Adani Power Vs Tata Power: Great power inevitably results in high electricity expenses! Surprisingly, we witnessed some unforgettable occurrences this week. Firstly, individuals were seen cooking chapattis on sidewalks. Following that, we observed a ‘jaggeryfall’ within a jaggery store. Subsequently, everyone shielded their faces with a stole to the point of being unidentifiable. Curious about the cause? It’s the heatwave. The premature arrival of summer and the heatwave caused discomfort. Consequently, the usage of air conditioners, fans, and coolers surged, as did the demand for electricity. Let’s not delve into bills but rather compare Adani Power and Tata Power, two major electricity providers, based on their operations, profits, potential, and more! Let’s delve into the comparison, shall we?
Adani Power Vs Tata Power
Electricity plays a crucial role in a nation’s infrastructure, allowing economic activities to extend beyond daylight hours. Countries aim to provide affordable and continuous electricity to all residents. India ranks as the world’s third-largest electricity consumer and producer but its per capita consumption is significantly below the global average. This presents a substantial opportunity for power companies such as Adani Power and Tata Power. Analysts predict that India’s power demand will triple by 2040.
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Adani Power, a division of the Adani Group, is presently the largest thermal power company in India, boasting a power generation capacity of 13,610 MW. Its thermal power facilities are situated in Gujarat, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh. Additionally, the company operates a 40 MW solar power plant in Gujarat. Notably, Adani Power was the pioneer in establishing a coal-based supercritical thermal power project worldwide, launched in Mundra in December 2010, and was enlisted under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Furthermore, the upcoming project in Godda, Jharkhand aims to export electricity from India to Bangladesh. Adani Power is currently in the process of constructing power plants with a combined capacity exceeding 7000 MW in various locations including Jharkhand, Madhya Pradesh, Gujarat, Rajasthan, and Karnataka.
Adani Power contributes 6% to India’s coal-based power capacity. Also, it makes up 16% of private investments. In the latest fiscal year, it signed a deal with Madhya Pradesh Power Management Company Ltd. Most of its power comes from long-term agreements, lasting around 18.5 years on average.
Tata Power operates in every aspect of the power industry and is the biggest integrated power firm in India. Their services encompass traditional and sustainable energy, power-related services, as well as modern customer offerings like solar rooftops, electric vehicle charging stations, and home automation. “Access to clean, affordable, and plentiful power is fundamental for the economic advancement of a city, state, or nation.” –Sri Jamsetji Tata, Founder of Tata Group
Tata Power established India’s initial hydroelectric power stations in 1915 under the name Tata Electric. Along with its subsidiaries and joint entities, it boasts a total generation capacity of 14,076 MW, with approximately 34% derived from renewable sources. The company holds a prominent position in various sectors of the value chain, including solar rooftops and value-added services. Additionally, Tata Power operates a transmission network spanning 3,532 km and a distribution network exceeding 400 thousand circuit km across India.
With a longstanding presence exceeding a century in the Indian power industry, Tata Power caters to over 12 million distribution customers. Recognized for its advancements in technology, processes, and platforms within the energy sector, the company’s business-integrated solutions emphasize mobility and lifestyle, positioning it for substantial growth.
Adani Power generates power through thermal and solar sources, while Tata Power relies on thermal energy. Additionally, Tata Power boasts a significant renewable energy portfolio, along with involvement in power transmission and distribution. Apart from its consumer-centric operations, Tata Power is also engaged in energy as a service and power trading.
Adani Power vs Tata Power – Competitive Advantage
Adani Power has:
Pan India presence
Long-term power purchase agreements
Pioneer in ultra-supercritical and supercritical technologies
Strategically located plants that lead to lower expenses.
On the other hand, Tata Power has:
Diversified presence across the energy value chain
Pan India presence
An experienced and well-established player in the energy sector.
Risks Involved
Nevertheless, the absence of coal and fluctuations in coal prices impact both companies..
Adani Power vs Tata Power – Impact of Covid-19
Power generation companies experienced minimal effects as they provide essential services. While workplace electricity demand decreased, household demand rose. As the economy reopened, the need for electricity spiked. Some returned to office work, while others remained remote. Both firms suffered revenue losses during the pandemic.
Adani Power vs Tata Power – Future prospects
Earlier, it was stated that India ranks third in electricity consumption but has a lower per capita usage compared to the global average. The government’s ‘Power for All’ project seeks to establish India as a manufacturing center, leading to sector growth. Adani Power is concentrating on expanding its capacity in both new and current facilities to meet the growing demand. Likewise, Tata Power is venturing into renewable energy and expanding its renewable energy holdings.
Growth with Goodness – Sustainability Efforts
Adani Power
Adani Power joined the industry in 2006 and has since demonstrated resilience and notable growth. It focuses on empowering communities through clear human development objectives and is dedicated to advancing positively. Adani Power has established itself as the top performer in India’s electric utility sector based on ESG evaluation by S&P Dow Jones Indices and SAM in 2019. Here are further details on Adani Power’s sustainability initiatives:
Their coastal locations use seawater. In addition, they use recycled and reused water for ash handling and dust suppression. Further, they have implemented rainwater harvesting in their hinterland plants.
Their team tries to understand the needs of local communities. These needs may be in areas of education, health, livelihood, and infrastructure development.
They have a system to receive and address grievances of local communities at operating locations.
They try their best to minimize any negative impact on biodiversity and ecosystem services. Ecosystem services include forests, grasslands, mangroves, and urban areas.
The company undertook large-scale plantations in and around our power plants and office locations.
They dispose of hazardous waste through authorized agencies as per the Hazardous Waste Handling and Management Rules.
Their emissions are well within emission standards.
Supercritical boilers help them to save about 2% of fuel per unit. Thereby, they lead to a reduction in greenhouse per unit.
Tata Power
Tata Power addresses Climate Change concerns through the implementation of sustainable and responsible growth practices. They have created a comprehensive sustainability framework that encompasses the environment, community, customers, and employees.
The company currently has a 30% clean energy portfolio, but it is aiming to have a 40-50% clean energy portfolio by 2025.
The health and safety of all employees and other stakeholders are its priority. Therefore, it is proactively driving the health and safety agenda through the length and breadth of the company.
PPC, fly ash bricks and road embankment constructions use the ash produced by its thermal power plants.
Tata Power educates its employees on the importance of proper management of E-Waste. Further, it looks out for possibilities for extending the usable life of things and minimizing e-waste generation.
Tata Power has a strategic intent to be water-neutral by 2035. Therefore it is committed to water conservation and management.
The company identifies risks and promotes a proactive approach to treating them. Further, it has allocated adequate resources to mitigate and manage risks.
Adani Power Vs Tata Power – Revenue Growth
Both Adani Power and Tata Power have experienced a growth in revenues. Adani Power saw a 6.3% CAGR in the last three years and 6.5% in the last five years, while Tata Power had a CAGR of 13.1% and 9.2% in the same periods, indicating faster growth compared to Adani Power. Despite power under penetration in India, top private players did not witness substantial revenue growth due to economic slowdown.
Adani Power Vs Tata Power – Profitability
Adani Power had negative profitability between 2018 and 2020, but it experienced a significant increase in profits, surpassing Tata Power during this period. Currently, Adani Power is showing a growing trend in profits. The company had negative profits before 2021 due to interest expenses on its debts. However, in recent years, its net profits have risen due to lower costs of imported coal. In contrast, Tata Power has been profitable for the past five years, although its profits have been decreasing. Tata Power has maintained a positive net margin with the strong performance of its EPC business and reduced interest costs from debt repayment. While Tata Power’s net margin decreased from 3.93% in 2018 to 0.49% in 2022, it has remained positive.
Adani Power Vs Tata Power – Key Metrics
Particulars
Adani Power
Tata Power
Face Value (₹)
10
1
EPS (₹)
26.8
7.96
ROE (%)
370
8.42
Current Ratio
0.95
0.80
Market Cap (Cr)
113,703
67,533
Promoter’s Holdings (%)
74.97
46.86
Dividend Yield (%)
0
0.83
Stock P/E (TTM)
11
26.6
Net Profit Margin
17.9
5.27
Adani Power’s revenue growth surpasses that of Tata Power, suggesting superior operational efficiency. Due to its long-term power purchase agreements, Adani Power was less affected by the economic slowdown. Adani Power has long-term borrowings amounting to ₹ 37,871.32 crores, whereas Tata Power’s total borrowings stand at ₹32,729.70 crores. Both companies exhibit a low current ratio, indicating challenges in meeting their short-term debts and obligations.
Tata Power outperforms Adani Power in aspects like backward integration, price-to-book value ratio, dividend yield, and others. Despite operating in a slow-growth sector, Adani Power has experienced significant growth in recent years, placing it ahead of Tata Power in terms of growth performance.
Concluding
Today’s article delves into a comparison between Adani Power and Tata Power, exploring their respective businesses and industries. We analyze the effects of Covid-19 on both companies and their future outlook, as well as their sustainability efforts. Lastly, we evaluate them based on essential metrics such as revenue, profitability, and financial ratios. Thank you for reading.
