Adani Power shares slip 10% from record high, what lies ahead?

Share price of Adani Power fell for the second straight session today as investors booked profit from record high. Adani Power stock hit lower circuit of 5 per cent to Rs 390.65 against the previous close of Rs 411.20 on BSE. In the previous session, shares of Adani Power closed 5 per cent lower at Rs 411.20. On Monday (August 22), the stock hit all-time high of Rs 432.80 after the Adani Group firm said it would buy DB Power Limited for an enterprise value of Rs 7,017 crore.

Currently, the stock is trading 9.73 per cent lower compared to the record high hit on Monday. The stock opened with a loss of 5 per cent today.

Meanwhile, a total of 1.29 lakh shares of the firm changed hands, amounting to a turnover of Rs 5.02 crore on the BSE. Market cap of the company fell to Rs 1.50 lakh crore on BSE.

Adani Power stock stands higher than 20-day, 50-day, 100-day and 200-day moving averages but lower than 5-day moving averages.

However, the stock has zoomed 405.7 per cent in a year and risen 291.63 per cent in 2022. The share hit a 52-week low of Rs 69.95 on August 24, 2021.

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On the outlook of Adani Power, Pavitraa Shetty, Co-founder & Trainer, Tips2Trades said, "Even though fundamentally, Adani Power has shown great improvement, ever increasing debt burden poses several risks for the future making the stock look extremely overvalued and overbought in every way. Investors are advised to keep booking profits at current levels and look to initiate fresh buy only near Rs 319- Rs 325 levels."

The deal with DB Power will enable the Adani Group firm to expand its offerings and operations in the thermal power sector in Chhattisgarh. DB Power owns and operates two units of 600 MW thermal power plant in Chhattisgarh's Janjgir Champa District. Diligent Power (DPPL) is the holding company of DB Power.

This acquisition's initial term of the MoU would be till October 31, 2022, but can be extended further on mutual agreement, said the firm in a filing to the exchanges.

Vinit Bolinjkar, Head of Research, Ventura Securities said, "Adani Power stock price has started a downward journey after the acquisition of DB Power Limited for an enterprise value of Rs 7,017 crore. Street looking at the deal at a price around Rs 6 crores per MW can be seen as a bit expensive, although considering positives features of the deal such as the profitability, proximity to coal mines, and PPAs."

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In the June quarter of the current fiscal, Adani Power posted an over 17 times rise in its consolidated net profit at Rs 4,780 crore against Rs 278 crore profit in the corresponding quarter last year.

Total revenue in Q1 more than doubled to Rs 13,723 crore compared with Rs 6,568.86 crore in the corresponding previous quarter. Consolidated EBITDA or operating profit zoomed 227 per cent to Rs 7,506 crore in Q1 against Rs 2,292 crore in the year-ago period. It includes prior period revenue recognition of Rs 4,212 crore against Rs 657 crore during the respective periods.

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