Disha Tandon, Pune
Adani Energy Solutions Ltd. (AESL) is the power transmission utility of the Adani Group, valued at a staggering $18.5 billion, and all indications are that it will capture significant growth in India’s energy market in its wake. According to a recent global brokerage report by Cantor Fitzgerald, AESL will have compounded annually with 20% revenue growth from FY24 to FY27 and healthy 29% growth in pre-tax profits over the same period.
AESL’s diversified portfolio includes both transmission and distribution assets, as well as a growing smart metering business. The company is uniquely positioned compared with other publicly traded utility and energy companies across the US, Europe, and Asia, to offer an attractive opportunity in a rapidly expanding market.
Canter Fitzgerald forecasts that AESL adjusted EBITDA will run ahead at a CAGR of 28.8%, dramatically higher than its peer set, with most seeing high single digit revenue growth. However, the outperformance by the company will be due to the massive investment in infrastructure by AESL as well as the flexibility that has ensured it keeps pace with the growing needs of energy in India.
Nine major transmission projects are currently under way, scheduled to boost the company’s operational capacity by a major margin within the next 18-24 months. Its distribution business is expected to continue growing at almost double-digit rates as the company expands its regulatory asset base. The smart metering division has a backlog of 22.8 million smart meters in place, promising substantial revenue, in addition to further contracts that could add over $6 billion to the income book.
The electrification infrastructure in India is significantly underdeveloped compared to more mature markets, so the opportunity at AESL is unique and stands to benefit from the large growth potential of India’s needs in terms of energy. With a population of 1.4 billion and growth in demand for electricity as incomes rise and living conditions improve, the market potential is enormous.
The company recently raised capital that was three times oversubscribed. In raising that funding, it now has sufficient resources to support its aggressive growth strategy. AESL is currently trading at about 60% of its peers. This will thus present an interesting investment opportunity within the current changes happening in energy solutions in India.
The more the country is investing in renewable energy, AESL will be even better prepared to be one of the first movers in transmission and distribution and anchor its position as one of the most significant players in the industry for years to come.