Adani Power Ltd is Rated Hold by MarketsMOJO

Current Rating and Its Significance

MarketsMOJO’s 'Hold' rating for Adani Power Ltd indicates a neutral stance on the stock, suggesting that investors should neither aggressively buy nor sell at this juncture. This rating reflects a balance of strengths and weaknesses across key evaluation parameters, signalling that while the stock has potential, it also carries certain risks that warrant caution. The rating was revised from 'Sell' to 'Hold' on 31 July 2025, following an improvement in the company’s overall Mojo Score from 44 to 51 points.

Here’s How Adani Power Looks Today

As of 28 December 2025, Adani Power Ltd is a large-cap company within the power sector, holding a market capitalisation of approximately ₹2,76,157 crores. It is the second largest company in its sector, constituting 16.61% of the entire power industry by market cap, trailing only NTPC. The company’s annual sales stand at ₹55,474.57 crores, representing 10.24% of the sector’s total sales.

Quality Assessment

The company’s quality grade is assessed as average. This reflects a mixed operational and financial profile. Adani Power has demonstrated healthy long-term growth, with net sales increasing at an annual rate of 16.64% and operating profit growing at 32.70%. However, the company’s ability to service its debt remains a concern, with a high Debt to EBITDA ratio of 3.48 times, indicating elevated leverage and potential pressure on cash flows. Additionally, the return on capital employed (ROCE) is relatively modest at 16.7%, with the half-year ROCE reported at 17.69%, the lowest in recent periods. The debt-equity ratio remains elevated at 0.83 times, signalling a cautious stance on financial risk.

Valuation Perspective

Adani Power is currently rated as very expensive in terms of valuation. The stock trades at an enterprise value to capital employed ratio of 3.2, which is high relative to its historical averages and peers. Despite this, the stock is trading at a discount compared to the average historical valuations of its sector peers. This valuation premium reflects investor expectations of sustained growth and operational improvements, but also suggests limited upside from current price levels without further fundamental progress.

Financial Trend

The financial trend for Adani Power is currently flat. The company’s profits have declined by 5.4% over the past year, despite a strong sales growth trajectory. This divergence suggests margin pressures or increased costs impacting profitability. The half-year results ending September 2025 were largely flat, with no significant improvement in key financial ratios. Investors should note that while the company has demonstrated resilience, the lack of profit growth tempers enthusiasm for near-term earnings expansion.

Technical Outlook

From a technical perspective, the stock exhibits a mildly bullish trend. Recent price movements show a 1-day decline of 0.73%, but the stock has delivered robust returns over longer periods: 6 months at +23.00%, year-to-date at +34.32%, and a one-year return of +40.13%. These returns significantly outperform the broader market benchmark BSE500, which has returned 5.76% over the same one-year period. This market-beating performance reflects positive investor sentiment and momentum, although short-term volatility remains a factor to monitor.

Debt and Risk Considerations

One of the key risks for investors is the company’s high leverage. The Debt to EBITDA ratio of 3.48 times indicates a relatively low ability to service debt comfortably, which could constrain financial flexibility in adverse market conditions. The debt-equity ratio of 0.83 times is also on the higher side, suggesting that the company relies significantly on borrowed funds. These factors contribute to the cautious 'Hold' rating, as they may limit the company’s capacity to invest aggressively or withstand economic shocks.

Market Position and Shareholding

Adani Power’s promoter group remains the majority shareholder, providing stability in ownership and strategic direction. The company’s sizeable market capitalisation and sectoral weight make it a key player in the Indian power industry. Its position as the second largest company in the sector underscores its importance in the energy landscape, with a substantial contribution to overall industry sales.

What the Hold Rating Means for Investors

For investors, the 'Hold' rating on Adani Power Ltd suggests maintaining existing positions rather than initiating new ones or exiting holdings. The stock’s current fundamentals indicate a company with solid market presence and growth potential, but also with valuation concerns and financial risks that warrant caution. Investors should monitor the company’s ability to improve profitability and manage debt levels, as these factors will be critical in determining future rating changes and stock performance.

In summary, Adani Power Ltd’s 'Hold' rating reflects a balanced view of its operational strengths and financial challenges. The company’s market-beating returns and growth prospects are tempered by high leverage and flat profit trends. As of 28 December 2025, investors are advised to watch for developments in earnings growth and debt management before considering a more bullish stance.

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