Adani Power shares in focus today; here's why

Shares of Adani Power Ltd are in focus on Tuesday amid a media report suggesting the Supreme Court held that the Adani group company was not liable to pay customs duty on electricity supplied from its thermal power plant in Mundra Special Economic Zone (SEZ) to the domestic market.

The SC set aside a 2019 Gujarat High Court order upholding the levy, the Economic Times reported. Business Today could not independently verify the report at the time of filing this copy. A bench comprising Justices Aravind Kumar and NV Anjaria held that the High Court should have followed the apex court’s 2015 decision granting relief to Adani Power on a similar issue, the ET reported.

Adani Power shares settled at Rs 146 piece on Monday. The Adani group stock has received 'Buy' rating from JM Financial with a target price of Rs 178 per share. 

The bench, as per the report, directed the power ministry and customs authorities to refund the amount that Adani Power had deposited against the demand for electricity supplied from the SEZ unit between September 16, 2010 and February 15, 2016. The refund is to be made within eight weeks. It would, however, not carry any interest.

A portion of the electricity generated by the 5,200 MW plant is used within the SEZ, while the remainder is supplied to buyers outside the zone, ET reported.

Before 2009, electrical energy itself was not subject to customs duty on import, as supplies from special economic zones to the domestic tariff area are treated as imports. In 2015, both the Gujarat High Court and the Supreme Court held that the customs department could not levy the duty, ruling that Adani Power was entitled to an exemption for the period from June 26, 2009 to September 15, 2010.

As the relief was limited to 2010, Adani Power subsequently approached the High Court again, seeking to restrain the department from collecting duty beyond 2010 and to secure a refund of the amounts already recovered, relying on the earlier High Court and Supreme Court rulings.

On Adani Power, JM Financial said the company's operational capacity is expected to reach 41.3 GW by FY32, with Ebitda per MW projected to increase from Rs 1.3 crore in FY25 to about Rs 1.8 crore by FY32, supported by superior operating metrics such as a plant load factor of 71 per cent and a plant availability factor of 91 per cent.

The brokerage added that net debt to Ebitda is likely to rise from 1.6 times in FY25 to around 3.0 times by FY29, as incremental debt is raised to fund a capex programme of approximately Rs 2,00,000 crore over FY25 to FY32. It expects leverage to ease back to around 1.6 times by FY31 as new capacities come on stream and cash flows improve.