Adani Power NCD Issue: Secures ₹7,500 Crore From Top Domestic Investors

Introduction

Adani Power has successfully raised ₹7,500 crore through a non-convertible debenture (NCD) issue, marking the Adani Group's largest domestic bond sale to date. The offering attracted strong participation from a broad spectrum of leading domestic financial institutions, signaling robust investor confidence in the company's financial health and growth prospects despite recent market volatility affecting the group's stocks.

Strong Institutional Demand

The NCD issue saw participation from 17 domestic institutions, including mutual funds, banks, and insurers. The demand was led by some of the country's most prominent financial players. SBI Mutual Fund emerged as the largest investor, committing ₹2,500 crore. Other major participants included ICICI Bank with an investment of ₹1,100 crore and Axis Bank with ₹1,000 crore. Kotak Mutual Fund and ICICI Mutual Fund also made significant commitments of around ₹500-600 crore each. The strong subscription underscores the market's positive view of Adani Power's operational stability and long-term strategy.

Bond Structure and Terms

The fundraising was structured across multiple tenures to appeal to different investor preferences. The issue included tranches with maturities ranging from two to five years, with corresponding coupon rates set between 8.00% and 8.40%. The bonds have secured an 'AA' credit rating from both Crisil and India Ratings, indicating a high degree of safety regarding timely servicing of financial obligations. The terms also include a step-up clause, where the coupon rate will increase by 25 basis points for every notch of a rating downgrade, offering an additional layer of security to investors.

Utilization of Proceeds

The proceeds from this significant capital raise are earmarked for strategic financial management. Adani Power intends to use the funds primarily for refinancing existing borrowings, which will help optimize its debt profile and potentially reduce interest costs. A portion of the funds will also be allocated for general corporate purposes, providing the company with the financial flexibility to support its operational requirements and ongoing expansion projects.

Investor Confidence and Business Fundamentals

Market participants have attributed the strong investor appetite to Adani Power's solid business fundamentals and clear revenue visibility. A key factor is that nearly 90% of the company's operating capacity is secured under long-term power purchase agreements (PPAs). These agreements provide a stable and predictable stream of cash flows, insulating the company from short-term market fluctuations. Investors have also cited improved fuel sourcing, efficient logistics, and stable plant utilization levels as factors contributing to stronger cash generation. One investor noted anonymously that the business remains "fundamentally strong" and that operations have not been impacted by recent market developments.

Financial Health and Peer Comparison

Adani Power maintains a relatively conservative balance sheet compared to its peers in the power sector. The company's net debt-to-EBITDA ratio stands at approximately 1.5 times. This is significantly lower than the leverage ratios of competitors such as the state-run NTPC and private players like Tata Power and JSW Energy, which are in the range of 4-5 times. This lower leverage is a key positive for analysts and investors, as it suggests a healthier financial position and a greater capacity to manage debt.

Ambitious Expansion and Growth Projections

As India's largest private thermal power producer, Adani Power currently operates a capacity of around 18 GW. The company has laid out an ambitious plan to more than double its capacity to 42 GW by the financial year 2032. This expansion is expected to drive significant earnings growth. Analysts project that the company's operating profit could more than triple over the next five years, with EBITDA forecasted to increase from the current ₹21,000 crore to approximately ₹75,000 crore by FY30, supported by new capacity additions and operational efficiency gains.

Market Context and Ratings Outlook

The successful fundraising occurred even as Adani Group stocks faced selling pressure following a U.S. regulator's actions. On the day of the news, Adani Power's shares closed 5.5% lower. However, global rating agencies have provided a reassuring outlook. Both Moody's and Fitch have revised their outlook on Adani Group entities to 'stable,' citing that the near-term impact from the ongoing U.S. investigation is limited. In November, Fitch had stated that the risks linked to the probe were "manageable" in the near term, providing a degree of comfort to long-term investors.

Conclusion

Adani Power's ability to raise ₹7,500 crore from a diverse group of esteemed domestic investors highlights the market's confidence in its strong operational foundation, prudent financial management, and clear growth trajectory. The successful NCD issue provides the company with the necessary capital to refinance debt and pursue its ambitious expansion plans, positioning it to capitalize on India's growing energy demand. This move demonstrates the company's resilience and its continued access to domestic capital markets, even amidst broader market headwinds.