Adani Power Ltd Upgraded to Hold as Financial and Technical Factors Shift

Financial Performance: A Mixed Bag with Negative Quarterly Trends

Adani Power’s financial trend has shifted from flat to negative in the latest quarter ending December 2025. The company reported a significant decline in key profitability metrics, with its Profit After Tax (PAT) falling by 17.6% to ₹2,479.58 crores compared to the previous four-quarter average. Net sales also hit a low of ₹12,451.44 crores, while PBDIT (Profit Before Depreciation, Interest and Taxes) dropped to ₹4,238.07 crores, marking the lowest quarterly figure in recent periods.

Return on Capital Employed (ROCE) has deteriorated to 17.69%, the lowest half-yearly figure recorded, signalling reduced efficiency in generating returns from capital investments. The debt-equity ratio has increased to 0.83 times, indicating a higher leverage level, which raises concerns about the company’s ability to service its debt, especially given its Debt to EBITDA ratio of 3.48 times.

However, some financial parameters remain robust. Cash and cash equivalents stand at a healthy ₹10,291.04 crores, the highest recorded in the half-year period, providing liquidity comfort. The debtors turnover ratio is also strong at 5.88 times, reflecting efficient receivables management.

Valuation: Expensive Yet Discounted Relative to Peers

Adani Power’s valuation remains on the expensive side, with an enterprise value to capital employed ratio of 3.5 times, driven by a ROCE of 16.7%. Despite this, the stock is trading at a discount compared to the historical average valuations of its peer group within the power sector. This valuation gap partly justifies the Hold rating, as the market appears to price in the recent financial headwinds while recognising the company’s underlying asset base and growth potential.

The stock’s current price of ₹155.20 is well below its 52-week high of ₹182.75 but comfortably above the 52-week low of ₹93.23, indicating some resilience amid volatility. Over the past year, the stock has delivered a remarkable return of 53.19%, significantly outperforming the BSE500 index return of 7.87% and the Sensex’s 6.66% during the same period.

Quality Assessment: Strong Institutional Backing and Market Position

Adani Power holds a Mojo Score of 50.0 and a Mojo Grade of Hold, upgraded from a previous Sell rating. The company is the second largest in the power sector by market capitalisation, valued at ₹2,99,298 crores, representing 17.31% of the sector’s total market cap. Its annual sales of ₹54,254.83 crores account for nearly 10% of the industry, underscoring its significant market presence.

Institutional investors have increased their stake by 0.83% in the last quarter, now collectively holding 15.06% of the company’s shares. This growing institutional participation is a positive signal, as these investors typically possess superior analytical resources and tend to favour companies with sound fundamentals and growth prospects.

Despite recent financial setbacks, the company’s long-term growth trajectory remains healthy, with net sales growing at an annualised rate of 15.83% and operating profit expanding at 30.46%. This sustained growth supports the quality assessment and justifies the Hold rating rather than a downgrade.

Technical Indicators: Bullish Momentum Gains Strength

The technical trend for Adani Power has improved from mildly bullish to bullish, reinforcing the upgrade in rating. Daily moving averages are firmly bullish, and Bollinger Bands on both weekly and monthly charts signal upward momentum. The Dow Theory also indicates mild bullishness on weekly and monthly timeframes.

However, some indicators remain mixed. The MACD is mildly bearish on the weekly chart but bullish monthly, while the KST (Know Sure Thing) indicator shows mild bearishness weekly and bullishness monthly. The On-Balance Volume (OBV) is mildly bearish weekly and neutral monthly, suggesting some caution among traders.

Overall, the technical picture supports a positive near-term outlook, which complements the fundamental analysis and contributes to the revised Hold rating.

Comparative Returns: Outperforming the Market Over Multiple Horizons

Adani Power’s stock performance has been impressive relative to the broader market benchmarks. Over the last week, the stock surged 15.09%, vastly outperforming the Sensex’s 1.79% gain. Over one month, it gained 4.76% while the Sensex declined by 2.27%. Year-to-date returns stand at 8.53%, compared to a negative 1.65% for the Sensex.

Longer-term returns are even more striking. The stock has delivered 53.19% over one year, 304.06% over three years, 1,358.65% over five years, and an extraordinary 2,979.37% over ten years, dwarfing the Sensex’s respective returns of 6.66%, 37.76%, 65.60%, and 244.38%. This market-beating performance highlights the company’s ability to generate shareholder value despite recent financial challenges.

Conclusion: Hold Rating Reflects Balanced View Amid Contrasting Signals

The upgrade of Adani Power Ltd’s investment rating from Sell to Hold reflects a balanced assessment of its current challenges and long-term strengths. While the recent quarterly financial results show deterioration in profitability and efficiency metrics, the company’s strong liquidity position, improving technical indicators, and robust long-term growth underpin a more cautious but optimistic stance.

Valuation remains on the expensive side, but the stock trades at a discount relative to peers, and its market-beating returns over multiple time horizons demonstrate resilience. The increased institutional interest further supports confidence in the company’s prospects.

Investors should monitor upcoming quarterly results closely, particularly for signs of financial recovery and debt servicing capability. For now, the Hold rating suggests maintaining exposure while awaiting clearer evidence of a sustained turnaround.

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