Source: Company Website
Recently few years ago, Mr. Narendra Modi, the Prime Minister of India said “The power and energy sectors are the biggest constituents of the infrastructure sector. If you ignore them, no development will happen.” and it was already well known and visioned by Mr. Gautam Adani back then in 1990s when he was laying down the foundation of the Adani Group and his strong vision enabled him in nurturing the growth and future development of the power transmission and distribution sector in India that he significantly achieved in the name of one of its pioneers, named Adani Transmission Ltd, country’s largest private power transmission company.
Adani Transmission Limited (ATL), the second largest and most valuable firm of the Adani Group, was formed in 2013 with the intention of combining the Adani Group’s power transmission businesses into a single entity. Following the completion of the Adani Group‘s business restructuring in 2015, ATL was listed in July 2015, and the promoter group holds 74.92 % of the equity stake in ATL as of March 31, 2021.
ATL holds 17 operational projects and 9 under implementation projects through its various subsidiaries, including the integrated Mumbai Generation, Transmission, and Distribution (GTD) business housed in Adani Electricity Mumbai Limited and an operational power transmission project acquired from KEC International Limited in February 2019.
ATL has presence across a number of states like Gujarat, Maharashtra, Rajasthan, Haryana, Chhattisgarh, Madhya Pradesh, Jharkhand, Bihar and Uttar Pradesh.
ATL is the country’s largest private transmission company, with a total transmission network of approximately 17,276 ckt km (circuit kilometre), of which 12,001 ckt km is operational and 5,275 ckt km is under construction.
From which segment does Adani Transmission Limited get most of its money from?
- Consolidated operating revenue of Rs.2727 crore in Q4FY21 increased by 5% QoQ & but decreased by 14% YoY.
- EBITDA at Rs.1027 crore on consolidated basis is down by 8% QoQ & 6% YoY.
- Consolidated PAT for the quarter decreased by 47% QoQ; but on YoY basis PAT has grown by more than 46 times due to lower base in March 2020 during Covid lockdown & depressed revenue.
- Consolidated operating revenue for FY21 fell by 13% to Rs.9926 crore.
- For FY21 consolidated PAT was Rs.1196 crore, witnessing a leg-up growth of 112% YoY.
- For the Financial year ended, Rs.1938 crore of Free Cash Flow was generated.
- EPS (diluted) for the FY21 came at Rs.10.28, a growth of over 36% YoY.
- As on 31st March, 2021, Net Debt stood at Rs.19,439 crore.
- Cost of Debt (weighted) was 9.2% & the Average debt maturity stood at 9.8 years.
- Return Ratios viz. ROE and ROCE for FY21 was at 14.34% and 11.17%, respectively.
Operational Highlights (segment wise)
- Operational revenue for Q4FY21 stood at Rs.720 crore & Rs.2,792 crore in FY21, witnessing low single-digit growth both QoQ & YoY.
- Operational EBITDA for Q4FY21 came at Rs.656 crore with slight growth of 1% QoQ & 6% YoY.
- For FY21, EBITDA came at Rs.2,574 crore with an improvement of 3.7% when compared with FY20.
- Operating EBITDA margin of Transmission business alone is 92%, which is the best in peer comparison.
- Transmission availability was at ~99.87% for FY21 leading to high supply reliability.
- The company added a transmission network of 1,756 ckt km (circuit kilometer) in Q4FY21 and 2,536 ckt km in FY21.
- The total transmission network now cumulatively stands at 17,276 ckt km, which is the longest HVDC (High Voltage Direct Current) line in Asia by any Private Player.
Adani Transmission Limited. – Financials over the years
- Operational revenue for Q4FY21 stood at Rs.1,556 crore it showed mild de-growth of 2% QoQ.
- FY21 operating revenue was Rs.6,048 crore witnessing a fall of 19.7% when compared with FY20.
- In Q4FY21, operational EBITDA of Rs.377 crore decreased by 20.6% when compared to last quarter.
- Operational EBITDA of Rs.1,659 crore for the distribution segment in FY21 also fell by 8% YoY.
- EBITDA margin stood at 24.3% for Q4FY21.
- Sale of energy stood at 1826 MU (million units) in Q4FY21 as against 1808 MU in Q4FY20.
- Distribution loss stood at 7.56% in Q4FY21 and 7.82% in FY21.
- Indian Transmission Sector is poised for significant growth by reaching ~Rs.8.2tn by 2029. ATL had 37% market share in transmission bids in FY20, which is likely to further increase.
- Private sector has won 42 projects out of a total 62 awarded since Feb 2015, which denotes the growing presence of private players.
Key Fundamental Snapshots
- Adani Transmission Ltd gave a remarkable return of around 713% over a period of 1 year with closing at 1453.85.
- Promoter Shareholding Pledge was reduced from 53.63% to 12.02% within a year.
- ATL has managed to achieve reduced credit risk, elongated debt maturity and lower cost of debt in a span of 5 years.
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- Major Public Shareholding :
- Major Increase in Mutual Fund Holdings for the month of April,21:
- Planned Capex of Rs.1800 crore in Transmission business over 3-4 years.
- Rs.950 crore capex will be undertaken in the Distribution segment also, over the next 5 years.
- The management expects to expand exponentially through organic and inorganic ways.
- It targets to achieve 20,000 ckt kms by FY22 through locked-in projects and strong TBCB pipeline.
- Under their restructuring of capital structure, ATL plans to transfer its US-dollar notes due 2026 and 2036 to its newly incorporated & wholly owned subsidiary, Adani Transmission Step-One Limited (ATSOL).
Recent Business Update
- The company acquired Warora-Kurnool Transmission Limited (WKTL) owned by Essel Infra Projects Limited for Rs.3370 crore. It further adds 1,750 ckt kms of transmission lines under ATL’s distribution operation & maintenance network.
- KEC international signed project agreements with WKTL (subsidiary of ATL) for Rs.477 crore to complete the remaining work of Transmission lines in Andhra Pradesh, Maharashtra & Telangana.
- Promoters of Adani group released 44, 85,000 pledged shares of Adani Transmission.
- India is likely to consume 1.8 lakh crore units by 2025, says CII in 2019 and in order for achieving it, an investment of about Rs. 5 lakh crores is required in the power transmission sector in the next forthcoming years that is also a major requirement for a $5 trillion economy.
- As India’s growth trajectory accelerates, large investments will be required in the transmission sector, particularly at the State level to meet up the demand which is being diligently followed by the Government of India with introduction of many investments and projects outlined.
- Barriers to entry are high in the transmission and distribution segments, which are largely state monopolies (one of them being Adani Transmission Ltd).Barriers include high fixed costs, fuel linkages and payment guarantees from state governments that buy power and retail distribution licenses.
- Operational risk is inherent in ATL’s business with cost over-run & delayed completion of projects.
- Being in a capital intensive industry, ATL will be under the burden of servicing their long-term debt. Due to numerous risks involved in this industry, the cost of debt is relatively high.
- An increase in leverage without proportional increase in EBITDA or Revenue generation and any deterioration in revenue quality will pose a threat to the financial risk profile of the company.
StockEdge Technical View
Adani Transmission looks quite strong as per technical parameters and likely to see further strength in the medium term if the stock holds 1400-1415 zone on the downside. The strength is most likely to continue in the near term if the stock holds above the support zone.
ATL’s wholly owned subsidiary, Adani Electricity Mumbai Limited (AEML) is a 93-year old integrated utility catering to Mumbai with more than 30 lakh connections. Robust growth pipeline through organic and in-organic route allows ATL with high visibility of cash flows in the years ahead. Net debt to EBITDA improved to 4.7x and healthy EBIT generation aids ATL to service their debt obligations, thereby deleveraging their balance sheet gradually.
Key monitorable ahead will be any weakening in ATL’s financial metrics, as a result of incremental debt to oblige its substantial capital expenditure initiative over the next four to five years.
Schemes like UDAY, 24×7 Power for All, Village Electrification etc. strengthens the value chain & will likely contribute towards ATL’s top-line growth.
Strong growth potential through Tariff-based Competitive Bidding (TBCB) transmission projects has created a level playing field for private players. Private players have an opportunity of at least Rs.2.3tn out of the expected investment of about Rs.8.2tn is in Indian Transmission industry over the next decade. ATL stands at a lucrative spot to benefit from its current 37% market share in bids made by the Transmission industry, which will likely expand gradually.
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