Asia. The Group handled a total cargo of 168 million MT in 2016-17.

The company has contributed to the economy of Bunyu, North Kalimantan, Indonesia by
producing 3.9 MMT of coal in 2016-17. The Group has made the largest investment by an Indian
company in Australia at the controversial Carmichael coal mine, Galilee Basin, Queensland. It is
estimated to produce coal at a peak capacity of 60 million metric tonnes per annum
(MMTPA).[citation needed] The Group is the first in India to build a High-Voltage Direct Current
(HVDC) system. In January, 2018, The Logistics and SEZ arm of the Group Adani Ports & SEZ
Limited added equipment and machinery to render it the biggest dredger fleet in India.

FIRST PHASE

22
The Adani Group commenced as a commodity trading firm in 1988 and diversified into the import
and export of multi-basket commodities. With a capital of 5 lakhs, the company was established
as a partnership firm with the flagship company, Adani Enterprises Limited, previously Adani
Exports Limited. In 1990 the Adani Group developed its own port in Mundra to provide a base for
its trading operations. It began construction at Mundra in 1995. In 1998, it became the top net
foreign exchange earner for India Inc. The company began coal trading in 1999 followed by a joint
venture in edible oil refining in 2000 with the formation of Adani Willmar.

SECOND PHASE

The group's second phase started with the creation of large infrastructure assets. The company
established a portfolio of ports, power plants, mines, ships and railway lines inside and outside
India.

Adani Power emerged as India's largest private power producer in 2014. Adani Power's total
installed capacity then stood at 9,280 MW. The Mundra Port, Adani Ports and SEZ Ltd. (APSEZ),
handled 100 million metric tonnes in fiscal 2013-14. On 16 May of the same year, Adani Ports
acquired Dhamra Port on East coast of India for Rs 5,500 crore. Dhamra Port was a 50:50 joint
venture between Tata Steel and L&T Infrastructure Development Projects, which has now been
acquired by Adani Ports. The port began operations in May 2011 and handled a total cargo of 14.3
million MT in 2013-14. With the acquisition of Dhamra Port, the Group is planning to increase its
capacity to over 200 million MT by 2020.

In 2015 the Adani Group's Adani Renewable Energy Park signed a pact with
the Rajasthan Government for a 50:50 joint venture to set up India's largest solar park with a
capacity of 10,000 MW. In November, 2015, the Adani group began construction at the port
in Vizhinjam, Kerala.

Adani Aero Defence signed a pact with Elbit-ISTAR and Alpha Design Technologies to work in
the field of Unmanned Aircraft Systems (UAS) in India in 2016. In April, Adani Enterprises
Limited secured approval from the Government of Gujarat to begin work on building a solar power
equipment plant. In September, Adani Green Energy (Tamil Nadu), the renewable wing of the
Adani Group, began operations in Kamuthi in Ramanathapuram, Tamil Nadu with a capacity of
648 megawatts (MW) at an estimated cost of Rs. 4,550 crore. In the same month, the Adani Group
inaugurated a 648 MW single-location solar power plant. It was the world's largest solar power

23
plant at the time in was set up . In December, the Adani Group inaugurated a 100 MW solar power
plant in Bhatinda, the largest in Punjab. The plant was built at a cost of Rs. 640 crore.

On 22 December 2017 the Adani Group acquired reliance the power arm of Reliance Infrastructure
for Rs 18,800 crore.

24
WINGS OF ADANI GROUP

Adani Enterprises Limited

Adani Enterprises Limited is the flagship entity of the Adani Group, one of India’s largest business
conglomerates. The US$ 11 bn Group enjoys significant interests across resources (coal mining
and integrated coal management), logistics (ports and logistics, shipping and rail), energy (power
generation and transmission) and ancillary industries. Through these businesses, the Adani Group
is integrated to the core of the world’s largest democracy, touching millions of lives.

Adani Enterprises is one of the fastest growing diversified conglomerates with business interests
across – Integrated Coal Management and mining, solar cells and module manufacturing, agri-
storage infrastructure and services as well as edible oils and food products.

This business mix - business-to-business and business-to-consumer – is directed at enhancing

access to basic services (electricity through timely coal availability), creating a less polluted world,
delivering quality food grain and providing healthy cooking media. In doing so, the Company
contributes to create a better world.

The company began as Adani Exports Limited in 1988 trading commodities. In March 1993, the
partnership company M/s. Adani Exports was converted into a limited company – Adani
Enterprises Limited. Run by Mr. Gautam Adani the company originally exported dyes and
intermediates, plastic products, agricultural products and frozen food to about 28 countries around
the world. Adani Management Consultancy Services was amalgamated with the company in
1994. With major interests in logistics and energy, the enterprise handles the mining, trading, gas
distribution, solar and agribusiness divisions of the Group. Adani Gas, a wholly owned subsidiary
executes the gas distribution business. Its real estate activities are managed by Adani Infrastructure
& Developers Private Limited.

Adani Ports & SEZ Limited

Adani Ports and Special Economic Zone Limited (APSEZ) is promoted by Adani Group, one of
India’s largest business conglomerates. The US$11 bn Group has interests across resources -coal
mining and trading; logistics- ports and logistics, shipping and rail; energy - renewable, thermal
power generation and transmission; agro commodities and ancillary industries.

25
Adani Ports and Special Economic Zone Limited is India’s largest ports developer and operator
company. In less than two decades, we have built, acquired and developed an unparalleled
portfolio of ports infrastructure and services across India - for India. Our ten strategically located
ports and terminals represent 24% of the country’s port capacity, handling cargo of vast hinterland,
demonstrating that when it comes to servicing core national needs, Adani Ports is prepared with
scale, scope and speed.
Adani Ports and Special Economic Zone Limited (APSEZ) is the largest private port company and
special economic zone in India. The company is headed by Mr. Karan Adani, CEO of APSEZ.
The company's operations include Port management, logistics and the special economic zone. The
company operates at the following ports: Mundra, Dahej, and Hazira, Gujarat; Dhamra, Odisha;
Kattupalli, Tamil Nadu; and Vizhinjam, Kerala.

In addition, the Adani Group manages terminals at the ports of Mormugao, Ennore,
Vishakhapatnam and Kandla (Tuna Takra). The logistics arm was initially promoted by the
Mundra Port Infrastructure Development Company Limited, an enterprise of the Government of
Gujarat and Adani Port Limited. The company began operations at the Mundra Port in October
1998. With a Concession Agreement with the Government of Gujarat and the Gujarat Maritime
Board in February, 2001I, the group was granted the right to operate and develop the Mundra Port
situated at the Navinal Island in the Kutch region for 30 years.

Established in August 1996 as Adani Power Limited, the company gained a certificate of
commence business in September of the same year. The company is run by Gautam Adani, Rajesh
S. Adani and Adani Enterprises Limited. The company develops and maintains power projects in
India. The firm has a combined installed capacity of 10,440 MW with four thermal power projects
across India. The company runs the following subsidiaries: Adani Power Maharashtra Limited,
Adani Power Rajasthan Limited, Adani Power Dahej Limited, Mundra Power SEZ Limited and
Adani Power (Overseas) Limited . In 2014, Adani Power overtook Tata Power to become India's
largest power producer. The third phase of Adani Power Ltd's (APL) thermal power plant at
Mundra in Gujarat is the world's first coal-fired plant to receive carbon credits from the United
Nations Framework Convention on Climate Change (UNFCCC). Adani Power's Udupi Power
Plant has been conferred with the Power Award by the Government of Karnataka.

The transmission team of Adani Power was set up to help support the state and central utilities in
evacuating power from our plants to benefit the end user. The team ended up creating over 5000

26
circuit Kilometres of transmission system in less than 3 years – yet another unmatched feat – and
went on to become a publicly listed business shortly afterwards.
The sheer dynamism of the Group has helped Adani Power grow tremendously since its inception
as well as incubate successful new businesses. As a result, the Power business today is one of the
largest businesses of the Adani Group.
Being the largest private power producer in India with an installed capacity of 10,480 MW, we are
now moving towards our ambitious target of 20,000 MW by 2020 with the help of a world class
team of Operations and Maintenance and an expert team of Engineering, Procurement and
Construction.

Adani Transmission Limited

Integrated in 2013, Adani Transmission Limited handles the commissioning, operations and
maintenance of electric power transmission systems. The holding company holds, operates and
maintains 8511 circuit kilometers of transmission lines that range from 400 to 765 kilovolts. The
total transmission capacity of the company is 16,200 megavolt amperes. The company has the
following subsidiaries: Maru Transmission Service Company Limited, Adani Transmission (India)
Limited, Hadoti Power Transmission Service Limited, Raipur-Rajnandgaon-Warora Transmission
Limited, Sipat Transmission Limited, and Chhattisgarh-WR Transmission Limited.

Adani Transmission Limited (ATL) headquartered at Ahmedabad in Gujarat, India, is one of the
largest private sector power transmission companies in India with a presence across the western
and northern regions of India. We primarily aim at addressing the vast potential in India’s
transmission sector and our ambitious target is to set up 20,000 circuit km of transmission lines by
2022. We currently operate more than 11300 circuit kilometre of transmission lines and around
18300 MVA of power transformation capacity. We have invested in the latest technologies
resulting in the highest network availability of over 99.80% in the country, which corresponds to
the best global standards.

27
CONCEPT OF FUNDAMENTALS ANALYSIS

Fundamental analysis is a method of analyzing a stock or any type of security by measuring its
intrinsic value. This is done by studying all the things that can influence this value such as the
company’s financial and management condition, that of the industry, and the overall economic
conditions. The key objective of doing this kind of analysis is to produce a particular value which
can be compared against the current price so that an investor can figure out if he or she is going to
buy or sell the security. If the value is lower than the current price, the stock is said to be overpriced
and an investor can decide to sell. On the other hand, if the value is more than what is currently
reflected in the current price, the stock is labeled as undervalued which is a basis for buying
because the investor aims to capture that gap as gains once the market realizes this and adjusts
upward.

In analyzing stocks, fundamental analysts work with the company’s earnings, revenues, profit
margins, and future growth, among others. In other words, the financial statement of the company
is the point of interest. If the investor is interested in bonds, the analysis is conducted by studying
the interest rates, information concerning the bond issuer, possible adjustments in credit ratings,
and the overall condition of the economy. Perhaps one of history’s most successful fundamental
analysts is Warren Buffett who is tagged at the Oracle of Omaha for turning himself into a
billionaire because of his investment strategies.

Fundamental analysis is about spending time going through numbers in a company’s balance sheet,
cash flow statement, and income statement, and the way they fit altogether. But beyond number
crunching, fundamental analysis also gives great importance to the intangible aspects like quality
of management and market share. Also, having a comprehensive insight about the direction of the
market and industry trends would provide a more complete picture. To sum up, a company’s
fundamentals is grouped into two broad aspects – the qualitative and the quantitative. Many
analysts take into account both aspects when making decisions.

Analyzing the financial status, management, growth potential, market share and other
fundamentals is called fundamental analysis of a company. In simple words, Fundamental

28
Analysis of a company is study of basic fundamentals of a company that can decide its future and
growth.

Different companies compete within a industry. A company can fall in the category of a very
attractive industry or sector but this is not a guarantee that the company will succeed. There are
several examples where an industry is doing will but some companies within that sector is not
doing well. On the other hand, there are examples where a company that fall under a poorly
performing sector but the company is growing well and making profits.

Quantitative Fundamentals

Quantitative fundamentals are measurable, numeric characteristics about a business operation.

These are obtained from the financial statements of the company. These statements show profits,
revenues, cash, and other assets, to name a few. The three types of financial statements you should
look at are the balance sheet, cash flow statement, and income statement. The balance sheet shows
if the company has the ability to balance what it owns with what it owes from various entities.
Meanwhile, the income statement presents the amount of money that the company had produced
and spent over a period of time. You can see from this statement whether the company is losing or
earning money. You should also be interested to see whether or not the company has enough cash
in its pocket to buy whatever it needs to improve or expand its business. You should see this if you
go over the cash flow statement.

Once you are done with quantitative analysis, you should be able to tell whether the company is
making money or not. How well the company profits from every dollar of revenue it is making?
Is the revenue growing? Even if a company is making profits, a good indication of a company
moving forward is a positive growth in revenues. A healthy company should also be able to pay
off its debt.

Qualitative Fundamentals

Apart from deciphering the complex numbers in the financial statements, you need to analyze the
intangible aspects of the business. Do you know what the business model is for this company? Do
29
you understand the core operations? One of the things that can be learned from Mr. Buffett is that
he does not usually invest in technology stocks because he doesn’t know how they operate which
is understandable. An investor should first clearly understand what he or she is going into. Another
important aspect to look at is competitive advantage because it is the catalyst that drives the long
term success of a business. Michael Porter of the Harvard Business School argued that a
sustainable competitive edge is obtained by having a unique competitive situation, undertaking
activities that are customized to the company’s approach, making clear choices and transactions
in comparison with competitors, having a high degree of fit across operations or activities, and
ensuring that these operations are greatly effective.

Perhaps one of the most important qualitative aspects that one should not miss is the quality of
management. To go deep into this however, you need to be a huge investor so you can get a chance
to meet the leaders and have a better understanding of how they are running the business. But
ordinary investors or analysts can still get the basic information by going over the website and
conducting research about them on the Internet. Take careful note about key performances and
huge decisions and how these have impacted the business.

In addition to these one need to study about the overall growth of the industry, market share among
companies, and the customer base. Is the industry growing? If so, companies that have a larger
market share should be the best candidates. Also, it pays to keep an eye on the business cycle. All
these things factor in the financial health of a company.

Fundamental analysis is said to be the cornerstone or foundation of investing. The goal of every
fundamental or value investor is to seek for stocks that have solid fundamentals. But a company’s
so-called fundamentals is so encompassing. That is why, even among fundamental analysts, the
strategies vary. While no single method is superior, as long as you can back up your analysis with
solid numbers and have complemented it with the current trends and condition of the industry and
economy, you should do just fine.

Fundamental analysis is the process of looking at a business at the most basic or fundamental
financial level. This type of analysis examines the key ratios of a business to determine its financial
health. Fundamental analysis can also give you an idea of the value of what a company's stock

30
should be. It takes several factors into account, including revenue, asset management, and the
production of a business as well as interest rate.

Many investors use fundamental analysis alone, but it can be particularly helpful to use it in
combination with other tools to evaluate stocks for investment purposes. The goal is to determine
the current worth of the stock, and, perhaps more importantly, to identify how the market values
the stock.

Even if one don't plan to do an in-depth fundamental analysis oneself, understanding the key ratios
and terms can help one follow stocks more closely and accurately.

31
COMPANY ANALYSIS
Adani Power Ltd was incorporated on August 22, 1996 and received a certificate of
commencement of business on September 4, 1996. The Company was originally incorporated by
Mr. Gautam S. Adani and Mr. Rajesh S. Adani, together with their relatives. The company became
a private limited company on June 3, 2002 and the name of the company was subsequently changed
to Adani Power Pvt Ltd.

In the year 2004, pursuant to internal restructuring amongst the Promoters, the entire shareholding
of the company was transferred to Mundra Port and Special Economic Zone Ltd (MPSEZL).
Subsequently, on May 29, 2006, MPSEZL transferred its entire shareholding in the company to
Adani Enterprises Ltd.

In December 19, 2006, the Government of India (GOI) granted approval to the company's proposal
for development, operation and maintenance of the sector specific Special Economic Zone (SEZ)
at Village: Tunda & Siracha, Taluka Mundra, Gujarat. In February 2, 2007, the company entered
into an agreement (PPA) with Gujarat Urja Vikas Nigam Ltd (GUVNL) for supply of power on
long term basis. In April 12, 2007, the company was, thereafter, converted into a public limited
company and the name of the company was changed to Adani Power Ltd.

32
During the financial year 2009-10, the company entered the Capital Market with initial public offer
(IPO) of 30,16,52,031 equity shares of Rs 10 each at a premium of Rs 90 per share. In August 20,
2009, the company's shares were listed on the Bombay Stock Exchange Ltd (BSE) and National
Stock Exchange of India Ltd (NSE). The company's power generating units (Unit 1 and Unit 2
each of 330 MW) of their phase I commenced commercial operations effective from October 1,
2009 and March 17, 2010 respectively. During the year, the company incorporated Adani Pench
Power Ltd (earlier known as Adani Power MP Ltd) as a wholly owned subsidiary company. The
company acquired Kutchh Power Generation Ltd and Adani Shipping PTE Ltd, Singapore by
purchase of all shares of respective companies at face value. Subsequently Adani Shipping PTE
Ltd, Singapore incorporated Rahi Shipping PTE Ltd, Singapore and Vanshi Shipping PTE Ltd,
Singapore as their wholly owned subsidiary companies.

33
INDUSTRY ANALYSIS

Introduction

Power is one of the most critical components of infrastructure crucial for the economic growth and
welfare of nations. The existence and development of adequate infrastructure is essential for
sustained growth of the Indian economy.

India’s power sector is one of the most diversified in the world. Sources of power generation range
from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable
non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity
demand in the country has increased rapidly and is expected to rise further in the years to come.
In order to meet the increasing demand for electricity in the country, massive addition to the
installed generating capacity is required.
In May 2018, India ranked 4th in the Asia Pacific region out of 25 nations on an index that
measures their overall power.

34
Market Size

Indian power sector is undergoing a significant change that has redefined the industry outlook.
India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the
same time, the competitive intensity is increasing at both the market and supply sides (fuel,
logistics, finances, and manpower).
Total installed capacity of power stations in India stood at 350.16 Gigawatt (GW) as of February
2019.

Investment Scenario
Between April 2000 and December 2018, the industry attracted US$ 14.18 billion in Foreign
Direct Investment (FDI), accounting for 3.48 per cent of total FDI inflows in India.
Some major investments and developments in the Indian power sector are as follows:

 In November 2018, Renascent Power Ventures Pte Ltd acquired 75.01 per cent stake in
Prayagraj Power Generation Company Limited (PPGCL) for US$ 854.94 million.
 In August 2018, Kohlberg Kravis Roberts & Co (KKR) acquired Ramky Enviro Engineers
Limited for worth US$ 530 million.
 In April 2018 ReNew Power made the largest M&A deal by acquiring Ostro Energy for
US$ 1,668.21 million.

Government Initiatives

The Government of India has identified power sector as a key sector of focus so as to promote
sustained industrial growth. Some initiatives by the Government of India to boost the Indian power
sector:

 As of September 2018, a draft amendment to Electricity Act, 2003 has been introduced. It
discusses separation of content & carriage, direct benefit transfer of subsidy, 24*7 Power
supply is an obligation, penalisation on violation of PPA, setting up Smart Meter and
Prepaid Meters along with regulations related to the same.
 Ujwal Discoms Assurance Yojana (UDAY) was launched by the Government of India to
encourage operational and financial turnaround of State-owned Power Distribution

35
 Companies (DISCOMS), with an aim to reduce Aggregate Technical & Commercial
(AT&C) losses to 15 per cent by FY19.
 As of August 2018, the Ministry of New and Renewable Energy set solar power tariff caps
at Rs 2.50 (US$ 0.04) and Rs 2.68 (US$ 0.04) unit for developers using domestic and
imported solar cells and modules, respectively.
 The Government of India approved National Policy on Biofuels – 2018, the expected
benefits of this policy are health benefits, cleaner environment, employment generation,
reduced import dependency, boost to infrastructural investment in rural areas and
additional income to farmers.

Achievements

Following are the achievements of the government in the past four years:

 India’s rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing
business - "Getting Electricity" ranking.
 Energy deficit reduced to 0.7 per cent in FY18 from 4.2 per cent in FY14.
 As of April 28, 2018, 100 per cent village electrification achieved under Deen Dayal
Upadhyaya Gram Jyoti Yojana (DDUGJY).

The Road Ahead

The Government of India has released its roadmap to achieve 175 GW capacity in renewable
energy by 2022, which includes 100 GW of solar power and 60 GW of wind power. The Union
Government of India is preparing a 'rent a roof' policy for supporting its target of generating 40
gigawatts (GW) of power through solar rooftop projects by 2022.
Coal-based power generation capacity in India, which currently stands at 191.09*GW is expected
to reach 330-441 GW by 2040.
India could become the world's first country to use LEDs for all lighting needs by 2019, thereby
saving Rs 40,000 crore (US$ 6.23 billion) on an annual basis.
All the states and union territories of India are on board to fulfil the Government of India's vision
of ensuring 24x7 affordable and quality power for all by March 2019, as per the Ministry of Power
and New & Renewable Energy, Government of India.

36
ECONOMIC CONDITION OF INDIA

Introduction

India has emerged as the fastest growing major economy in the world and is expected to be one of
the top three economic powers of the world over the next 10-15 years, backed by its strong
democracy and partnerships.

Market size
India’s GDP is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19.
India has retained its position as the third largest startup base in the world with over 4,750
technology start-ups.
India's labour force is expected to touch 160-170 million by 2020, based on rate of population
growth, increased labour force participation, and higher education enrolment, among other factors,
according to a study by ASSOCHAM and Thought Arbitrage Research Institute.
India's foreign exchange reserves were US$ 405.64 billion in the week up to March 15, 2019,
according to data from the RBI.

Recent Developments
With the improvement in the economic scenario, there have been various investments in various
sectors of the economy. The M&A activity in India reached record US$ 129.4 billion in 2018 while
private equity (PE) and venture capital (VC) investments reached US$ 20.5 billion. Some of the
important recent developments in Indian economy are as follows:

 During 2018-19 (up to February 2019), merchandise exports from India have increased
8.85 per cent year-on-year to US$ 298.47 billion, while services exports have grown 8.54
per cent year-on-year to US$ 185.51 billion.
 Nikkei India Manufacturing Purchasing Managers’ Index (PMI) reached a 14-month high
in February 2019 and stood at 54.3.
 Net direct tax collection for 2018-19 had crossed Rs 10 trillion (US$ 144.57 billion) by
March 16, 2019, while goods and services tax (GST) collection stood at Rs 10.70 trillion
(US$ 154.69 billion) as of February 2019.

37
  Proceeds through Initial Public Offers (IPO) in India reached US$ 5.5 billion in 2018 and
US$ 0.9 billion in Q1 2018-19.
 India's Foreign Direct Investment (FDI) equity inflows reached US$ 409.15 billion
between April 2000 and December 2018, with maximum contribution from services,
computer software and hardware, telecommunications, construction, trading and
automobiles.
 India's Index of Industrial Production (IIP) rose 4.4 per cent year-on-year in 2018-19 (up
to January 2019).
 Consumer Price Index (CPI) inflation stood at 2.57 per cent in February 2019.
 Net employment generation in the country reached a 17-month high in January 2019.

Government Initiatives

The interim Union Budget for 2019-20 was announced by Mr Piyush Goyal, Union Minister for
Finance, Corporate Affairs, Railways and Coal, Government of India, in Parliament on February
01, 2019. It focuses on supporting the needy farmers, economically less privileged, workers in the
unorganised sector and salaried employees, while continuing the Government of India’s push
towards better physical and social infrastructure.

Total expenditure for 2019-20 is budgeted at Rs 2,784,200 crore (US$ 391.53 billion), an increase
of 13.30 per cent from 2018-19 (revised estimates).

Numerous foreign companies are setting up their facilities in India on account of various
government initiatives like Make in India and Digital India. Mr. Narendra Modi, Prime Minister
of India, has launched the Make in India initiative with an aim to boost the manufacturing sector
of Indian economy, to increase the purchasing power of an average Indian consumer, which would
further boost demand, and hence spur development, in addition to benefiting investors. The
Government of India, under the Make in India initiative, is trying to give boost to the contribution
made by the manufacturing sector and aims to take it up to 25 per cent of the GDP from the current
17 per cent. Besides, the Government has also come up with Digital India initiative, which focuses
on three core components: creation of digital infrastructure, delivering services digitally and to
increase the digital literacy.

38
Some of the recent initiatives and developments undertaken by the government are listed below:

 In February 2019, the Government of India approved the National Policy on Software
Products – 2019, to develop the country as a software hub.
 The National Mineral Policy 2019, National Electronics Policy 2019 and Faster Adoption
and Manufacturing of (Hybrid) and Electric Vehicles (FAME II) have also been approved
by the Government of India in 2019.
 Village electrification in India was completed in April 2018. Universal household
electrification is expected to be achieved by March 2019 end.
 The Government of India released the maiden Agriculture Export Policy, 2018 which seeks
to double agricultural exports from the country to US$ 60 billion by 2022.

Road Ahead
India's gross domestic product (GDP) is expected to reach US$ 6 trillion by FY27 and achieve
upper-middle income status on the back of digitisation, globalisation, favourable demographics,
and reforms.

India's revenue receipts are estimated to touch Rs 28-30 trillion (US$ 385-412 billion) by 2019,
owing to Government of India's measures to strengthen infrastructure and reforms like
demonetisation and Goods and Services Tax (GST).

India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per
cent of its energy from non-fossil sources by 2030 which is currently 30 per cent and also have
plans to increase its renewable energy capacity from to 175 GW by 2022.

India is expected to be the third largest consumer economy as its consumption may triple to US$
4 trillion by 2025 , owing to shift in consumer behaviour and expenditure pattern, according to a
Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second
largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report
by Price Waterhouse Coopers.

39
COMPETITORS OF ADANI POWER

NTCP

NTPC is India’s largest power utility with an installed capacity of 55,126 MW (including JVs),
plans to become a 130 GW company by 2032. Established in 1975, NTPC aims to be the world’s
largest and best power major.

40
NTPC has comprehensive Rehabilitation & Resettlement and CSR policies well integrated with
its core business of setting up power projects and generating electricity. The company is committed
to generating reliable power at competitive prices in a sustainable manner by optimising the use
of multiple energy sources with innovative eco-friendly technologies thereby NTPC is contributing
to the economic development of the nation and upliftment of the society.

The total installed capacity of the company is 55,126 MW (including JVs) with 21 coal based, 7
gas based stations, 2 Hydro based station and 1 Wind based station. 9 Joint Venture stations are
coal based and 11 Solar PV projects. The capacity will have a diversified fuel mix and by 2032,
non fossil fuel based generation capacity shall make up nearly 30% of NTPC’s portfolio.

NTPC has been operating its plants at high efficiency levels. Although the company has 15.56%
of the total national capacity, it contributes 22.74% of total power generation due to its focus on
high efficiency.

In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as fresh
issue and 5.25% as offer for sale by the Government of India. NTPC thus became a listed company
in November 2004 with the Government holding 89.5% of the equity share capital. In February
2010, the Shareholding of Government of India was reduced from 89.5% to 84.5% through a
further public offer. Government of India has further divested 9.5% shares through OFS route in
February 2013. With this, GOI's holding in NTPC has reduced from 84.5% to 75%. The rest is
held by Institutional Investors, banks and Public. Presently, Government of India is holding in
NTPC has reduced to 69.74%.

NTPC is not only the foremost power generator; it is also among the great places to work. The
company is guided by the “People before Plant Load Factor” mantra which is the template for all

41
its human resource related policies. In 2018, NTPC was recognized as “Laureate” for consistently
ranking among “Top 50 Best Companies to Work for in India” for last 10 years in the Great Place
to Work and Economic Times survey. Besides, NTPC was also recognized as the best among PSUs
and in Manufacturing.

42
RELIANCE POWER

Reliance Power Limited is a part of the Reliance Group, one of India’s largest business houses.
The group operates across multiple sectors,including telecommunications, financial services,
media and entertainment, infrastructure and energy. The energy sector companies
include Reliance Infrastructure and Reliance Power.

Reliance Power has been established to develop, construct and operate power projects both in India
as well as internationally. The Company on its own and through its subsidiaries has a large
portfolio of power generation capacity, both in operation as well as capacity under development.

The power projects are going to be diverse in terms of geographic location, fuel type, fuel source
and off-take, and each project is planned to be strategically located near an available fuel supply
or load centre. The company has close to 6000 MW of operational power generation assets. The
projects under development include three coal-fired projects to be fueled by reserves from captive
mines and supplies from India and elsewhere; one gas-fired projects; and twelve hydroelectric
projects, six of them in Arunachal Pradesh, five in Himachal Pradesh and one in Uttarakhand.

Reliance Power's project portfolio also includes 3,960 MW Sasan Ultra Mega Power Project
(Madhya Pradesh). UMPPs are a significant part of the Indian government's initiative to
collaborate with power generation companies to set up 4,000 MW projects to ease the country’s
power deficit situation.

Reliance Power has also registered projects with the Clean Development Mechanism executive
board for issuance of Certified Emission Reduction (CER) certificates.

43
44
TATA POWER

Tata Power Limited is an Indian electric utility company based in Mumbai, Maharashtra, India and
is part of the Tata Group. The core business of the company is to generate, transmit and distribute
electricity. With an installed electricity generation capacity of 10,577 MW, it is India's largest
integrated power company. Tata Power has been ranked 3rd in 2017 Responsible Business
Rankings developed by IIM Udaipur. In February 2017, Tata Power became the first Indian
company to ship over 1 GW solar modules.

Tata Power has operations in India, Singapore, Indonesia, South Africa and Bhutan. Tata Power
Group has its operations based in 35 locations in India. The thermal power stations of the company
are located at Trombay in Mumbai, Mundra in Gujarat, Jojobera
and Maithon in Jharkhand, Kalinganagar in Odisha, Haldia in West
Bengal and Belgaum in Karnataka. The hydro stations are located in the Western Ghats of
Maharashtra and the wind farms in Ahmednagar, Supa, Khanke,
Brahmanwel, Gadag, Samana and Visapur. The company installed India’s first 500 MW unit at
Trombay, the first 150 MW pumped storage unit at Bhira, and a flue gas desulphurization plant
for pollution control at Trombay. It has generation capacities in the States
of Jharkhand and Karnataka, and a distribution company in Delhi, servicing over one million
consumers spread over 510 square km in the North Delhi. The peak load in this area is about
1,150 MW. Tata Power announced on 24 July 2012, commissioning of the second unit of 525 MW

45
capacity of the Maithon mega thermal project in Dhanbad. The first unit of identical capacity was
commissioned in September 2011.

Tata Power (Mundhra Plant In Mumbai)

46
SWOT ANALYSIS

STRENGHS

1. The diversified nature of the Adani Group helps in the growth of Adani Power

2. Most of the equity share capital and Debt has been invested in the creation of assets which are
operational. This has led to Increasing Revenues YoY. This shows a strong Project - Execution
record.

3. Operating Profit to Sales ratio for Adani Power is higher than the National average. This
indicates higher Operational Efficiency of Adani Power.

4. Since the largest supplier of coal is Adani Enterprises, this reduces the cost of coal to Adani
Power.

5. One of the major players in the Indian power industry.

47
WEAKNESSES

1.Present only in very few states namely Gujarat, Maharashtra and Haryana

2. Has a very low market share even compared to the private playes like Tata Power and Reliance
Power

OPPORTUNITIES

1. Can diversify into Hydro-electric power generation

2. Adani Group has a presence in coal imports and coal mining. This offers a significant
opportunity for Adani Power to expand its operations and compete with other contenders for
UMPPs.

3. Opportunity to establish presence in other parts of the country.

THREATS

1. Changes in International prices of coal.

2. Changes in International policies regarding import of coal.

3. Increase in private sector power generations could lead to compressed rates of merchant power.

48
FINDINGS

FINANCIAL RATIO ANALYSIS OF ADANI POWER

DEBT EQUITY RATIO- The debt-to-equity (D/E) ratio is calculated by dividing a company’s

total liabilities by its shareholder equity. These numbers are available on the balance sheet of a

company’s financial statements.

The ratio is used to evaluate a company's financial leverage. The D/E ratio is an important metric

used in corporate finance. It is a measure of the degree to which a company is financing its

operations through debt versus wholly owned funds. More specifically, it reflects the ability of

shareholder equity to cover all outstanding debts in the event of a business downturn.

Debt-to-equity ratio = Liabilities / Equity

49
Companies operating with high debt to equity on their balance sheets are vulnerable to economic

cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly

difficult to service the interest on their borrowings as profit margins decline. It is believe that long

term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results

of operations. But for Power industry the cost of setting plants are huge which may increase the

debt over equity.

CURRENT RATIO- The current ratio is a liquidity ratio that measures a company's ability to pay
short-term obligations or those due within one year. It tells investors and analysts how a company
can maximize the current assets on its balance sheet to satisfy its current debt and other payables.

The current ratio is called “current” because, unlike some other liquidity ratios, it incorporates all
current assets and liabilities .The current ratio is also called the working capital ratio.

Current Ratio= Current Asset/ Current Liabilities

A ratio under 1 indicates that the company’s debts due in a year or less are greater than its assets
(cash or other short-term assets expected to be converted to cash within a year or less.)

ASSET TURNOVER RATIO- The asset turnover ratio measures the value of a company's sales
or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator
of the efficiency with which a company is using its assets to generate revenue.

The higher the asset turnover ratio, the more efficient a company. Conversely, if a company has a
low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.

ASSET TURNOVER RATIO = NET SALES/ AVERAGE TOYAL ASSET

Where:

50
  Net sales are the amount of revenue generated after deducting sales
returns, sales discounts, and sales allowances.
 Average total assets are the average of aggregate assets at year end of the
current and preceding fiscal year. Note: an analyst may use either average or
end-of-period assets.

INVENTORY TURNOVER RATIO- Inventory turnover is the number of times a company sells
and replaces its stock of goods during a period. Inventory turnover provides insight as to how the
company manages costs and how effective their sales efforts have been.

 The higher the inventory turnover, the better since a high inventory turnover typically
means a company is selling goods very quickly and that demand for their product exists.
 Low inventory turnover, on the other hand, would likely indicate weaker sales and
declining demand for a company’s products.

INVENTORY TURNOVER RATIO= COGS/AVERAGE INVENTORY

(Where, Cogs= Cost Of Goods Sold)

This measurement also shows investors how liquid a company’s inventory is. Think about it.
Inventory is one of the biggest assets a retailer reports on its balance sheet. If this inventory can’t
be sold, it is worthless to the company. This measurement shows how easily a company can turn
its inventory into cash.

DEBTORS TURNOVER RATIO- The accounts receivable turnover ratio, also known as the
debtor’s turnover ratio, is an efficiency ratio that measures how efficiently a company is using its
assets. The accounts receivable turnover ratio measures the number of times over a given period
that a company collects its average accounts receivable.

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

Where:

 Net credit sales are sales where the cash is collected at a later date. The formula for net
credit sales is = Sales on credit – Sales returns – Sales allowances.

51
  Average accounts receivable is the sum of starting and ending accounts receivable over a
time period (such as monthly or quarterly), divided by 2.

INTEREST COVERAGE RATIO- The interest coverage ratio is a debt ratio and profitability
ratio used to determine how easily a company can pay interest on its outstanding debt. The interest
coverage ratio may be calculated by dividing a company's earnings before interest and taxes
(EBIT)during a given period by the company's interest payments due within the same period.

The Interest coverage ratio is also called “times interest earned.” Lenders, investors, and creditors
often use this formula to determine a company's riskiness relative to its current debt or for future
borrowing.

INTEREST COVERAGE RATIO = EBIT/ INTEREST EXPENSES

(Where, Ebit= Earning Before Interest And Taxes)

OPERATING MARGIN- The operating margin ratio, also known as the operating profit margin,
is a profitability ratio that measures what percentage of total revenues is made up by operating
income. In other words, the operating margin ratio demonstrates how much revenues are left over
after all the variable or operating costs have been paid. Conversely, this ratio shows what
proportion of revenues is available to cover non-operating costs like interest expense.

This ratio is important to both creditors and investors because it helps show how strong and
profitable a company’s operations are. For instance, a company that receives 30 percent of its
revenue from its operations means that it is running its operations smoothly and this income
supports the company. It also means this company depends on the income from operations. If
operations start to decline, the company will have to find a new way to generate income.

OPERATING MARGIN= OPERATING INCOME/ NET SALES

Operating income, also called income from operations, is usually stated separately on the income
statement before income from non-operating activities like interest and dividend income. Many
times operating income is classified as earnings before interest and taxes. Operating income can
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be calculated by subtracting operating expenses, depreciation, and amortization from gross income
or revenues.

NET PROFIT MARGIN- The net profit margin is equal to how much net income or profit is
generated as a percentage of revenue. Net profit margin is the ratio of net profits to revenues for a
company or business segment. Net profit margin is typically expressed as a percentage but can
also be represented in decimal form. The net profit margin illustrates how much of each dollar in
revenue collected by a company translates into profit.

Net income is also called the bottom line for a company or the net profit. Net profit margin is also
called net margin. The term net profits is equivalent to net income on the income statement, and
one can use the terms interchangeably.

NET PROFIT MARGIN= (Total Revenue – Total Expenses)/Total Revenue

= Net Profit/Total Revenue

RETURN ON CAPITAL EMPLOYED- Return on capital employed (ROCE) is a financial ratio

that measures a company's profitability and the efficiency with which its capital is used. In other
words, the ratio measures how well a company is generating profits from its capital. The ROCE
ratio is considered an important profitability ratio and is used often by investors when screening
for suitable investment candidates.

ROCE is a useful metric for comparing profitability across companies based on the amount of
capital they use. There are two metrics required to calculate return on capital employed: earnings
before interest and tax and capital employed.

RETURN ON CAPITAL EMPLOYED= NET OPERATING PROFIT/ EMPLOYED

CAPITAL

=NET OPERATING PROFIT/ (TOTAL ASSET- CURRENT LIABILITIES)

ROCE is a long-term profitability ratio because it shows how effectively assets are performing
while taking into consideration long-term financing. This is why ROCE is a more useful ratio
than return on equity to evaluate the longevity of a company.
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This ratio is based on two important calculations: operating profit and capital employed. Net
operating profit is often called EBIT or earnings before interest and taxes. EBIT is often reported
on the income statement because it shows the company profits generated from operations. EBIT
can be calculated by adding interest and taxes back into net income if need be.

RETURN ON NETWORTH- Return on equity (ROE) is a measure of financial performance

calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal
to a company’s assets minus its debt, ROE could be thought of as the return on net assets.

ROE is considered a measure of how effectively management is using a company’s assets to create
profits. ROE is expressed as a percentage and can be calculated for any company if net income
and equity are both positive numbers. Net income is calculated before dividends paid to common
shareholders and after dividends to preferred shareholders and interest to lenders.

RONW = Net Income / Shareholders’ Equity

Return on Net Worth (RONW) is a measure of profitability of a company expressed in percentage.
It is calculated by dividing the net income of the firm in question by shareholders’ equity. The net
income used is for the past 12 months. It can be represented mathematically as follows:

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CURRENT DISCOUNT

>
50%
Share price is ₹50.7 vs Future cash flow value of ₹145.39
ACCORDING TO DIFFERENT ANALYSTS FUTURE GROWTH OF ADANI POWER

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CONCLUSION
Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as
Adani Power Limited (NSEI:ADANIPOWER) with a market-capitalization of ₹196.42B, rarely
draw their attention. Surprisingly though, when accounted for risk, mid-caps have delivered better
returns compared to the two other categories of stocks. Let’s take a look at ADANIPOWER’s debt
concentration and assess their financial liquidity to get an idea of their ability to fund strategic
acquisitions and grow through cyclical pressures.

At the current liabilities level of ₹256,615.0M liabilities, it appears that the company has not
maintained a sufficient level of current assets to meet its obligations, with the current ratio last
standing at 0.53x, which is below the prudent industry ratio of 3x.

For companies that have on average been loss making in the past we assess whether they have at
least 1 year of cash runway.

Whilst loss making Adani Power has sufficient cash runway for more than 3 years if it maintains
the current positive free cash flow level.

Since total debt levels have outpaced equities, ADANIPOWER is a highly leveraged company.
This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for
some businesses. However, since ADANIPOWER is presently unprofitable, there’s a question of

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sustainability of its current operations. Maintaining a high level of debt, while revenues are still
below costs, can be dangerous as liquidity tends to dry up in unexpected downturns.

Whilst loss making Adani Power has sufficient cash runway for more than 3 years, even
with free cash flow being positive and shrinking by -11.7% per year.

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