Adani Green shares fall 4% on profit, debt concerns

Why did Adani Green shares fall 4% after good results?

The result was strong: net profit rose 15% to Rs 673 crore and revenue 39% to Rs 4,520 crore. But shares fell because the market prices the future, not the past. Adani Green's fast growth is paid for with debt, Rs 16,000 crore capex and Rs 13,700 crore new borrowing in the first half, so investors worry interest costs and transmission delays will eat future profits.

Is Adani Green's growth worth its debt?

That is the bet investors are weighing. The company grows fast, but growth is paid for with debt: net debt is around Rs 76,000 crore, against revenue of Rs 12,268 crore. Its interest bill eats into profits. Whether it is worth it depends on whether transmission lines catch up so power can be sold.

Is Adani Green's 92% EBITDA margin real?

Yes, it is real, but EBITDA is earnings before interest, taxes, depreciation and amortisation. A solar or wind farm, once built, has almost no fuel cost: the sun and wind are free. So the operating margin is naturally high, around 91-92%, with most costs being debt interest and equipment depreciation. JM Financial put it at 91% for the quarter.

Why is the stock priced so far above what the company earns?

Investors are paying for future growth, not today's profit. Adani Green trades at 84 times earnings, while the sector average is 42. Its EV/EBITDA of 25 times also exceeds the 21 times sector norm. That premium assumes the 50 GW capacity target by 2030 gets built and generates returns, which depends on debt costs staying manageable and grids absorbing new power.

What makes the future less certain for Adani Green?

The future is uncertain because growth runs ahead of the grid. Transmission lines are being built slower than new solar and wind farms, so generated power gets curtailed. In the first half of this financial year, solar grid availability fell to 78.9% from 89%. Debt also weighs heavy: the company raised Rs 13,700 crore while interest costs climb.

What are Jefferies and JM Financial seeing differently?

They disagree on how quickly India's power grid will catch up with new solar and wind farms. JM Financial notes curtailment is rising, with solar grid availability falling from 89% to 78.9% and wind from 97.4% to 93.7%, making it cautious. Jefferies calls it temporary, betting on new transmission and surging demand.

Are debt and grid delays why the stock fell?

Yes. The stock fell not on the past results, but on obstacles ahead: heavy debt and transmission line delays. Adani Green spent Rs 16,000 crore on capital expenditure and drew Rs 13,700 crore in new debt in the first half of the year. Meanwhile, grid availability for its solar fell to 78.9% because transmission lines are behind, limiting power sales.