Synopsis : Jefferies remains optimistic on Adani Power as the company accelerates its plan to expand capacity to 42 GW by FY32, backed by long-term PPAs and strong cash-flow visibility. The brokerage believes improving earnings, lower risk from contracted capacity, and future growth opportunities support further upside in the stock.
Adani Power’s 42 GW Growth Ambition Gets Stronger
Brokerage firm Jefferies has reaffirmed its positive outlook on Adani Power after recent management interactions highlighted significant progress in the company’s expansion plans. The brokerage maintained its ‘Buy’ rating with a target price of Rs 255, implying an upside potential of approximately 11% from previous closing levels.
According to Jefferies, Adani Power is steadily advancing towards its ambitious target of increasing installed capacity from 18.3 GW currently to 42 GW by FY32, positioning itself as a major beneficiary of India's growing power demand.
Long-Term PPAs Reduce Business Risk
One of the key positives highlighted by Jefferies is the company's success in securing long-term Power Purchase Agreements (PPAs).
Over the last two years, Adani Power has secured 12.6 GW of thermal PPAs out of the 19.3 GW bid out across states, significantly improving revenue visibility. As a result, nearly 95% of its existing operating capacity is now tied to long-term contracts, compared to over 80% at the end of FY25.
The brokerage noted that 56% of the planned 23.7 GW expansion capacity is already contracted under long-term PPAs, while management aims to secure agreements for the remaining capacity as well.
Better Tariffs Boost Earnings Visibility
Jefferies highlighted that the company continues to secure new contracts at attractive tariff rates.
Adani Power signed a 1.6 GW PPA with Maharashtra State Electricity Board at Rs 5.4 per unit, while additional agreements totaling 8 GW were signed with states including Bihar, Madhya Pradesh, Assam, Uttarakhand, and Tamil Nadu at tariffs ranging between Rs 5.8 and Rs 6.3 per unit.
Higher tariff agreements are expected to support profitability and strengthen future earnings.
Strong Cash Flows Despite Aggressive Expansion
Despite executing one of the largest thermal power expansion programs in the country, Jefferies expects Adani Power to maintain a healthy balance sheet.
The brokerage forecasts:
- Operating cash flow CAGR of around 20% between FY26 and FY30
- EBITDA CAGR of approximately 23% during FY26-FY30
- Free cash flow turning positive by FY30
- Net debt-to-EBITDA peaking at 3.4x in FY27 before falling to around 2x by FY30
Jefferies believes robust operating cash generation will help the company fund expansion while keeping leverage under control.
Capacity Expansion Backed by Execution Readiness
Adani Power has already secured critical resources required for its long-term expansion strategy.
The company has:
- Acquired sufficient land for the 42 GW target
- Ordered equipment for the entire upcoming 23.7 GW capacity
- Partnered with leading suppliers such as Larsen & Toubro and Bharat Heavy Electricals (BHEL)
Following the acquisition of a 180 MW thermal asset from Jaiprakash Associates, total installed capacity has increased to 18.3 GW.
Jefferies expects another 6.9 GW of capacity to become operational by FY29.
Faster Growth Than Industry Peers
According to Jefferies, Adani Power's earnings growth trajectory remains superior to several peers.
The brokerage expects Adani Power's EBITDA to grow 2.3 times between FY26 and FY30, compared to an estimated 1.7 times growth for NTPC over the same period.
This stronger growth profile justifies the valuation premium assigned by Jefferies.
Nuclear Power Could Become a Future Opportunity
Apart from thermal power, Adani Power is also preparing for future opportunities in nuclear energy.
The company incorporated two subsidiaries during FY26 to explore nuclear power generation opportunities. While Jefferies has not included any financial contribution from this segment in its estimates, it sees nuclear energy as a potential long-term growth avenue.
Outlook
Jefferies believes Adani Power is entering a phase of sustained growth supported by contracted capacity additions, rising power demand, improving cash flows, and strong execution visibility. With most upcoming capacity already backed by long-term agreements and free cash flow expected to improve significantly over the next few years, the brokerage remains constructive on the company's long-term prospects.
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