India’s electricity demand story is entering a structurally different phase. Unlike earlier cycles where incremental demand could be absorbed by surplus capacity or seasonal generation, the coming decades point toward a sustained rise in base-load and peak-load power requirements. Against this backdrop, Adani Power’s expanding thermal footprint has drawn renewed attention from institutional analysts, who increasingly view thermal capacity not as a sunset asset, but as a strategic necessity during India’s long transition to renewable dominance.

The recent buy initiation on Adani Power reflects this shift in thinking. Rather than treating thermal generation as a declining business, the focus is now on execution capability, operating metrics, and the company’s ability to monetise scale efficiently in an environment of rising power demand.

Adani Power buy call analysis examines India’s rising power demand, capacity expansion strategy, EBITDA visibility, leverage trajectory, and valuation risks for long-term investors.

About Adani Power

Adani Power is India’s largest private-sector thermal power producer. Over the years, the company has steadily built capacity across multiple states, integrating fuel sourcing, logistics, and power offtake arrangements. Its current installed capacity stands at 18.1 GW, comprising both organic projects and acquired assets, positioning it as a critical contributor to India’s electricity grid.

What differentiates Adani Power is not just scale, but its ability to synchronise large assets efficiently, renegotiate fuel arrangements, and improve plant-level operating parameters over time. This operational depth has become increasingly relevant as India’s peak power demand rises.

India’s Power Demand: The Structural Context

India’s projected peak power demand is expected to move toward 700 GW by the mid-2040s. While renewable energy will account for a large share of incremental capacity additions, renewables alone cannot meet round-the-clock demand due to intermittency and storage constraints. Thermal power continues to act as the backbone that stabilises the grid during demand spikes and low renewable output periods.

This reality has prompted policymakers and utilities alike to reassess the role of coal-based generation. Rather than aggressive shutdowns, the focus has shifted to efficiency, emissions management, and capacity readiness. For operators like Adani Power, this creates a multi-year visibility window where well-run thermal assets can generate stable cash flows.

Capacity Expansion Strategy

Adani Power is targeting capacity expansion to nearly 41.9 GW by FY32. This expansion is not a single-phase bet but a calibrated build-up combining brownfield expansions, inorganic acquisitions, and optimisation of existing assets. The strategy aims to align capacity availability with India’s evolving demand curve rather than front-loading investments without offtake clarity.

A key execution milestone cited by analysts is the synchronisation of the Mundra units within a defined timeframe. Timely commissioning reduces interest capitalisation risks and accelerates revenue generation, directly impacting return metrics.

Operating Metrics: The Real Differentiator

Thermal power profitability is highly sensitive to plant load factors, availability, and heat rates. Adani Power has demonstrated improvement across these metrics, with plant load factors around the low-70% range and plant availability exceeding 90%. These numbers are critical because even small efficiency gains can translate into meaningful EBITDA expansion at scale.

Pre-ordering of critical equipment, long-term fuel linkages, and power purchase agreements further enhance predictability. Collectively, these enablers reduce operational volatility and allow management to focus on incremental optimisation rather than firefighting.

EBITDA Growth Visibility

Analysts expect EBITDA per megawatt to rise steadily over the coming years as higher utilisation, better tariffs, and operating leverage kick in. From current levels, EBITDA per MW is projected to trend meaningfully higher by FY32, driven by both scale and efficiency.

This improvement matters because it directly supports deleveraging over the medium term. Higher operating cash flows provide room to service incremental debt while funding expansion, reducing refinancing risk.

Leverage and Balance Sheet Trajectory

Adani Power’s net debt to EBITDA is expected to rise in the near term as capital expenditure accelerates. However, this increase is linked to growth investments rather than operational stress. As new capacity becomes operational, leverage is projected to moderate over time.

This dynamic is important for investors to understand. Short-term leverage expansion does not necessarily imply balance-sheet weakness if cash-flow visibility remains intact and assets are commissioned on schedule.

Valuation Perspective

The stock is being valued on an EV/EBITDA multiple that reflects improving operating metrics and scale benefits. While thermal power businesses historically commanded lower multiples, the reassessment of base-load necessity and execution reliability has led to a valuation re-rating across the sector.

The target price implies confidence in sustained EBITDA growth rather than speculative expansion. Investors should note that valuation remains sensitive to execution timelines and regulatory developments.

Key Risks to Monitor

Despite the constructive outlook, risks remain. Thermal power is capital-intensive, and delays in execution can pressure returns. Regulatory changes, fuel supply disruptions, merchant power price volatility, and counterparty risks must be tracked closely.

Additionally, thermal concentration exposes the company to long-term energy transition policies. While the near-to-medium-term outlook is supportive, investors should continuously reassess policy signals.