Adani group - Ventura Securities

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For any further query, please email us on [email protected]

TABLE OF CONTENTS

Significant wealth creators 03

Adani Green Energy 06

Adani Ports & Special Economic Zone 50

Adani Transmission 117

Adani Total Gas 161

Adani Enterprises 195

Disclaimer 250

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Significant wealth creators

From humble origins with the listing of Adani Enterprises Ltd, today the group has spawned

into a multi national diversified conglomerate with a cumulative market cap of 133.25 bn $

comprising 6 listed entities namely

• Adani Enterprises Ltd (AEL) -m.cap 25.6 bn $)

• Adani Ports and SEZ Ltd (APSEZ) -m.cap 21.2 bn $)

• Adani Transmission Ltd (ATL) -m.cap 28.1 bn $)

• Adani Green Energy Ltd (AGEL) -m.cap 29.4 bn $)

• Adani Total gas Ltd (ATGL) -m.cap 26.1 bn $)

• Adani Power Ltd -m.cap 5.4 bn $)

Intergenerational promoters with a large stake bring long term focus to the business

Today Gautam Adani, family and next generation with their vision of “Courage, Commitment

and Trust” have built one of the most vibrant and dynamic business groups. With significant

stake in the listed entities in their individual capacities, they bring to the business stability and

long term focus which has contributed to significant wealth creation.

Strategic partnerships with domain experts have added value to the business entities

Value creation has been the single most important focus that has aided the Adani group.

Wherever essential they have entered into strategic partnerships/JV’s with international

domain leaders to bring best practices to the existing businesses. They roped in

• The Total Energies SE, a French group, for their foray into City Gas Distribution (CGD)

business of Adani Total Gas Ltd (ATGL) and the renewable energy business of Adani

Green Energy Ltd (AGEL). Today, not only is ATGL India’s largest CGD company but

AGEL has gone a step further to emerge as the world’s largest solar energy player by

2025 and the world’s largest renewable energy producer by 2030.

• Adani Wilmar Limited (AWL) an equal JV started in 1999 is today one of India’s largest

agribusiness company which is slated to IPO in the not too distant future. The JV

partner Wilmar group is Asia’s leading agri business group and has scripted the success

story of Adani Wilmar. The edible oil brand Fortune is the leader in its category with

~17% market share.

• When Adani Transmission Limited (ATL) acquired the power distribution business for

the Mumbai geography, they roped in Qatar Investment Authority as a strategic

financial investor in their step down subsidiary Adani Electricity Mumbai Ltd (AEML).

• For its data centre business, Adani Enterprises Ltd (AEL) has entered into a JV with

EdgeConneX, a company with a decade’s experience of serving global cloud service

providers in mature markets.

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• In the Airport vertical, AEL is scouting for domain experts who will beef up the growth

of the airports business. In addition, it is also looking at tieing up with business partners

to develop non aero revenue streams.

Secret sauce of the success of the Adani group

1. Executions Skill- The group believes in a time bound execution philosophy with clear

deliverables in place.

2. Capital Management- The group redesigns the capital structure of the asset & has

access to pool of best global investors.

3. Multi fold growth- The business is scaled up to match industry leading practices along

with significant focus on revenue expansion.

4. Value creation- Once the revenue expansion is done, focus turns to earning industry

leading margins via large operating scale.

ESG

The group’s future investment is aligned to sustainable growth with focus on preserving

environment. Adani group has publicly disclosed various ESG goals and is among the few

groups to have ESG committee in place across all its listed companies.

We initiate coverage on the listed entities of the Adani group as follows:

Adani Enterprises Ltd- AEL stands among the few listed company to have generated >30%

CAGR in wealth for its investors Over the years, AEL has incubated various businesses of the

group like transmission, renewable energy, city gas distribution etc which have themselves

gone on to become big business themselves. In its 2nd phase, AEL is currently incubating

several new businesses like airports, data centres, solar manufacturing, roads, defence & green

businesses. Adani Wilmar a JV company is on the verge of unlocking value through its proposed

IPO.

Adani Ports and SEZ Ltd- In a post-covid scenario, where the world is distancing itself from its

over dependance on China, India has emerged as a reliable, responsible and geopolitically

viable option for global manufacturing. Further, favourable policies like Atmanirbhar Bharat,

Make in India Make for World, PLI schemes, etc., have helped create a launch pad for resurgent

Company name Rating CMP INR PT INR

Upside

%

M.cap

INR cr

Revenue

CAGR

FY21-24

%

EBITDA

CAGR

FY21-24

%

PAT

CAGR

FY21-24

%

FY24 RoE

%

FY24 RoIC

%

AEL

Buy for long

term 1,723 1,889 10 189,519 20.6 54.5 10.0 5.8 8.6

APSEZ Buy 770 1,697 121 157,133 24.3 24.8 20.1 18.6 19.0

ATL Buy 1,854 2,797 51 203,921 17.0 20.3 31.2 18.1 10.8

AGEL Buy 1,390 2,810 102 217,343 72.3 78.7 146.9 40.2 11.5

ATGL Buy 1,685 2,012 19 185,356 45.6 33.8 40.1 28.7 28.8

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EXIM volumes, which are expected to scale to 1790-2570 MMT by FY30 from 971 MMT clocked

in FY21. Adani Ports & Special Economic Zone Ltd (APSEZ) with its portfolio of 13 ports

(installed capacity of 560 MMT & 28.6% EXIM volume share), is well positioned to expand its

market share to 38.9% from this surge in EXIM trade.

Adani Transmission Ltd- Adani Transmission Ltd (ATL) is India’s leading private sector

transmission player with a 35% market share. ~INR 3 trillion of TBCB projects are expected to

be allocated to the private players over FY21-30. ATL with its superior execution and O&M

skills, demonstrated high ‘total availability factor’, best in class EBIDTA margins of 92% and

capital management excellence is best placed to benefit from this. The 35-year TBCB contracts

provide for long term visibility. Over FY21-24, we expect a 33.4%/26.1% CAGR in the

operational asset base and revenues to INR 41,560 crore /INR 6,257 crore respectively.

Adani Green Energy Ltd- Adani Green Energy Limited (AGEL) is one of the largest renewable

companies in India, with a current project portfolio of 13,990 MW and 20,284 of MW locked-

in growth (from under construction assets). The company has aspirations to up its installed

capacity to 25 GW / 45 GW by 2025 / 2030 respectively making it the world’s largest renewable

company by capacity. With India’s stated intent of procuring 450 GW from renewable energy

by 2030, AGEL is well placed to benefit from this megatrend. Currently the company has a

~5.3% of share in India’s renewable installed capacity, which is set to grow to ~10% by 2030.

Adani Total Gas Ltd- ATGL, a JV (equal stake of 37.4%) between Adani Group and French

energy major Total Energies (TOTAL), is India’s largest private-sector city gas distributor (CGD),

with 19 standalone operational geographical areas (GAs). In addition, ATGLs equal stake JV

with Indian Oil Corporation (IOC) – IOAGPL houses another 19 GA thus enabling ATGL to

emerge as a true pan India CGD player. Both JV partners, Total (which has operations in 108

countries) and IOC (parent of Petronet LNG), bring rich experience in sourcing LNG at

competitive prices besides ensuring availability.

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TABLE OF CONTENTS

Adani Green Energy Ltd.

Parabolic growth trajectory while significantly de-risked

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Adani Green Energy Limited (AGEL) is one of the largest renewable companies in

India, with a current project portfolio of 13,990 MW and 20,284 of MW locked-in

growth (from under construction assets). The company has aspirations to up its

installed capacity to 25 GW / 45 GW by 2025 / 2030 respectively making it the world’s

largest renewable company by capacity. With India’s stated intent of procuring 450

GW from renewable energy by 2030, AGEL is well placed to benefit from this

megatrend. Currently the company has a ~5.3% of share in India’s renewable installed

capacity, which is set to grow to ~10% by 2030.

AGEL’s strong execution skills, land procurement strategy and superlative capital

management have ensured that project implementation is done before time, leading

to a shorter payback period and faster cash flow generation. Further, the fact that

Adani Green is able to dispatch its entire capacity at a 10% discount to the current

market clearing price (of the relevant state) and still deliver returns ensures that AGEL

has the highest possible efficiency and return on investment.

Risk mitigation through long term PPAs, pervasive use of technology, roping in Total

Energy as a strategic partner, and matching debt mature profile to the life-cycle of

the PPA contracts is an added advantage.

Marquee global investors have subscribed to its Investment Grade long term Green

Bonds and consortium of 18 international bankers provide for construction finance

on revolving credit. This is a testimony of AGEL’s inherent strengths in attracting

global capital, which is so vital for sustaining the blitzkrieg pace of growth. On ESG

compliance too, AGEL has left no stone unturned to deploy best global practices.

Despite the fact that AGEL has seen a sharp spurt in its stock price (outperforming the

broader index and its peers by a wide margin), we believe that there exists significant

room for further upside. We initiate coverage on AGEL with a BUY and FY24 based

target price of INR 2,810 per share, implying 102% upside over the next 24 months.

Key Financial Data (INR Cr, unless specified)

Revenue EBITDA

Net Profit

EBITDA (%)

Net Profit

(%) EPS (₹)

BVPS (₹)

RoE (%)

RoIC (%)

P/E (X) P/BV

(X)

EV/ EBITDA

(X)

FY20 2,549 1,450 (23) 56.9 (0.9) (0.1) 14.8 (1.0) 6.6 (9,371.4) 93.3 158.0

FY21 3,124 2,235 210 71.5 6.7 1.3 13.6 9.5 7.0 1,026.4 101.4 106.6

FY22E 6,224 4,767 1,084 76.6 17.4 6.9 20.5 33.0 10.1 198.8 67.1 52.4

FY23E 9,129 7,294 1,414 79.9 15.5 9.0 29.6 30.1 10.1 152.5 46.6 36.7

FY24E 15,978 12,750 3,162 79.8 19.8 20.2 49.8 40.2 11.5 68.2 27.7 23.3

BUY @ CMP INR 1,390 Target: INR 2,810 in 24 months Upside Potential: 102%

Parabolic growth trajectory while significantly de-risked

Industry Power

Scrip Details

Face Value (INR) 10.0

Market Cap (INR Cr) 2,17,343

Price (INR) 1,390

No of Shares O/S (Cr) 156

3M Avg Vol (000) 52.2

52W High/Low (INR) 1428/860

Dividend Yield (%) 0

Shareholding (%) Sept 2021

Promoter 60.14

Institution 18.15

Public 21.71

TOTAL 100.0

Price Chart

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AGEL (LHS) SENSEX (RHS)

Adani Green Energy Ltd.

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Source: Company Reports & Ventura Research

0

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Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21

1 year forward EV/EBITDA band chart

EV per sh 52.07x 58.57x

65.07x 71.57x 78.07x

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EV/EBITDA & Std Deviation

EV/EBIDTA Average Upper SD 1

Upper SD 2 Lower SD 1 Lower SD 2

Strong growth visibility drives price

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Valuation

Adani Green Energy Limited (AGEL) is one of the largest renewable energy companies in India,

with a current project portfolio of 13,990 MW with locked-in growth of 20,284 MW.

We have used the DCF model to value AGEL since it has signed PPAs that throw up significant

cash over the next 25 years (typical life of a renewable PPA contract). While AGEL’s stated

intent is to build capacities of 45GW by 2030, the confirmed PPAs on hand are for 20.3 GW by

2025 and cash flows from these projects would be available at least till FY50. We have modeled

25 GW of capacity by FY25 and over the period FY25-FY55, we have conservatively modeled

1000 MW per annum. Any further confirmed PPA’s signed would be over and above our

estimates. We have also built-in conservative assumptions with regards to CUF & margin

assumptions and we would want to see “proof of the pudding” before we incorporate the same

in our financial model.

India, in its bid to achieve net zero emissions by 2070, would have to rely heavily on renewable

energy and enhance its total capacity 14.5X to 5630 GW (bulk of which would be from

renewable sources). As demonstrated across all business units of the Adani Group, they intend

to achieve significant scale and size and hence, our 1000 MW per annum capacity addition

post 2025 is an extremely conservative estimate.

We have discounted back the future cash flows to FY24 and value the company at INR 2,810

per share, presenting an upside of 102% from the CMP of INR 1,390.

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DCF Valuation


FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY40E FY45E FY50E FY55ETotal Installed capacity (MW) 7,954 11,234 18,300 25,000 26,000 27,000 28,000 29,000 30,000 40,000 45,000 50,000 55,000

Solar capacity (MW) 5,163 6,793 13,409 20,109 21,109 22,109 23,109 24,109 25,109 35,109 40,109 45,109 50,109

Wind capacity (MW) 1,101 1,701 2,151 2,151 2,151 2,151 2,151 2,151 2,151 2,151 2,151 2,151 2,151

Hybrid capacity (MW) 1,690 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740 2,740

Solar CUF (%) 25.0 25.3 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4

Wind CUF (%) 36.8 38.6 38.6 38.6 38.6 38.6 38.6 38.6 38.6 38.6 38.6 38.6 38.6

Hybrid CUF (%) 40.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0

Solar Revenue (Rs.Cr.) 4,318 5,080 10,771 21,344 23,808 24,705 25,584 26,411 27,230 34,701 38,026 41,114 43,967

Wind Revenue (Rs.Cr.) 774 1,463 2,134 2,134 2,134 2,133 2,133 2,133 2,133 2,133 2,133 2,133 2,133

Hybrid Revenue (Rs.Cr.) 426 2,556 3,043 3,043 3,043 3,043 3,043 3,043 3,043 3,043 3,043 3,043 3,043

EBIDTA (Rs.Cr.) 4,767 7,294 12,750 21,188 23,155 23,900 24,603 25,265 25,919 31,851 34,506 36,972 39,250

EBIDTA Margin (%) 76.6 79.9 79.8 79.8 79.8 79.9 79.9 79.9 79.9 79.8 79.8 79.8 79.8

Long Term Market Return 11.0%

Risk Free Rate 6.4%

Cost of Equity 6.7%

Interest Rate 10.5%

Tax Rate 25.2%

Cost of Debt 7.9%

WACC 7.1%

Terminal Value Growth 3.0%

Terminal Value 6,11,329

FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY40E FY45E FY50E FY55E

FCFF (20,855) (19,032) 4,296 13,556 14,126 14,611 15,147 19,164 21,131 22,224 24,194

Discount Factor from FY24 0.93 0.87 0.81 0.76 0.71 0.66 0.62 0.31 0.22 0.16 0.11

Discounted FCFF from FY24 (19,477) (16,600) 3,499 10,313 10,036 9,694 9,386 5,994 4,695 3,508 2,713

Total of Discounted FCFF FY24 1,42,870

FY24 Present Value of Terminal Value 3,78,808

FY24 Value of Operations 5,21,678

FY24 Net Debt 82,153

FY24 Value of Equity 4,39,525

FY24 Value of Equity per share 2,810

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Our Bull and Bear Case Scenarios

We have prepared a Bull and Bear case scenario based on AGEL’s terminal growth.

• Bull Case: With the ambitious capacity expansion plan to become the world’s largest

renewable energy generation company. AGEL has a significant opportunity to grow its

business in the coming years. We have assumed a terminal growth of 4%, which will

result in a Bull case price target of INR 3,629 (upside of 161% from the CMP).

• Bear Case: We have assumed a terminal growth of 1%, which will result in a Bear case

price target of INR 1,982 (upside of 43% from the CMP). Our base case implies a

significant margin of safety for buying at the current price.

Bull & Bear Case Scenario

Source: Ventura Research

Investment Triggers

• Strong growth potential of the industry

• De-risking strategies that provide long term revenue visibility and strong cashflow generation.

Catalysts

• Need for adoption of renewable energy sources

• Rapid urbanization, rural electrification, adoption of EVs, raising consumer durable penetration, growth in GDP & per capita income, Make in India and China+1 are likely to increase power consumption in India.

Bull Case Price

INR 3,629 per share

Target Price

INR 2,810 per share

Bear Case Price

INR 1,982 per share

Current Price

INR 1,390 per share

4% terminal value growth



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Valuation and Comparable Metric of Domestic and Global Renewable energy Companies

Source: Ventura Research & Bloomberg

AGEL is a pureplay renewable IPP

NTPC & Tata Power are energy companies with a mix bag of thermal, renewable, manufacturing etc.

Sterling & Wilson is primarily an EPC company.

Azure & Renew Power are Indian corporates listed in US

For any further query, please email us on [email protected] 1212

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Strong EBIDTA growth and significant room for margin sustainability are potential re-rating factors

Source: Ventura Research, ACE Equity & Bloomberg

Adani Green

Tata PowerNTPC Ltd.

JSW Energy

Enphase Energy

Darling Ingredients

Brookfield Renewable

Clearway Energy

First Solar

NextEra Energy

SolarEdge Tech

Orsted A/S

Siemens Gamesa

Enel

Azure Power

-2.0

8.0

18.0

28.0

38.0

48.0

58.0

68.0

78.0

88.0

5.5 10.5 15.5 20.5 25.5 30.5 35.5 40.5

FY24

EB

IDT

A C

AG

R (

%)

FY24 EV/EBIDTA (x)

Adani Green

Tata Power

NTPC Ltd.

10

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100

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4 14 24 34 44 54 64 74 84 94

FY24

Rev

en

ue

CA

GR

(%

)

FY24 EBIDTA Margin (%)

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Financial Analysis and Projections

We expect AGEL’s overall revenues to grow at a CAGR of 72.3% to INR 15,978.0 cr over FY21-

24E as 18,300 MW of renewable capacity is operationalized. This blitzkrieg growth is

supported by

• 65% CAGR in solar installation capacity to 13.4 GW, resulting in 86% CAGR volume

growth to 31,424 Mn Units, and 68% CAGR revenue growth to INR 10,771 cr.

• wind power generation capacity is expected to grow at 84% CAGR to 2 GW leading to

a 132% CAGR volume growth to 7,412 Mn Units, and 122% CAGR revenue growth to

INR 2,134 cr.

• hybrid generation is expected to clock a 27% CAGR to 2.7 GW triggering a 96% CAGR

volume growth to 11,041 Mn Units, and 93% CAGR revenue growth to INR 3,043 cr.

EBITDA is estimated to grow at a CAGR of 78.7% to INR 12,750.4 cr. PAT is estimated to grow

at a CAGR of 146.9% to INR 3,162.4 cr. Subsequently, RoE and RoIC are expected to improve

to 40.2% (+3,069bps) and 11.5% (+445bps), respectively, by FY24E.

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AGEL’s Financial Summary


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AGEL’s story in charts

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Strong revene growth on the cards

Solar power Wind power Hybrid power

EPC Traded Goods YoY Growth (%)

(%)INR Cr.

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Solar projects to remain the mainstay of the renewable energy source

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Improving profitability

EBITDA Net Profit

EBITDA Margin (%) Net Margin (%)(%)

INR Cr

(30)

(20)

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Improving return ratio despite ongoing capex

Net Worth Invested Capital

RoE (%) RoIC (%)

(%)INR Cr

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Higher debt due to huge capex plans

Total Debt Net Debt

Net Debt to Equity (X) Net Debt to EBITDA (X)

(X)INR Cr

(4,000)

(2,000)

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High capex to be a drag on FCF generation

CFO FCF

CFO to EBITDA (%) FCF to Net Profit (%)

(%)INR Cr

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Company overview

With a portfolio of 13,990 MW of installed capacity and secured PPAs of 20,284 MW, Adani

Green Energy Limited (AGEL), part of the Adani group, is one of the largest renewable energy

companies in India. The electricity generated is supplied to sovereign and sub sovereign

promoted entities on the back of 25-year long-term Power Purchase Agreements (PPAs). With

a portfolio of 54 operational projects and 12 projects under construction, AGEL is driving India

on its renewable energy journey.

Source wise Capacity Breakup (in MW)


By 2030, AGEL aspires to emerge as the world’s largest renewable energy company scaling its

renewable generation capacities to 25GW by 2025 and further to 45GW by 2030.

AGEL is the first Indian renewable energy developer to issue a 20-year amortizing project

finance type structure - the USD Green Bond of USD 362.5 mn. This provides foreign investors

an opportunity to participate in the Indian renewable energy space via investment-grade

bonds.

AGEL past performance – launchpad for its aggressive growth trajectory

In the past 5 years, while leading peers have struggled to grow, AGEL has successfully

onboarded significant capacity driven by

• strong pipeline of greenfield capacities

• fully funded capex

• harnessing inorganic growth opportunities

However, margins of the company remained volatile in the past 5 years.

4763

647

15393

2151

2740

Solar Wind Hybrid

5,410 MW operational

20,284 MW Locked-in Growth

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AGEL posted profitable growth


Particulars FY17 FY18 FY19 FY20 FY21 CAGR (%) Min (%) Max (%) FY17 FY18 FY19 FY20 FY21

Adani Green 1716.9 195.1 39.0 23.9 22.6 58.0 22.6 1716.9 80.4 56.3 74.1 56.9 71.5

TATA Power -6.5 -2.7 11.3 -2.5 11.4 4.2 -6.5 11.4 20.0 9.0 10.0 18.0 18.0

SW Solar 19.9 -32.3 -8.9 -9.6 -32.3 19.9 8.0 8.0 6.0 -7.0

Websol Energy 5.9 -38.1 -62.6 185.2 -21.5 -15.1 -62.6 185.2 10.0 9.0 -36.0 1.0 22.0

NTPC 11.8 7.4 13.9 9.2 1.9 8.0 1.9 13.9 26.0 26.0 23.0 29.0 31.0

Borosil Renewable 34.3 13.6 20.4 25.0 85.0 -2.6 13.6 85.0 11.0 14.0 14.0 14.0 39.0

JSW Energy -15.9 -2.6 13.5 -9.5 -16.3 -15.1 -16.3 13.5 40.0 34.0 31.0 43.0 42.0

KPI Global -6.0 23.0 9.0 72.0 73.0 40.7 -6.0 73.0 68.0 59.0 45.0 46.0 57.0

India Macro Factors

Power Consumption Growth (%) 4.1 6.1 5.2 1.3 -1.1 3.1 -1.1 6.1

GDP Growth - Nominal (%) 11.8 11.0 10.5 7.8 -3.0 7.5 -3.0 11.8

GDP Growth - Real (%) 8.3 6.8 6.5 4.0 -7.3 3.5 -7.3 8.3

Core Sector Growth (%) 5.3 4.5 5.8 -8.6 12.6 0.0 -8.6 12.6

Revenue Growth (%) EBITDA Margin (%)5 yrs Revenue Performance

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Key growth drivers

Gargantuan growth opportunity for the renewable energy sector

The coming together of multiple factors has resulted in the renewable energy sector offering

growth potential which is expected to sustain for decades. These factors are enumerated

below

Low per capita electricity consumption cannot last for very long

Today, India is the third-largest energy-consuming country globally, and yet it has one of the

lowest per capita consumption. In our opinion, this dichotomy cannot last for very long and

the per capita consumption is only set to explode.

World Per capital energy consumption (kWh)

Source: Ministry of power, World data, Company Reports & Ventura Research

As per an independent think-tank Council on Energy, Environment and Water (CEEW), for net

zero emissions by 2070 India would need to put up 5630 GW of renewable power (or ~14.5X

the current installed capacity of 388 GW). The reasons for this surge in renewable power

demand are enumerated below

• India’s population to overtake China by 2027

It is expected that by 2027, India will become the most populous country, overtaking

China.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

200

400

600

800

1,000

1,200

India Per capita electricity (kWh)

5% CAGR 2010-18

2020

( 0 9 t h D e c 2 0 2 1 )


Population growth -

Source: Statista, Company Reports & Ventura Research

With its median age of 29 (compared to 38 for USA and China), India has the largest youthful

population in the world. This will ensure that the growth in consumption will sustain over

decades.

India’s youthful population to sustain power consumption growth for decades -

Source: Statista, Company Reports & Ventura Research

• Electricity demand in Tier II, III and IV towns set for a long-term upward trajectory

Over 65.5% of India’s electricity demand is concentrated among the cosmopolitan

centres and large cities. With the success of the reform schemes like

o 24*7 power for all,

150

350

550

750

950

1,150

1,350

1,550

1,750

China India USA Indonesia Pakistan Brazil

Population of countries (in Mn.) 2021 Population of countries (in Mn.) 2030

Population of countries (in Mn.) 2050

15

20

25

30

35

40

45

50

India China USA Brazil Japan

2121

( 0 9 t h D e c 2 0 2 1 )


o Saubhagya,

o UDAY,

o Deendayal Upadhyaya Gram Jyoti Yojana,

o Integrated Power Development Scheme, and

o 100% FDI in the sector,

demand in tier II, III and IV towns is at an inflection point and should contribute to fueling

demand.

Household electricity consumption per month in urban and rural India -

Source: IEA, Company Reports & Ventura Research

GDP & per capita income set to grow

Globally, it has been witnessed that as an economy’s per capita GDP grows beyond USD 2000,

consumer durable demand starts escalating. India’s per capita GDP at USD 1901 is very close

to that inflection point. India’s consumer durable penetration is low compared to that of

developed economies and hence the unleashing of this pent-up demand should serve as a

catalyst for surging electricity demand.

0 10 20 30 40 50 60 70 80 90 100

India overall

Urban

Rural

0-30 kWh 31-50 kWh 51-100 kWh 101-300 kWh 301-500 kWh >500 kWh

2222

( 0 9 t h D e c 2 0 2 1 )


Under penetration of consumer durables demand sets the tone for exponential growth in electricity consumption

Source: Havells presentation, Company Reports & Ventura Research

Appliance ownership in India has been growing and diversifying. In 1990, the only appliance

that most households had was a ceiling fan. By 2019, television had also become quite

commonplace, and the number of refrigerators was steadily increasing.

By 2040, air conditioners, personal computers, and washing machines are expected to become

much more common, particularly in urban areas.

Indian household’s appliance ownership is set to explode

Source: IEA, Company Reports & Ventura Research

An illustration of how the demand explosion is expected to occur can be better visualized

taking into consideration demand for air conditioning. Air conditioner stock is expected to

zoom to 670 million units by 2040 from a paltry 30+ million units presently. As a result, India’s

3

23

43

63

83

103

123

India China USA

10 10

15

11

5

7

9

11

13

15

17

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

WashingMachines

Refrigerator Room AirConditioner

ColorTelevision

2019 2025E CAGR (%)

INR Cr

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1990 2000 2010 2019 2030 2040

Room Air Conditioner Color Television Refrigerator

Personal computer Washing Machines Dishwasher

Dryer

2323

( 0 9 t h D e c 2 0 2 1 )


consumption of electricity for cooling will grow six-fold to reach 650 TWh by 2040. Around

two‐thirds of this demand will come from the residential sector, with the remainder stemming

from a steady rise in office buildings, retail, education, hotels, and hospitals, etc.

Present-day lifestyle of always being connected to fuel incremental demand

The present-day lifestyle of always being connected, would mean that the demand on the

existing energy capacities would only multiply.

Connected lifestyle


Action on climate change to lead to an irreversible change for renewable energy sources

With climate change and global warming being a pressing issue, alternate sources of non-

polluting fossil fuel-based energy resources would have to be speedily inducted into the energy

mix. Solar and wind are infinite sources of this non-polluting energy.

India, in keeping with its pledge at the Paris convention and COP26, has undertaken to enhance

the renewable energy generation from the current 175 GW to 450 GW by 2030.

During the COP 26 summit, the Indian PM has taken a pledge to meet 50 percent of the

country’s energy requirements from renewable energy (RE) by 2030.

2424

( 0 9 t h D e c 2 0 2 1 )


Power generation growth & capacity break-up -

Source: Ministry of power, Company Reports & Ventura Research

Installed Capacity Mix 2030

Source: CEA, Company Reports & Ventura Research

India has abundant untapped sources of renewable energy

The National Institute of Solar Energy has assessed India’s solar potential at 748 GW (assuming

3% wasteland coverage by solar PV modules). The assessed wind energy potential, as per the

National Institute of Wind Energy, is estimated at 302.25 GW at 100 meters above ground

level.

(5)

0

5

10

15

20

0200400600800

1,0001,2001,4001,600

Power Generation (Bn Units)

Fossil Fuel Generation Grw (%)

Non-Fossil Fuel Generation Grw (%)

Power Generation Grw (%)

Bn Units (%)

Power generation sources break-up (%)

Coal Other Fosil fuel

Hydro Wind, Solar & Other RE

Nuclear

Fossil Fuels Non-Fossil Fuels

2525

( 0 9 t h D e c 2 0 2 1 )


State wise potential of renewable energy generation

Source: karenvis, Company Reports & Ventura Research

These represent adequate sources of renewable energy to meet India’s total energy

requirements.

Current solar and wind capacity installation suggest significant growth opportunities still to be tapped


161

120 110 111 81

469

0

50

100

150

200

250

300

350

400

450

500

Rajasthan Gujarat Maharashtra Jammu &Kashmir

Karnataka Others

Wind Energy (GW) Solar Energy (GW) Total Renewable potential (GW)

0

2

4

6

8

10

12

14

16

Solar Wind

2626

( 0 9 t h D e c 2 0 2 1 )


Solar & wind share of total annual generation in India's renewables-rich states -


Need for electric mobility solutions

The global drive to embrace electric mobility itself would mean that power requirements

would surge dramatically.

The subsidy programs Faster Adoption and Manufacturing of Electric Vehicles (FAME) 2015

and the second phase of the policy, FAME‐II 2019 (with a budget of $1.4 billion for three years)

provided the much-needed initial encouragement for the growth of EVs in India. The incentives

included were not only for the purchase of electric and hybrid vehicles but also for the

deployment of charging stations.

It is estimated that ~7 million electric cars will ply on Indian roads by 2030 and 27 million by

2040. A more significant opportunity for electrification exists in the form of 2W & 3W EVs.

From 1.8 million 2W & 3W in 2019, it is estimated that this number will gallop to 55 million by

2030 and 160 million by 2040.

0

5

10

15

20

25

30

35

Solar Wind

2727

( 0 9 t h D e c 2 0 2 1 )


EV Penetration (%)

Source: KPMG, Company Reports & Ventura Research

Fuel inflation will get contained in a renewable energy regime

Fossil fuel inflation has been a cash guzzler for Indian households. On the other hand,

renewable energy contracts are typically long-term in nature and the recent downtrend in

price discovery has proven that declining prices of renewable energy (lower than fossil fuels)

supplies are possible. This, in our opinion, is one of the single largest attributes of renewable

energy that can accelerate EV adoption and replace IC vehicles.

AGEL leveraging the large renewable energy opportunity

Adani Green Energy Limited (AGEL), capitalizing on the large renewable energy opportunity,

has been quick to establish one of the largest Indian renewable companies. Today, it has an

operational portfolio of 5.4 GW out of the 20.4 GW of PPA contracts, offering a 4x locked-in

growth.

The portfolio also includes an inorganic acquisition of 5 GW renewable assets of SB Energy

India. This portfolio holds 1,700 MW of operational renewable assets, 2,554 MW of assets

under construction and 700 MW of assets near construction. Solar capacity accounts for 84%

of the portfolio (4,180 MW), wind-solar hybrid capacity accounts for 9% (450 MW) and wind

capacity accounts for 7% (324 MW).

The total renewable portfolio of AGEL of around ~20.4 GW makes the company the largest

renewable power developer in India today. By 2030, AGEL aspires to build a renewable energy

capacity of 45 GW. In the process, AGEL by 2025 would become the world’s largest solar power

company and the largest renewable power company by 2030. Currently the company has a

~5.3% share in India’s renewable installed capacity, which is set to grow to ~10% by 2030.

Segment Sub-segment EV Penetration (%)

2025 2030

2W Scooters 15-25 50-70 B2B 40-60 60-80 B2C 13-18 40-60 Motorcycles 1-2 10-20 Overall 7-10 25-35

3W Overall 35-45 65-75

4W-PV Personal 1-3 10-15 Commercial 5-10 20-30

Buses STUs 15-25 25-40

2828

( 0 9 t h D e c 2 0 2 1 )


AGEL’s aspirations defying gravity


AGEL has been successful in de-risking all aspects of capacity creation that has ensured speed

in scaling up

AGEL’s speed in building capacity has been nothing less than extraordinary. They have been

able to scale their capacities given their

- strong project management and execution skills,

- in-house EPC and O&M, which is a low-cost enabler,

- a speedy implementation which results in lower payback and early cashflow generation,

- leveraging global capital at competitive costs & elongated maturities that help in sustaining

cashflow

- ability to tie-up long term fixed price PPAs with low counterparty risk providing for project

viability and revenue visibility

Strong project management and execution skills

Land acquisition experience and ability to secure right-of-way

Land acquisition and securing the ‘right-of-way’ are the biggest challenges to the timely

completion of the projects. Adani Group has rich experience in pan-Indian land identification

and pricing as well as liaisoning with local and state-level officials for securing the right of way.

As a result of which, it has a head start compared to its peers.

The Adani Group has been proactive in identifying ~2 lac acres of land at 85+ locations pan-

India having good renewable energy potential. It has already secured the purchase of 1 lac

acres with its philosophy of resource planning 3 years in advance.

1.9 2.0 2.5 3.5

8.2

12.3

18.3

25.0

45.0

1.0

6.0

11.0

16.0

21.0

26.0

31.0

36.0

41.0

46.0

51.0

FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY30E

2929

( 0 9 t h D e c 2 0 2 1 )


Where ever possible AGEL has introduced a combination of bi-facial & mono-facial PV modules

to maximize “sun capture”, thereby lowering its land footprint per MW to 3.2 acres per MW

(from the earlier 5 acres per MW).

Project implementation initiated only post securing 100% transmission connectivity

Further, the company ensures 100% transmission connectivity before any project

implementation is initiated. This helps in mitigating any unforeseen risks before

implementation of any projects.

Centralized and digitally-enabled Project Management & O&M teams ensure smooth

operational sustenance

For project implementation, it has well-established standardized SOPs for execution and O&M.

All project implementation is centrally managed by a Project Management and Assurance

Group (PMAG) and 125 strong Energy Network Operation Center (ENOC) . The digitally-

enabled ENOC provides real-time data monitoring with regards to electricity generation,

locations of plant faults, and rectification.

The capable of fault monitoring has been refined right down to the module level of 315 watts i.e.

0.000315 MW and at each WTG level for the wind farms. Further at the inception stage itself, we ensure

plants design is configured to generate such a granular level of data. AGEL’s IoT and Cloud-Based

Analytics Platform at the ENOC enables analytics driven real time monitoring of renewable plants

across 12 states in India thereby ensuring high plant availability of 99% (Solar) and significantly

high power supply EBITDA of over 90%.

As a second layer of performance assurance process of integrating and using automated drones for

thermography of solar modules for identifying module-level faults and waer & tear of WTGs is a;lso

being taken up.

Thus, remote management of all sites from a single location leads to rapid scale-up of capacity.

For O&M, AGEL deploys ~3-4 employees for a 250 MW plant. Further, outsourced contract

labour is deployed on a fortnightly basis and nearly ~20% of the company’s plants undertake

robotic cleaning of the PV modules. For training of filed engineers modern technologies like

AR & VR are being experimented with.

This wholistic technology-driven approach and in-depth data analytic has enabled AGEL benchmark

energy generation near P50 level generation (for solar) and P75 level (for wind) which is at par with the

highest global thresholds.

Assured & timely equipment supply from global vendors ensures timely project execution

The scale at which the company operates, assured supply chain becomes important. AGEL has

strong relationship with global vendors which results in timely supply at cheapest of costs

without compromising on quality.

The vibrancy of this supply chain was tested during the pandemic when AGEL was able to

commission 571 MW of capacity without any material delays.

3030

( 0 9 t h D e c 2 0 2 1 )


It also leverages existing relationships with over 200,000 vendors on a pan-India basis which

helps in successful and timely implementation of its projects.

All these measures taken to de-risk project implementation have ensured that capacities are

commenced well ahead of stipulated timelines leading to earlier payback and cashflow

generation.

Advance de-risking for potential pipeline with focus on most critical resource


Energy network operation center


3131

( 0 9 t h D e c 2 0 2 1 )


Adequate financing with long tenure and lowest cost ensures project viability and revenue

visibility

The capital requirements for a renewable energy project ranges between INR 4-6 crore per

MW. Considering the aspirations of AGEL, needless to say, there is a huge demand for capital.

To shore up its equity base, AGEL roped in global major Total Energy as a strategic partner.

Total not only invested INR 3707 cr for a 50% stake in 3 SPVs (with a cumulative 2.35 GW of

capacity) but also sourced a 20% stake at the holdco level from the promoters for a sum of

USD 2.5 Bn. For this consideration, Total has one board representative who brings project

execution experience to the table.

AGEL’s Capital Management Program enables de-risking at both the construction and

operation stage while optimizing the stakeholder returns with well-established access to

international capital markets through a revolving construction facility and placement of green

bonds.

Total Energy investment


Matching funding with the PPA tenure

As 75% of the project capex is funded through debt, AGEL’s ability to tie-up debt at the SPVs

remains a key monitorable.

- The company has issued Green bonds worth USD 750 mn at the holdco level to meet

the equity funding needs of the SPVs. It is also in the process of tying up another USD

950 mn. Moody’s has done credit assessments for a total of USD 1.7 bn.

- AGEL has further secured a revolving Construction Framework Agreement for USD

1.35 bn with participation from 18 international banks to fully fund the construction

pipeline.

Once a project is commissioned and power generation stabilized (within the first three-to-six

months), the construction finance debt is refinanced with the help of long tenure Green bonds.

For this purpose, the company has issued

- ‘BB+‘ rated USD 500 mn Green Bonds of 5 years tenure and 10.5% cost issued for

refinancing 930 MW Restricted Group 1 (RG 1),

- ‘BBB-‘ IG rated USD 362.5 mn Green Bonds of 20 years tenure and 9.5% cost issued for

refinancing 570 MW Restricted Group 2 (RG 2).

3232

( 0 9 t h D e c 2 0 2 1 )


All in all, the company has a total limit of Rs.13000 cr of bond issuance already approved.

Going forward, AGEL is looking to raise long term funding to match the tenures of PPAs,

thereby de-risking any kind of asset liability mismatch.

Funding hierarchy


Long-term PPA contracts and low counterparty risk

Most of the PPA contracts (88%) secured by AGEL are with sovereign or sub-sovereign counter

parties (NTPC, NHPC, Adani power and SECI). This helps negate the counter party risk of default

or any delays in receipts.

Also, with all of the future power generation being pre-sold, all revenue related uncertainties

are eliminated, leading to long-term asset viability and revenue visibility.

As of today, only ~3% of revenue from Tamil Nadu State Electricity Board (TNEB) are delayed.

This delay has led to a penal interest liability of ~INR 500 cr, which is also receivables.

Low counterparty risk


Sovereign / Sovereign equivalent rated Others

3333

( 0 9 t h D e c 2 0 2 1 )


Strong revenue visibility on the cards

The company has spread its power generation resources across 12 states which reduces

dependency on any one state as well as weather and state specific risks.

AGEL pan-India presence


During the period FY21-24E, we expect the solar capacity to grow at 65% CAGR to 13.4 GW

which will resulting in 86% CAGR volume growth to 31,424 Mn Units, and 68% CAGR revenue

growth to INR 10,771 cr.

3434

( 0 9 t h D e c 2 0 2 1 )


During the period FY21-24E, we expect the wind capacity to grow at 84% CAGR to 2 GW which

will resulting in 132% CAGR volume growth to 7,412 Mn Units, and 122% CAGR revenue growth

to INR 2,134 cr.

During the period FY22E-24E, we expect the hybrid capacity to grow at 27% CAGR to 2.7 GW

which will result in 96% CAGR volume growth to 11,041 Mn Units, and 93% CAGR revenue

growth to INR 3,043 cr.

With all the key drivers in place, we expect AGEL’s overall revenues to grow at a CAGR of 72.3%

to INR 15,978.0 cr over FY21-24E. EBITDA is estimated to grow at a CAGR of 78.7% to INR

12,750.4 cr. PAT is estimated to grow at a CAGR of 146.9% to INR 3,162.4 cr. Subsequently,

RoE and RoIC are expected to improve to 40.2% (+3,069bps) and 11.5% (+445bps),

respectively, by FY24E.

The company is targeting ~17% of equity IRR from any projects and projects IRR of ~12-13%.

The company has ~20-25% of equity IRR for some projects.

Power supply capacity and revenue mix


1,970 2,319 3,320

7,954 11,234

18,300

25,000 26,000

27,000 28,000

29,000 30,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Average Installed Capacity (MW)

Solar (MW) Wind (MW)

Hybrid (MW) Installed capacity (MW)

1,913 2,065 2,419

6,065

9,676

16,586

28,410

0

5,000

10,000

15,000

20,000

25,000

30,000


Power supply revenue mix (Rs.Cr.)

Solar (Rs.Cr.) Wind (Rs.Cr.) Hybrid (Rs.Cr.) Revenue (Rs. Cr)

3535

( 0 9 t h D e c 2 0 2 1 )


Renewable energy portfolio performance


2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

1,500

11,500

21,500

31,500

41,500

51,500

61,500

71,500


Solar Units sale (mn units) Average Tariff (Rs./Unit)

2.0

2.5

3.0

3.5

4.0

4.5

20

1,020

2,020

3,020

4,020

5,020

6,020

7,020

8,020


Wind Units sale (mn units) Average Tariff (Rs./Unit)

2.7

2.7

2.8

2.8

2.9

2.9

3.0

800

2,800

4,800

6,800

8,800

10,800

12,800

FY22E FY23E FY24E FY25E

Hybrid Units sale (mn units) Average Tariff (Rs./Unit)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000


Total Units sale Blended Average Tariff (Rs./Unit)

(40)

(20)

0

20

40

60

80

100

(2,000)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


Improving profitability

EBITDA Net Profit

EBITDA Margin (%) Net Margin (%)(%)

INR Cr

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

1,00,000


Growing CFO but higher capex needs more debt

CFO (RHS) Total Debt (LHS)

3636

( 0 9 t h D e c 2 0 2 1 )


Strong organizational commitment to adopting best in class ESG initiatives

AGEL has a strong commitment to emerge

• in the Top 10 global companies for ESG benchmarking for the electric utility sector by

FY25

• to become a Single use Plastic Free ( SuPF ) company by FY24

• to become Zero Waste to Landfill (ZWL) company by FY25

• to become net water neutral for all its plants (with more than 200 MW generation

capacity) by FY25

AGEL has further adopted strong ESG practices and recently scored 66 out of 100 in DJSI-S&P

Global’s Corporate Sustainability Assessment significantly ahead of global Electric Utility sector

average of 38. Also, it has been assigned MSCI ESG rating of ‘A’.

ESG philosophy


3737

( 0 9 t h D e c 2 0 2 1 )


Environmental philosophy


Social philosophy


3838

( 0 9 t h D e c 2 0 2 1 )


Governance philosophy


3939

( 0 9 t h D e c 2 0 2 1 )


Business Quality Score

Key Criteria Score Risk Comments

Management & Leadership

Management Quality 8 Low The management is of decent quality. It has been able to deliver growth while taking calculated risks.

Promoters Holding Pledge 5 Moderate The promoter holding is 60.14% and there is 1.1% of promoter pledging as of Sept 2021.

Board of Directors Profile 7 Low The average experience of directors is >20 years with significant experience in industry. Also, many of the board members are working since inception.

Industry Consideration

Industry Growth 7 Low Renewable energy is the need of the hour for tackling climate change. Further, India's per capita electricity consumption which is abysmally low (when compared to developed nations) is set to explode.

Regulatory Environment or Risk 7 Low The company has locked in growth for 25 GW of renewable capacity. In addition, the 25 years of PPAs provides strong revenue visibility.

Entry Barriers / Competition 6 Moderate High capex and long gestation period provide for high entry barriers. Competitive environment is low since there is enough room for growth spanning decades.

Business Prospects

New Business / Client Potential 8 Low India’s power requirements are set to explode and renewable energy is expected to replace conventional fossil fuels. As such there is no dearth of business potential.

Business Diversification 6 Moderate The company is into the renewable power generation business which has limited scope for diversification.

Market Share Potential 8 Low AGEL is the largest renewable energy generator company in India.

Margin Expansion Potential 7 Low Cost rationalization, improving utilization of under constructed assets will helps to AGEL to improve its profitability.

Earnings Growth 8 Low Higher electricity demand and needs for renewable energy generation will drive growth.

Valuation and Risk

Balance Sheet Strength 4 High

Elevated debt levels and capex hungry growth will mean that the balance sheet will remain leveraged. However, the innovated financial engineering has helped lower stress on the balance sheet by extending the debt tenure and addressing any potential asset-liability mismatch.

Debt Profile 4 High Higher debt on the balance sheet and aggressive capex plans will not go towards reducing the debt burden.

FCF Generation 6 Moderate Higher capex plans will result in a negative FCF for the next few years.

Dividend Policy 4 High Aggressive growth plans shun the possibility of any dividend payout in the short to medium term.

Total Score

Ventura Score (%)

95

65 Moderate

The overall risk profile of the company is moderate and we consider it as a Moderate risk company for investments


4040

( 0 9 t h D e c 2 0 2 1 )


Annual Report Takeaways

We analyzed the FY21 annual report of AGEL and our key observations are as follows:

Key Takeaways

• Scale: The company believes that the vastness of the opportunity is among the largest

in the world. It is servicing the growing needs of a nation where the per capita

electricity consumption is a fraction of the corresponding consumption in developed

economies, representing decades of prospective growth. India’s primary energy

demand is expected to grow at a CAGR of 4.2% between 2017 and 2040, faster than

any major economy.

• Low-cost bidder: AGEL is also the lowest (L1) bidder in 4.5 GW solar tenders from

Andhra Pradesh Green Energy Corporation. The total renewable portfolio of AGEL of

around ~19 GW makes the company the largest renewable power developer in India

today.

• Investment of Total Energy: An important development at AGEL was the expansion of

its partnership with French energy major TOTAL SA. The latter acquired 20% equity in

the company in addition to holding 50% in 2,353 MW of operational solar assets. This

respect enhancing equity ownership is a validation of AGEL’s capability in building

quality assets, O&M excellence and governance practices.

• Strong pipeline: AGEL’s consolidated portfolio and pipeline were a sizable ~19 GW as

on 31st March, 2021, with considerable optimism of achieving its stated aspiration of

25 GW in renewable energy capacity by 2025.

• Funding pipeline: The company diversified its funding source from conventional Indian

debt providers to the global Green Bond market. Global funding access holds out twin

advantages of predictable long-term costs on the one hand, and an extended

repayment tenure on the other, graduating what is essentially a debt instrument to

quasi-equity. AGEL mobilized a USD 1.35 Billion revolving construction facility that will

keep financing the long under-construction pipeline. This is one of the largest revolving

project financing deals in Asia’s renewable energy sector.

Pay Grades

The remuneration growth of KMP is in line with the performance of the company. The

Chairman has not taken any hike in remuneration in the last four years.

Remuneration in the last 4 years


Parameter (Fig in INR Cr) FY18 FY19 FY20 FY21 CAGR%

Chairman 0.0 0.0 0.0 0.0 NA

Share in Total Employee Cost (%) NA NA NA NA

Chief Financial Officer 1.4 2.3 1.4 0.0 NA

Share in Total Employee Cost (%) 3.3 3.9 1.3 NA

Remuneration of SVP/VP/GM 0.0 4.2 6.3 7.7 760.0

Share in Total Employee Cost (%) 0.0 7.1 5.9 20.2

Employee Cost 43.7 59.7 107.0 38.0 (4.5)

Employee Cost as % of Revenue (%) 2.9 2.9 4.2 1.2

4141

( 0 9 t h D e c 2 0 2 1 )


Management & Leadership Team Turnover

Details on Board of Director and KMPs

Source: Company Reports

Auditor qualifications & significant notes to accounts

BSR & Co. LLP & Dharmesh Parikh & Co. LLP are the auditors and there were no

qualifications/emphasis of matters highlighted by them in the FY21 Annual Report.

Major Related Party Transactions with promoters and KMPs

Over the last four years, related party transactions continue to remain elevated. These

transactions are mainly due to Unsecured Perpetual Debt & Loans and Advances given to

various parties.

Related Party Transactions are relatively higher


Board of Director & KMP FY18 FY19 FY20 FY21

Gautam S Adani CM CM CM CM

Vneet S Jaain MD & CEO

Jayant Parimal CEO CEO CEO

Rajesh S Adani NED NED NED NED

Dinesh Kanabar NED NED

Raminder Singh Gujral NED NED

Sandeep Singhi ID ID ID ID

Poornima Advani ID ID ID

Jose Ignacio Sanz Saiz ID ID

Sagar R Adani ED ED ED

Pragnesh S Darji CS CS CS CS

Raaj Kumar Sah ID ID

Jay Shah ID

Sushama Oza ID

CM-Chairman NED-Non Executive Director

MD-Managing Director ID-Independent Director

CFO-Chief Financial Officer CS-Company Secretary

WTD-Whole Time Director ED-Executive Director

Parameter (Fig in INR Cr) FY18 FY19 FY20 FY21

Related Party Trans 8,444.9 2,681.5 2,470.0 5,339.0

Compensation to KMP 1.4 6.6 0.0 3.0

Transactions as % of Revenue (%) 570.6 130.6 96.9 171.0

4242

( 0 9 t h D e c 2 0 2 1 )


Contingent Liabilities

Contingent liabilities are well within range.

Contingent Liabilities are lower


Management Team


Parameter (Fig in INR Cr) FY18 FY19 FY20 FY21

Claims against the company not acknowledged 30.9 52.6 60.0 66.0

Contingent Lia. as % of Revenue (%) 2.1 2.6 2.4 2.1

Contingent Lia. as % of Net Worth (%) 2.3 2.7 2.5 3.0

Key Person Designation Details

Mr. Gautam Adani Chairman & MD

Mr. Gautam Adani has over 36 years of business experience. Under his

leadership, the Adani Group has emerged as a global integrated infrastructure

player with interests across resources, logistics and energy verticals.

Mr. Rajesh Adani Non-Executive Director

Mr. Rajesh Adani has been associated with Adani Group since its inception.

He is in-charge of the operations of the Group and is responsible for

developing its business relationships.

Mr. Sagar R. Adani Executive Director

He aims to build the Group’s identity around an integrated business model,

backed by his sound understanding of new processes, systems, and

macroeconomic issues, coupled with his growing experience. He holds a

degree in Economics from Brown University, USA.

Mr. Vneet Jaain CEO

He has been associated with Adani Group for over 15 years. During his

association, he has been spearheaded on Group’s strategy for its energy and

infrastructure business and has been instrumental growing various

businesses from conceptualisation to operation - renewable, power

CA Kaushal Shah CFO

He has held various leadership positions in Adani Group during his total 29

years of experience. Kaushal is a Chartered Accountant of 1993 batch and

holds a Bachelor of commerce from Gujarat University, India and degree of

PGDISA from Institute of Chartered Accountants of India.

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Key Risks & Concerns

• Land availability risk

Renewable energy projects require a huge land parcel, 4 acres of land for a 1 MW

power generation unit. So, for the total under construction pipeline of 20 GW of

project execution, the company requires ~80,000 acres of land. Also, for ongoing capex

further requires a land of ~1,80,000 acre of land. Any unavailability of land or delay in

land acquisition will adversely impact the performance of the company.

• Higher leverage on the balance sheet

Majority of growth of the company is debt funded growth so any adverse situation or

inability to repay debt will impact business and performance adversely. Higher debt

will increase the interest burden and any adverse business scenario will hamper future

growth. Higher ongoing and future capex will require higher borrowing in future also.

However, the company’s renewable capacity installed in the past started throwing

decent cash flows, which will definitely support balance sheet strength.

Debt laden balance sheet


• Promoters stake pledge

This was at disconcerting levels in FY21 but has subsequently reduced to being less of

an issue

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Pledge as a % of total Shares held by Promoters


• The renewable energy sites are vulnerable to the hostile impact of cyclone and other

adverse weather conditions.

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Quarterly and Annual Performance


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Summary of Management Commentary and Quarterly Performance over last few quarters

Key Criteria View Comments

Q2FY21

Business Performance POSITIVE Revenues up 1% YoY to INR 718 cr, Revenue from power supply up 15% to INR 530 cr, Power supply EBITDA up 19% to INR 490 cr.

Solar energy units up 22% to 1,187 Mn units, CUF of 20.7%, Wind energy units up 11% to 162 Mn units, CUF of 30.3%

Q3FY21

Business Performance POSITIVE

Revenues up 61% YoY to INR 843 cr, Revenue from power supply up 31% to INR 591 cr, Power supply EBITDA up 34% to INR 532 cr. Solar energy units up 27% to 1,200 Mn units, CUF of 20.8%, Wind energy units up 106% to 103 Mn units, CUF of 18.9%

Q4FY21


Revenues up 51% YoY to INR 1,082 cr, Revenue from power supply up 15% to INR 690 cr, Power supply EBITDA up 15% to INR 626 cr. Solar energy units up 24% to 1,482 Mn units, CUF of 24.3%, Wind energy units up 20% to 132 Mn units, CUF of 22.2%

Q1FY22


Revenues up 23% YoY to INR 1,079 cr, Revenue from power supply up 39% to INR 848 cr, Power supply EBITDA up 41% to INR 789 cr. Solar energy units up 39% to 1,650 Mn units, CUF of 25%, Wind energy units up 103% to 404 Mn units, CUF of 38.5%

Outlook & Strategy POSITIVE

150 MW wind plant commissioned in Gujarat

50 MW solar plant commissioned in Uttar Pradesh

Signed definitive agreements for 100% acquisition of SB Energy Holdings Limited. It houses 4,954 MW of renewable assets in India. The target portfolio consists of 84% solar capacity (4,180 MW), 9% wind-solar hybrid capacity (450 MW) and 7% wind capacity (324 MW).

Q2FY22

Business Performance POSITIVE Revenues up 112% YoY to INR 1,295 cr, Revenue from power supply up 58% to INR 834 cr, Power supply EBITDA up 61% to INR 787 cr. Solar energy units up 41% to 1,430 Mn units, CUF of 21.4%, Wind energy units up 185% to 471 Mn units, CUF of 42.9%


PPA signing commenced with SECI towards Letter of Award previously received for manufacturing linked solar project of 8 GW with signing of PPAs for 867 MW in Oct 2021. Awarded 450 MW Wind project from SECI in Oct 2021

Capacity guidance for FY25: 25000 MW (including inorganic acquisition).

Run-rate EBITDA guidance for FY25: ~INR 20,000 cr.


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Financial Analysis & Projections


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TABLE OF CONTENTS

Adani Ports & Special

Economic Zone Ltd.

The largest port and integrated logistics player

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In a post-covid scenario, where the world is distancing itself from its over dependance

on China, India has emerged as a reliable, responsible and geopolitically viable option

for global manufacturing. Further, favourable policies like Atmanirbhar Bharat, Make

in India Make for World, PLI schemes, etc., have helped create a launch pad for

resurgent EXIM volumes, which are expected to scale to 1790-2570 MMT by FY30

from 971 MMT clocked in FY21. Adani Ports & Special Economic Zone Ltd (APSEZ)

with its portfolio of 13 ports (installed capacity of 560 MMT & 28.6% EXIM volume

share), is well positioned to expand its market share to 38.9% from this surge in EXIM

trade.

Another growth driver of APSEZ is its foray into the highly fragmented USD 160 bn

(growing at 10% CAGR) logistic infrastructure vertical through its wholly owned

subsidiary Adani Logistics Limited (ALL). ALL has fast established itself as a leading

player in the container handling, bulk goods, agri-logistics and warehousing verticals.

PM Modi’s “Gati Shakti” in combination with the National Logistic Policy and

digitization is expected to be a game-changer as it aims to lower the logistic cost from

the present 14% of GDP to 7-8% over the next 5-6 years and boost economic

development. Given the Adani group’s global scale of operations, execution

excellence and capital raising capability, we expect APSEZ to emerge as the largest

transport utility.

We expect a 20.4% CAGR volume growth to 432 MMT and 52.2% growth from

logistics leading to a 24.3% /24.8% /20.1% CAGR growth in revenue / EBIDTA / PAT to

INR 24,106.2 cr/ INR 15,515.4 cr/ INR 8,769.9 cr by FY24. Despite continuing

investments, we believe that peak debt is behind us and strong cashflow generation

should enable APSEZ to achieve lower balance sheet leverage. We initiate coverage

with a BUY for a DCF based price objective of INR 1,697, representing an upside of

120% over the next 24 months. Concor is a strategic fit for APSEZ and a winning bid

would lead to a major re-rating of the stock.

Omicron breakout and slowdown in global trade are risks to our estimates.


Revenue EBITDA

Net Profit

EBITDA (%)

Net Profit

(%) EPS (₹)

BVPS (₹)

RoE (%)

RoIC (%)

P/E (X) P/BV

(X)

EV/ EBITDA

(X)

FY20 11,439 5,505 3,763 48.1 32.9 17.5 120.2 14.7 7.9 41.5 6.0 32.5

FY21 12,550 7,983 4,994 63.6 39.8 23.2 149.3 16.3 9.8 31.2 4.9 23.2

FY22E 16,917 10,848 5,592 64.1 33.1 26.0 170.0 15.9 13.2 27.9 4.3 16.9

FY23E 19,955 12,912 6,762 64.7 33.9 31.5 194.5 16.8 15.8 23.1 3.7 13.9

FY24E 24,106 15,515 8,770 64.4 36.4 40.8 225.9 18.6 19.0 17.8 3.2 11.2

BUY @ CMP INR 770 Target: INR 1,697 in 24 months Upside Potential: 120%

The largest port and integrated logistics player

Industry Ports

Scrip Details



Price (INR) 770

No of Shares O/S (Cr) 204

3M Avg Vol (000) 267

52W High/Low (INR) 901/428

Dividend Yield (%) 0.69


Promoter 63.83

Institution 31.15

Public 5.02

TOTAL 100.0

Price Chart

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APSEZ SENSEX

Adani Ports & Special Economic

Zone Ltd.

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1 year forward EV/EBITDA band chart

EV per sh 7.76x 12.11x

16.46x 20.81x 25.16x

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Upper SD 2 Lower SD 1 Lower SD 2

30.00

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02-Apr-18 02-Apr-19 02-Apr-20 02-Apr-21

Peer group price performance

APSEZ CONCOR Gujarat Pipavav GDL

0.5

0.7

0.9

1.1

1.3

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1.7

1.9

2.1

10-Apr-18 10-Apr-19 10-Apr-20 10-Apr-21

APSEZ commands slightly premium valuation to CONCOR, which has significantly expanded in

the past 1 year

Strong business potential deserves re-rating

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Valuation

We have used the DCF model to value APSEZ. We have discounted back the future cash flows

to FY24 and value the company at INR 1,697 per share, presenting an upside of 120% from the

CMP of INR 770.

DCF Valuation


Long Term Market Return 11%

Risk Free Rate 6.3%

Cost of Equity 9.6%

Interest Rate 9.0%

Tax Rate 22.0%

Cost of Debt 6.9%

WACC 8.4%



FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31EFCFF 8237 10090 12539 14795 17605 20441 24791 29124

Discount Factor from FY24 0.92 0.85 0.79 0.72 0.67 0.62 0.57 0.53

Discounted FCFF from FY24 7,600 8,589 9,847 10,720 11,770 12,608 14,108 15,291

Total of Discounted FCFF FY24 90,533

FY24 Present Value of Terminal Value 2,92,380

FY24 Value of Operations 3,82,913




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We have prepared a Bull and Bear case scenario based on APSEZ’s terminal growth.

• Bull Case: As the largest integrated port and logistics company in India, APSEZ has a

significant opportunity to grow its business in the coming years. We have assumed a

terminal growth of 4%, which will result in a Bull case price target of INR 1,931 (upside

of 151% from the CMP).


price target of INR 1,294 (upside of 68% from the CMP). Our base case implies a




Investment Triggers

• Strong growth potential of the industry

• Largest private port player in India with growing market share

• Integrated logistics player which helps to provide end-to-end service to the customers

Catalysts

• Gateway to growing international trades and supports domestic logistics need

• Indian economy is on an explosive growth trajectory which helps to grow EXIM trades and Make in India and China + 1 themes will support further.

Bull Case Price

INR 1,931 per share

Target Price

INR 1,697 per share

Bear Case Price

INR 1,294 per share

Current Price

INR 770 per share




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Valuation and Comparable Metric of Domestic and Global Port & Logistics Companies


PEG

Company Name Mkt Cap Price 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024

Domestic Peers (fig in INR Crores)

Adani Port 148241 726.0 0.7 27.9 23.1 17.8 16.9 13.9 11.2 15.9 16.8 18.6 13.2 15.8 19.0 16917 19955 24106 64.1 64.7 64.4 33.1 33.9 36.4

CONCOR 39808 653.0 0.4 34.2 25.9 21.3 20.4 14.7 12.0 10.6 12.8 14.3 14.9 20.3 25.0 7640 9369 10956 24.3 26.9 27.5 15.3 16.4 17.1

Gateway Distripark 3483 279.0 0.4 22.7 18.6 13.8 10.6 9.0 7.5 9.7 11.0 12.8 12.0 14.1 14.9 1359 1547 1756 27.1 26.9 27.5 11.3 12.1 14.4

Gujarat Pipavav port 4904 101.0 0.8 22.7 14.8 13.8 8.9 7.3 6.6 10.2 15.4 16.4 25.3 33.8 37.7 796 921 999 57.7 59.7 60.7 27.1 35.9 35.6

Mahindra Logistics 5343 743.0 0.4 82.1 45.5 32.9 23.9 17.6 14.4 10.5 16.4 18.9 19.6 27.3 27.9 4119 4960 5889 5.5 6.1 6.3 1.6 2.4 2.8

Allcargo Logistics 8707 354.0 0.4 21.4 20.0 17.4 NA NA NA 15.2 14.5 NA NA NA NA 14165 14331 13878 6.6 6.9 8.1 2.9 3.0 3.6

Transport Corp. of India 5174 670.0 0.4 20.7 18.4 14.7 14.3 13.0 10.3 17.9 17.1 17.7 18.2 18.5 19.3 NA NA NA NA NA NA NA NA NA

TCI Express 7762 2017.0 1.2 54.9 43.8 35.9 40.3 32.5 25.7 25.7 25.6 24.4 38.5 41.0 43.4 NA NA NA NA NA NA NA NA NA

Global Peers (fig in mn USD)

Public Storage 58172 331.7 4.2 35.4 32.9 30.8 25.1 23.5 21.8 26.5 27.9 NA 13.3 13.3 NA 3584 3771 4206 72.9 74.3 72.1 45.9 46.8 44.8

Hutchison Port holdings 2004 0.2 NA 17.2 17.2 NA 5.0 4.9 NA 3.5 3.6 NA 8.5 8.5 NA 1462 1459 NA 59.8 59.3 NA 8.0 8.0 NA

Port of Tauranga 3301 4.9 4.4 42.4 39.8 36.5 27.3 26.0 24.4 7.7 8.1 8.7 8.1 8.4 8.9 253 262 276 53.0 54.3 54.9 30.8 31.7 32.7

Hamburger Hafen 1742 23.2 NA 16.6 14.6 NA 6.2 6.8 NA 14.3 14.6 NA 14.1 12.2 NA 1602 1624 1637 26.1 26.5 29.5 6.5 7.3 NA

Sahathai Terminal 47 0.1 NA 23.5 NA NA NA NA NA 4.1 NA NA NA NA NA 46 NA NA 27.5 NA NA 4.3 NA NA

Globalport 900 312 0.1 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA

Danaos Corp. 1811 72.6 NA 3.8 3.1 NA 3.6 2.2 NA 16.9 16.5 NA 15.7 18.3 NA 855 954 NA 79.1 80.8 NA 56.4 61.7 NA

Navios Maritime Partners LP 793 25.8 NA 1.3 1.3 NA 1.5 1.1 NA 25.3 20.9 NA 24.1 22.2 NA 1218 1216 NA 67.7 68.0 NA 51.3 51.6 NA

Net Margin (%)P/E Ratio EV/EBIDTA RoE (%) RoIC (%) Sales EBITDA Margin (%)


( 0 9 t h D e c 2 1 )


Improving ROIC and significant room for margin expansion are potential re-rating factors


Adani Port

CONCOR

Gateway Distripark

Gujarat Pipavav port

Mahindra Logistics

Transport Corp. of India

TCI Express

Port of Tauranga

7.0

12.0

17.0

22.0

27.0

32.0

37.0

42.0

47.0

5.0 10.0 15.0 20.0 25.0 30.0

FY24

Ro

IC (

%)

FY24 EV/EBIDTA (x)

Adani PortCONCOR

Gateway DistriparkGujarat Pipavav port

Mahindra Logistics

Allcargo Logistics

5.0

7.0

9.0

11.0

13.0

15.0

17.0

19.0

21.0

23.0

25.0

2.0 12.0 22.0 32.0 42.0 52.0 62.0 72.0 82.0

FY24

Rev

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GR

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)

FY24 EBIDTA Margin (%)

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Ports business unit

During FY18-21, the Ports capacity was enhanced from 335 MMT in FY18 to 498 MMT in FY21.

Given the pandemic, despite a strong volume growth of 11.1% CAGR to 247 MMT in FY21 from

180 MMT recorded in FY18, revenues grew at 1% CAGR to INR 9,015 crore while EBIDTA

declined at 1% CAGR to INR 6,050 crore. Margins too declined 350 bps to 67.1% in FY21.

During FY21 and H1FY22, the company acquired the Krishnapatnam and Gangavaram ports,

both of which are expected to improve the overall performance of the port business in the

years to come.

During FY21-24E, we expect the capacities to grow at 10% CAGR to 667 MMT. We expect

volumes to grow at 20% CAGR to 432 MMT leading to 23.4% CAGR growth in revenue to INR

16,927 cr. EBIDTA is expected to grow at 24.3% CAGR to INR 11,630 cr. Margins are expected

to remain stable at 68.7% (+160 bps)

Harbour business

During FY18-21, the harbour business reported a 11% revenue CAGR to INR 1,408 crore while

EBIDTA grew at 11% CAGR to INR 1,266 crore. Earlier the harbour revenue clubbed along with

port revenue at certain assets. Going forth the harbour revenue as a matter of policy will be

disclosed separately.

During FY21-24E, we expect the harbour revenue to grow at 20.4% CAGR to INR 2,459 cr. The

EBIDTA is expected to grow at a 18.4% CAGR to INR 2,102 cr. Margins are expected to remain

stable at 85.5%.

Logistics business

During FY18-21, the logistics business reported a 5% revenue CAGR to INR 958 crore while

EBIDTA grew at 44% CAGR to INR 226 crore.

During FY21-24E, we expect the logistics revenue to grow at 52.2% CAGR to INR 3,380 cr.

EBIDTA is expected to grow at 72.1% CAGR to INR 1,153 cr. Margins are expected to expands

to 34.1% (+1052 bps).

8433584329

SEZ and other business

During FY18-21, the SEZ & other businesses reported an 18.9% revenue CAGR to INR 1,169

crore.

During FY21-24E, we expect the SEZ and others revenue to grow at a 4.7% CAGR to INR 1,340

cr. EBIDTA is expected to grow at 12.6% CAGR to INR 630 cr. Margins are expected to expand

to 47.01% (+927bps).

Sweating of port assets and strong growth of the fledgling logistics business are expected to

propel APSEZ’s overall revenues to INR 24,106.2 cr (24.3% CAGR) over FY21-24E. EBITDA is

estimated to grow at a CAGR of 24.8% to INR 15,515.4 cr while PAT is estimated to grow at

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a CAGR of 20.1% to INR 8,769.9 cr. Subsequently, RoE and RoIC are expected to improve to

18.6% (+232bps) and 19.0% (+920bps), respectively, over the same period.

APSEZ’s Financial Summary


Fig in INR Cr (unless specified) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31ERevenue from operations 8,439.4 11,323.0 10,925.4 11,438.8 12,549.6 16,917.3 19,954.7 24,106.2 28,758.5 34,605.8 40,773.9 47,472.1 54,882.3 62,228.8 69,795.3YoY Growth (%) 18.7 34.2 (3.5) 4.7 9.7 34.8 18.0 20.8 19.3 20.3 17.8 16.4 15.6 13.4 12.2Raw Material Cost 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0RM Cost to Sales (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Employee Cost 383.1 447.3 529.8 546.5 615.1 710.4 827.5 990.1 1,176.0 1,403.2 1,666.6 1,979.4 2,351.0 2,740.0 3,134.6Employee Cost to Sales (%) 4.5 4.0 4.8 4.8 4.9 4.2 4.1 4.1 4.1 4.1 4.1 4.2 4.3 4.4 4.5Other Expenses 2,641.5 4,051.5 3,804.1 5,387.5 3,951.1 5,359.4 6,214.9 7,600.7 9,163.9 11,030.3 13,167.9 15,306.9 17,537.6 19,653.7 21,667.2Other Expenses to Sales (%) 31.3 35.8 34.8 47.1 31.5 31.7 31.1 31.5 31.9 31.9 32.3 32.2 32.0 31.6 31.0EBITDA 5,414.7 6,824.1 6,591.6 5,504.7 7,983.4 10,847.5 12,912.3 15,515.4 18,418.6 22,172.3 25,939.4 30,185.8 34,993.7 39,835.1 44,993.4EBITDA Margin (%) 64.2 60.3 60.3 48.1 63.6 64.1 64.7 64.4 64.0 64.1 63.6 63.6 63.8 64.0 64.5EBIT 4,254.5 5,635.7 5,218.1 3,824.4 5,876.1 8,248.1 10,082.0 12,438.3 15,074.9 18,556.9 22,012.0 25,914.3 30,326.2 34,782.1 39,556.7EBIT Margin (%) 50.4 49.8 47.8 33.4 46.8 48.8 50.5 51.6 52.4 53.6 54.0 54.6 55.3 55.9 56.7Interest 1,393.2 1,257.4 1,428.3 1,950.6 2,255.3 3,276.1 4,135.6 4,145.0 4,200.6 4,601.1 4,616.2 4,621.9 4,633.3 4,641.0 4,652.2Interest cost to Sales (%) 16.5 11.1 13.1 17.1 18.0 19.4 20.7 17.2 14.6 13.3 11.3 9.7 8.4 7.5 6.7Net Profit 3,911.5 3,673.6 3,990.2 3,763.1 4,994.3 5,591.7 6,762.3 8,769.9 10,769.3 13,161.0 16,298.1 19,833.5 23,342.2 26,777.8 31,123.8Net Margin (%) 46.3 32.4 36.5 32.9 39.8 33.1 33.9 36.4 37.4 38.0 40.0 41.8 42.5 43.0 44.6

Adjusted EPS 19.3 18.1 19.6 18.5 24.6 27.5 33.3 43.2 53.0 64.8 80.2 97.6 114.9 131.8 153.2P/E (X) 37.7 40.2 37.0 39.2 29.5 26.4 21.8 16.8 13.7 11.2 9.1 7.4 6.3 5.5 4.7Adjusted BVPS 86.3 103.7 120.8 126.1 150.7 172.6 198.6 231.8 272.1 320.7 380.0 451.3 534.0 627.6 734.8P/BV (X) 8.4 7.0 6.0 5.8 4.8 4.2 3.7 3.1 2.7 2.3 1.9 1.6 1.4 1.2 1.0Enterprise Value 1,75,378.5 1,74,766.9 1,77,114.6 1,78,800.1 1,85,151.3 1,83,284.8 1,79,684.8 1,74,273.0 1,65,466.1 1,57,999.3 1,49,556.6 1,38,810.8 1,26,455.2 1,11,003.5 92,206.7EV/EBITDA (X) 32.4 25.6 26.9 32.5 23.2 16.9 13.9 11.2 9.0 7.1 5.8 4.6 3.6 2.8 2.0

Net Worth 17,526.0 21,068.8 24,538.2 25,623.5 30,628.3 35,069.2 40,343.8 47,096.6 55,281.3 65,152.1 77,212.7 91,691.1 1,08,497.5 1,27,509.7 1,49,296.4Return on Equity (%) 22.3 17.4 16.3 14.7 16.3 15.9 16.8 18.6 19.5 20.2 21.1 21.6 21.5 21.0 20.8Capital Employed 39,740.2 43,273.0 52,083.9 55,699.3 65,569.1 82,030.0 87,373.8 94,270.5 1,03,576.0 1,13,723.1 1,25,823.9 1,40,382.5 1,57,350.2 1,76,363.2 1,98,383.1Return on Capital Employed (%) 10.0 9.2 7.9 6.1 7.2 8.2 9.4 10.7 11.7 12.7 13.6 14.4 15.0 15.4 15.6Invested Capital 36,854.4 39,785.7 45,602.8 48,373.5 59,729.5 62,304.0 63,978.5 65,319.6 64,697.4 67,101.3 70,719.2 74,451.9 78,902.6 82,463.1 85,453.0Return on Invested Capital (%) 11.5 14.2 11.4 7.9 9.8 13.2 15.8 19.0 23.3 27.7 31.1 34.8 38.4 42.2 46.3

Cash Flow from Operations 4,062.6 5,608.1 6,029.4 7,401.8 7,555.8 8,563.2 13,508.9 16,148.7 20,478.2 20,277.0 22,931.3 26,877.4 30,603.8 34,455.5 39,134.4Cash Flow from Investing (2,639.4) (3,845.8) (4,424.2) (750.4) (14,142.7) (5,635.1) (6,333.3) (4,758.9) (5,092.2) (5,177.9) (6,817.5) (7,439.1) (8,499.8) (8,005.8) (7,799.1)Cash Flow from Financing (1,324.7) (1,889.0) 2,313.3 (4,255.6) 3,513.9 8,658.7 (5,554.0) (6,018.2) (5,664.4) (7,615.0) (8,813.5) (9,896.7) (11,007.8) (12,405.7) (13,756.1)Net Cash Flow 98.5 (126.7) 3,918.6 2,395.8 (3,073.0) 11,586.8 1,621.6 5,371.6 9,721.5 7,484.1 7,300.2 9,541.6 11,096.2 14,043.9 17,579.3Free Cash Flow 744.7 891.9 3,811.3 1,717.2 4,266.3 2,121.2 6,509.1 8,237.4 10,089.8 12,538.5 14,794.6 17,605.2 20,441.4 24,791.1 29,124.1FCF to Revenue (%) 8.8 7.9 34.9 15.0 34.0 12.5 32.6 34.2 35.1 36.2 36.3 37.1 37.2 39.8 41.7FCF to EBITDA (%) 13.8 13.1 57.8 31.2 53.4 19.6 50.4 53.1 54.8 56.6 57.0 58.3 58.4 62.2 64.7FCF to Net Profit (%) 19.0 24.3 95.5 45.6 85.4 37.9 96.3 93.9 93.7 95.3 90.8 88.8 87.6 92.6 93.6FCF to Net Worth (%) 4.2 4.2 15.5 6.7 13.9 6.0 16.1 17.5 18.3 19.2 19.2 19.2 18.8 19.4 19.5

Total Debt 22,214.3 22,204.2 27,545.7 30,075.8 34,940.8 46,960.8 47,030.0 47,173.9 48,294.7 48,571.0 48,611.2 48,691.3 48,852.7 48,853.5 49,086.8Net Debt 19,328.4 18,716.8 21,064.6 22,750.0 29,101.3 27,234.8 23,634.7 18,223.0 9,416.1 1,949.2 (6,493.5) (17,239.2) (29,594.9) (45,046.6) (63,843.4)Net Debt to Equity (X) 1.1 0.9 0.9 0.9 1.0 0.8 0.6 0.4 0.2 0.0 (0.1) (0.2) (0.3) (0.4) (0.4)Net Debt to EBITDA (X) 3.6 2.7 3.2 4.1 3.6 2.5 1.8 1.2 0.5 0.1 (0.3) (0.6) (0.8) (1.1) (1.4)Interest Coverage Ratio (X) 3.1 4.5 3.7 2.0 2.6 2.5 2.4 3.0 3.6 4.0 4.8 5.6 6.5 7.5 8.5

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APSEZ’s story in charts


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Company overview

Adani Ports & Special Economic Zone Ltd. (APSEZL) is the largest private sector developer and

operator of ports in India. It has a portfolio of 13 operational ports/terminals located at

Mundra, Dahej, Hazira, Dhamra, Kattupalli, Krishnapatnam, Mormugao, GPL, Vizag, Dighi,

Ennore, etc. This portfolio presents the most widespread national footprint with deepened

hinterland connectivity.

Having consolidated its position as a pan-India operator, it is now looking to transform into an

integrated port and logistics service company. Through its subsidiary Adani Logistics Ltd.,

APSEZ operates three logistics parks located at Patli in Haryana, Kila-Raipur in Punjab and

Kishangarh in Rajasthan. With the ability to handle 500,000 twenty-foot equivalent units

(TEUs) annually, the Adani logistics business is growing at a rapid pace.

Organizational Structure


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Journey of logistics business of the company


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Schematic representation of Adani’s integrated port and logistics operation


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Port locations and capacity

Installed capacity (MMT) FY18 FY19 FY20 FY21 FY22 FY23 FY24

Total Port capacity 335 395 426 498 562 601 689

Major Ports

Mundra Port 242 249 264 264 264 264 264

Hazira Port 35 30 30 30 30 38 47

Dahej Port 14 14 14 14 14 14 18

Dhamra Port 35 45 45 45 45 59 59

Kattupalli Port 18 18 18 18 18 18

KPCL 64 64 64 80

GPL 64 64 80

Vizhinjam 18 35

Colombo 26

Minor Ports 9 39 55 63 63 63 63

Warehousing (Mn. Sq.Ft.) 0 0 2 6 14

Source: Company Reports & Ventura Research; Minor ports includes – Tuna, Mormugao, Dighi, Ennore, Vizag

6363

( 0 9 t h D e c 2 0 2 1 )


Industry-wide growth opportunity

As per the Ministry of Shipping, ~95% of the country’s trade takes place though the 13 major

& 200+ non-major ports located along iIndia’s 7500 km long coastline and vast network of

navigable waterways. Ports are the gateways for EXIM trade which play a crucial role in a

country’s GDP growth.

India’s port network - Gateway to EXIM trade

Source: MIV 2030, Company Reports & Ventura Research

India’s EXIM volume which has been growing at a 4.3% CAGR over the last decade, is expected

to grow at a CAGR of 6% to 2,165 MMT by FY30. The Maritime India Vision (MIV) 2030,

estimates the low-high range between 1,790-2,570 MMTPA taking into account the bullish and

bearish scenarios.

Indian port traffic projection and recent trends


8801060

1285

1790

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Port Cluster-wise traffic projection by 2030


Maritime India Vision (MIV) 2030 road map

MIV 2030 envisions an overall investment of INR 3,00,000 – 3,50,000 cr across ports, shipping,

and inland waterways categories. This vision roadmap is estimated to help unlock INR 20,000+

Cr worth of potential annual revenue for Indian Ports.

Maritime India Vision (MIV) 2030


Government initiatives to boost EXIM trades are as enumerated below

Sagarmala Pariyojana

Sagarmala Pariyojana, launched in 2015, focuses on enhancing the performance of the logistics

sector in India by setting up new mega ports, modernizing existing ports. More than 605

projects having a total cost of INR 8.80 trillion have been identified under the Sagarmala

Pariyojana. Of these, 89 projects worth INR 140 Bn have been completed and 443 projects

worth INR 4.32 trillion are under various stages of implementation and development.

Ease of doing business

Direct Port Delivery (DPD) and Direct Port Entry (DPE) has been introduced to make import and

export more efficient and cost-effective. Along with this, some changes have also been made

in customs law to facilitate trade.

Dedicated Freight Corridor (DFC)

A network of DFCs is planned which will help build connectivity of the ports with the hinterland

to facilitate faster movement of traffic.

Proposed network of DFCs

Source: DFC report, Company Reports & Ventura Research

Base High Base High Base High Base High Base High Base High Base High Base High

Gujarat - 5 45 55 310 330 5 15 - 5 10 20 100 120 470 550

North Maharashtra - 5 - 5 60 70 5 15 - 5 5 10 - 5 70 115

South Maharashtra & Goa - 5 30 40 - 5 40 50 - 5 - 3 10 20 80 128

Karnataka - 5 - 5 40 50 - 5 - 5 - 3 10 20 50 93

South Tamil Nadu & Kerala - 5 20 30 30 40 - 5 - 5 3 5 20 30 73 120

South Andhra Pradesh & North Tamil Nadu - 5 110 130 30 40 5 15 - 5 3 5 80 100 228 300

North Andhra Pradesh 25 35 15 25 30 40 20 30 - 5 - 3 40 60 130 198

West Bengal & Odisha 40 50 150 170 70 90 25 35 - 5 - 3 45 55 330 408

Total 65 115 370 460 570 665 100 170 - 40 21 52 305 410 1,431 1,912

Others TotalCoking Coal Thermal Coal POL Iron Ore Steel Container

Key Performance Indicator Current (2020) Target (2030)

Major Ports with >300 MTPA cargo handling capacity - 3

% of Indian cargo transshipmenthandled by Indian ports 25 >75

% of cargo handled at Major Ports by PPP/ other operators 51 >85

Average vessel turnaround time (containers) in hours 25 <20

Locations Kms.

East – West Corridor (Kolkata–Mumbai) 2,000

North-South Corridor (Delhi-Chennai) 2,173

East Coast Corridor (Kharagpur-Vijayawada) 1,100

Southern Corridor (Chennai-Goa) 890

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Proposed network of DFCs


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Currently two corridors, the Eastern Corridor and the Western Corridor are under

implementation. The two routes cover a total length of 3,360 kilometres with the Eastern DFC

stretching from Ludhiana in Punjab to Dankuni in West Bengal and the Western DFC from

Jawaharlal Nehru Port in Mumbai to Dadri in Uttar Pradesh.

DFC Locations (Western Corridor)


DFC Locations (Eastern Corridor)


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Advantages of using DFCs


The DFC network is heralded to be the biggest harbinger of change leading to exponential

growth in EXIM volume.

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APSEZ is the biggest beneficiary of India’s booming EXIM trade

APSEZL has grown from being a single port operator in 2001 to a multilocational, deep draft

sea port company with a portfolio of 13 ports. These strategically located ports and terminals

represent 20%+ of the country’s port capacity and catered to 28.6% of India’s EXIM trades

(including 42.6% of containers market share) as on H1FY22.

The company offers a wide range of services like ports, port infrastructure (including marine

services such as anchorage, pilotage, tug pulling, berthing), SEZs, and logistics. These wide

ranges of services provide clients comfort in having to deal with only one vendor with a single-

window interface for seamless end-to-end logistics solutions, right from unloading of cargo to

final delivery of goods.

APSEZ’s Port network


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APSEZ growing faster than market


Stable cargo mix





to remain stable at 68.7%.

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Port wise revenue contribution


Port wise EBIDTA contribution


Mundra port

APSEZ’s Mundra port is the largest commercial port in India. It emerged as the largest

container handling port in FY20-21 (surpassing JNPT) with a market share of 32% (+500bps).

This port has twenty-six berths and two single point moorings with an annual capacity of 264

MMT cargo with dedicated terminals for different cargo and commodity types. It is also

capable of berthing fully loaded capesize vessels (VLCC and ULCC) and has a privately

developed rail network of 69 km from Adipur to Mundra port, opening gates to nation-wide

connectivity. It is also connected to the Indian National Highway (NH) network through State

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Dhamra Port Kattupalli Port KPCL

GPL Terminals at Major Ports Vizhinjam

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Mundra Port Hazira Port Dahej Port

Dhamra Port Kattupalli Port KPCL

GPL Terminals at Major Ports Vizhinjam

Colombo YoY Growth (%)

INR (Cr.)

(%)

INR (Cr.)

(%)

7171

( 0 9 t h D e c 2 0 2 1 )


Highway 48 via Anjar and State Highway 6. A concession with 40 km water front from Gujarat

Maritime Board and ample land for expansion with 99-year lease from Gujarat Govt.

Mundra is the world’s largest coal import terminal and also handles LNG and LPG operations

since FY20.

During FY21-24E, we expect the capacities to remain unchanged at 264 MMT. We expect


5,890 cr. EBIDTA is expected to grow at 11.5% CAGR to INR 4,179 cr. Margins are expected to

remain stable at 71.0%.

Mundra port financial snapshot


Dhamra port – Being modeled on the lines of Mundra

Dhamra has the potential to handle more than 100 MMTPA of dry bulk, liquid bulk, breakbulk,

containerized and general cargo. Its proximity to the mineral belts of Odisha, Jharkhand and

West Bengal, helps serve the hinterland with the greatest of efficiencies. Dhamra also has a 62

km rail connectivity to Bhadrak/Ranital Link Cabin connecting the main Howrah-Chennai line.

This port has four berths with a current annual capacity to handle 45 MMT of cargo. During

FY21-24E, we expect the capacities to grow at 9% CAGR to 59 MMT. We expect volumes to

grow at 12% CAGR to 45 MMT leading to 13.8% CAGR growth in revenue to INR 2,193 cr.

EBIDTA is expected to grow at 13.4% CAGR to INR 1,472 cr. Margins are expected to remain

stable at 67.1%.

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Revenue

EBIDTA

Net Sales Realisation (Rs./MT) (RHS)

EBIDTA (Rs./MT) (RHS)

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Dhamra port financial snapshot


Hazira port

Hazira is set to emerge as the largest multi-product commercial port in south Gujarat. It is

capable of berthing Panamax vessels, liquid tankers and container vessels. The Hazira port is

located on the main broad gauge rail route between Delhi and Mumbai which is double track,

fully electrified and designed for fast trains which brings a strategic locational advantage.

Hazira port has six berths with an annual capacity to handle 30 MMT cargo and the potential

to handle 75 MMTPA of cargo in the coming years. During FY21-24E, we expect the capacities

to grow at 16% CAGR to 47 MMT. We expect volumes to grow at 13.6% CAGR to 32 MMT

leading to 15.8% CAGR growth in revenue to INR 1,999 cr. EBIDTA is expected to grow at 17.0%

CAGR to INR 1,537 cr. Margins are expected to remain stable at 76.9%.

Hazira port financial snapshot


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Dahej port

Dahej is equipped to handle all kinds of dry bulk and break-bulk cargo, including coal, fertilizers,

agri products, steel cargo and minerals, among others. It is capable of berthing Capesize and

Panamax vessels. It is connected to contiguous industrial hubs of Gujarat, Maharashtra and

eastern Madhya Pradesh. This port is also connected to the National Highway 8 through the

six-lane State Highway 6. Dahej port has a multi-user waterfront facility (Ro-Ro Jetty) to

support cargo movement.

It can handle 14 MMTPA with two dry and break-bulk berths and dedicated facilities for

handling project cargo. During FY21-24E, we expect the capacities to grow at 7.7% CAGR to 18

MMT. We expect volumes to grow at 30.1% CAGR to 12.9 MMT leading to 32.6% CAGR growth

in revenue to INR 680 cr. EBIDTA is expected to grow at 37.7% CAGR to INR 457 cr. Margins

are expected to remain stable at 67.1%.

Dahej port financial snapshot


Kattupalli port

Kattupalli is located on the Coromandel coast about 24 km north of Chennai Port. It is capable

of berthing fully loaded capesize vessels and container vessels. It has three berths with 710

quay length with an annual capacity to handle 18 MMT cargo. This port has an off-dock CFS

with 45,000 sq. ft. of closed warehouse and a gated complex with 6 lanes ensuring faster

turnaround times for trailers. The company has commenced liquid terminal operations;

handled 80,000 Tonnes of cargo.

The cargo volume was lower in H1FY22 due to the continued impact of COVID-19 in the

Chennai cluster, especially as the auto ancillary sector was impacted the most. However, since

then, the company has witnessed quarter on quarter improvement. Realization and margin

profile will continue to improve with growth in cargo volumes. The company has recently

captured a few new lines at the port, which will help improve volumes.

During FY21-24E, we expect the capacities to remains flat at 18 MMT. We expect volumes to

grow at 4.0% CAGR to 9.9 MMT leading to 5.3% CAGR growth in revenue to INR 270 cr. EBIDTA

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is expected to grow at 0.8% CAGR to INR 144 cr. Margins are expected to remain stable at

53.5%.

Kattupalli port financial snapshot


Krishnapatnam port (KPCL)

KPCL, acquired in FY21, is located on the east coast in the Nellore district of Andhra Pradesh

(~180 km from Chennai Port). KPCL has been developed under a 50-year concession starting

Mar-09 (30+10+10) from the AP government. As per the concession terms, KPCL currently pays

a revenue share of 2.6% of its gross revenue to the AP Government. It is the largest private

port on the east coast & the 2nd largest private port in the country. It is an all-weather, deep-

water port having 64 MMTPA of multi-cargo capacity. It is also equipped to handle dry, liquid

& container cargo and has 5 terminals with a combined quay length of 3.3 km.

It has road connectivity through an Internal Road network of 55 Kms, connected by a 25 kms

long dedicated four-lane road with four lane NH-5 Chennai Kolkata corridor. Upgradation of

the 4 lane to 6 lane road is in progress with ROW of 60 m. For rail connectivity, Krishnapatnam

Rail Co. Ltd. (KRCL) – SPV formed for Double Rail Line from Venkatachalam to Port. (15 Km)

with ROW of 30 m & Single Rail Line from Venkatachalam to Obulavaripalle (91 Km). KPCL holds

12.96% in KRCL.

APSEZ as per its master plan has approvals to enhance capacity to 300 MMTPA from current

64 MMTPA. Currently, only 3,064 acres of the 6,800 acres of available land has been

developed.

The company has a target to enhance the volume at KPCL to 100 MMT by FY25 and double its

EBIDTA by FY23.

100

150

200

250

300

75

125

175

225

275

325


Revenue

EBIDTA



30

35

40

45

50

55

60

65

6

8

10

12

14

16

18

20



Vol. (MMT)


7575

( 0 9 t h D e c 2 0 2 1 )


Capacity expansion potential at KPCL

Land Bank with Port Area in Acres

Total Land in Possession 4,621

Additional land allotted by Government & to be acquired 2,169

Total Land for the Port 6,790

Capex possibilities MMT

Existing Capacity 64

Debottlenecking plans 100

Port expansion potential 500


KPCL capacity break-up


The company has planned on reducing costs and to improve EBIDTA to 78% by FY25.

Dry Bulk Container Liquid

FY20 - 64 MMT

Dry Bulk Container Liquid

FY25 - 100 MMT

7676

( 0 9 t h D e c 2 0 2 1 )


Cost Saving measures at KPCL


During FY21-24E, we expect the capacities to grow at 4.8% CAGR to 74 MMT. We expect

volumes to grow at 38.3% CAGR to 52 MMT leading to 36.3% CAGR growth in revenue to INR

2,475 cr. EBIDTA is expected to grow at 40.2% CAGR to INR 1,905 cr. Margins are expected to

remain stable at 77.0%.

KPCL financial snapshot


Cost Saving measures Annual savings (Rs Cr)

(A) Operational Processes 80

Rationalized dumpers, wheel loaders, excavators etc. and process improvement 35

A decrease in repair & maintenance & fuel expenses due to equipment rationalization 20

Increased utilization of mechanized systems from 45% in Dec-19 to 55% in Nov-20 7

Others 18

(B) Contracting Processes 68

Activity-based costing 17

Fixed to the variable conversion of the equipment hired on a fixed period basis to per MT 13

Alternate sources of procurement of spares & consumables 12

Others 26

(C) Rationalization Processes 98

Insurance premium 46

Rationalization of rental and business promotion expenses 12

The decrease in consultancy & personnel expenses 12

Others 28

Grand total (A + B + C) 246

250

300

350

400

450

500

550

500

1,000

1,500

2,000

2,500

3,000

FY21 FY22E FY23E FY24E

Revenue

EBIDTA



25

30

35

40

45

50

55

60

65

70

75

15

25

35

45

55

65

75

85



Vol. (MMT)


7777

( 0 9 t h D e c 2 0 2 1 )


Gangavaram Port (GPL)

GPL commenced operations in 2009 (BOOT model) and has a 50-year concession till 2059.

Gangavaram port is a zero-debt company and has cash balance of INR 957 Cr as of 30-Sep-21.

In Q2FY22, APSEZ secured ownership of this asset post acquisition from Warburg Pincus (31.5%

stake) and Government of Andhra Pradesh (10.4%). With this APSEZ is currently holding a

41.9% stake in Gangavaram Port Ltd. (GPL).

The balance 58.1% stake is to be acquired from the DVS Raju family and in consideration 4.77

cr shares of APSEZ are to be issued. The entire transaction is done at a valuation of INR 6,200

cr (8.8x FY21 EV/EBIDTA).

GPL is an all-weather, deep water multipurpose port, located at Vizag. GPL has excellent

connectivity to service states which contribute ~43% of India’s GDP (the rich mineral and metal

industrial belt) and has excellent road and rail connectivity.

• Twin Railway line connectivity to the main broad gauge national network of "Chennai-

Visakhapatnam-Howrah".

• 4 lane expressway of 3.8 km connecting the port with the NH5 (Chennai - Kolkata), to

be widened to 6 lane under BharatMala Project (BMP).

It has an operational capacity of 64 MMTPA and having 9 berths with 19.5 m draft. Gangavaram

port has freehold land of 1,800 acres of which 800 acres available for future development. Also,

an additional leased land of 1,052 acres can be used for future development.

The company has a master plan to enhance capacity to 250 MMTPA with 31 berths.

Cargo Mix (%)


During FY22E-24E, we expect the capacities to remain flat at 47 MMT. We expect volumes to

grow at 13.0% CAGR to 47 MMT leading to 15.3% CAGR growth in revenue to INR 1,868 cr.


stable at 67.5%.

Non cocking coal Cocking coal Iron Ore Limestone Minerals Steel Others

7878

( 0 9 t h D e c 2 0 2 1 )


Gangavaram port financial snapshot


Vizhinjam port

Vizhinjam is a deep draft, all-weather port under construction in South Kerala. The first phase

of 17.59 MMTPA capacity is expected to be commissioned in FY23 while the second phase of

another 17.59 MMTPA capacity is expected to come up in FY24.

Vizhinjam Port is an ambitious plan of APSEZ to develop India’s first Mega Transshipment

Container Terminal at Vizhinjam, Kerala.

Vizhinjam port financial snapshot


200

250

300

350

400

600

800

1,000

1,200

1,400

1,600

1,800

FY22E FY23E FY24E

Revenue

EBIDTA



52

54

56

58

60

62

64

66

68

70

20

25

30

35

40

45

50

55

60

65

70

FY22E FY23E FY24E


Vol. (MMT)


0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

FY23E FY24E

Revenue

EBIDTA



0

5

10

15

20

25

30

35

40

45

0

5

10

15

20

25

30

35

40

FY23E FY24E


Vol. (MMT)


7979

( 0 9 t h D e c 2 0 2 1 )


Colombo port

APSEZ received a Letter of Intent (LOI) from the Ministry of Ports and Shipping of Sri Lanka for

the development and operations of the West Container Terminal (WCT) in Colombo, Sri Lanka

in FY21.

The first phase with a capacity of 26.39 MMTPA is schedule for commencement of operations

in FY24. The second phase with a capacity of 24.92 MMTPA is expected to be operational in

FY25.

Colombo port financial snapshot


Minor ports

Tuna terminal – It has capacity of 14 MMTPA and a draft of 16.2m. It is capable of handling

1,20,000 DWT vessels at berth and is equipped to handle all kinds of dry bulk and break-bulk

cargo, including coal, fertilizers, agri products, steel, cargo and minerals, among others. It is

connected to the National Highway 8A, a link to the Mumbai-Delhi corridor.

Mormugao terminal – It is located on the west coast of India in Goa. It has one berth terminal

with an annual capacity to handle 5.20 MMTPA cargo. It has permission to handle coal cargo

and has adequate infrastructure to handle Panamax and capesize vessels. This port has

locational advantage in servicing the Maharashtra and Karnataka hinterland.

Ennore terminal – This contemporary container terminal with an annual capacity to handle 12

MMT cargo is located in the northern suburbs of Chennai.

Vizag terminal – It is located on the east coast of India in the state of Andhra Pradesh. It has

one berth located in the northern arm of the inner harbour of Vishakhapatnam Port Trust with

a capacity to handle 6.41 MMTPA. It has permission to handle coal cargo and has adequate

infrastructure to handle Panamax vessels. It has strong rail-road connectivity to the hinterlands

of Andhra Pradesh, Telangana, Chhattisgarh and Odisha. Its infrastructure comprises of 280m

berth, two harbour mobile cranes, 2.22 km conveyor, two stacker-and-reclaimers with

mechanized wagon loading facility and large storage land area.

150

200

250

300

350

400

450

500

100

200

300

400

500

600

700

800

900

FY24E FY25E

Revenue

EBIDTA



0

5

10

15

20

25

30

35

40

45

50

0

10

20

30

40

50

60

FY24E FY25E


Vol. (MMT)


8080

( 0 9 t h D e c 2 0 2 1 )


Dighi port – The port is equipped to handle bulk and liquid cargo with an annual capacity of 8

MMTPA. It will empower APSEZ to service customers in Maharashtra, North Karnataka, West

Telangana and Madhya Pradesh.

During FY21-24E, we expect the capacities to flat to 63 MMT. We expect volumes to grow at

24% CAGR to 26.9 MMT leading to 26.3% CAGR growth in revenue to INR 728 cr. EBIDTA is

expected to grow at 35.0% CAGR to INR 139 cr. Margins are expected to grows to 19.1%.

Minor ports growth in numbers


APSEZ is among the five fastest growing port companies in the world and intends to retain this

position by targeting 500 MMT of cargo volume by 2025 (Indian market share of 40%).

APSEZ port volume estimation

H1FY22 FY30

Low Base High

Indian cargo (As per MIV 2030) MMT 504 1,790 2,165 2,570 APSEZ market share (%) 29 35 38 40

APSEZ cargo vol. (MMT) 144 627 823 1,028

Our assumption (MMT) 841.5


APSEZL has been in Capex mode over the last few years. Many of the port projects

commissioned in recent years are witnessing a gradual ramp-up in cargo volumes amid a

challenging external trade environment.

APSEZL has ongoing projects at Mundra, Kattupalli and Dhamra ports to enhance capacity,

which will boost cargo volumes in the long-term. The above projects would entail a total Capex

of about Rs. 3,000-3,500 crore annually over FY22E-FY23E.

APSEZ is building 10mn ton of LPG & LNG capacity at Mundra and another 10mn ton of capacity

at Dhamra. It is also targeting doubling these capacity in the coming five years for which

infrastructure is already in place. Dhamra port 5mn MT of capacity is sold out to IOCL for next

30 yrs.

(50)

0

50

100

150

200

250

300

(200)

0

200

400

600

800

1,000


Revenue

EBIDTA



15

20

25

30

35

40

45

50

5

15

25

35

45

55

65

75



Vol. (MMT)


8181

( 0 9 t h D e c 2 0 2 1 )





to remain stable at 68.7%.

Consolidated port segment growth in numbers


West-East coast parity

APSEZ after tasting success at its Mundra port, adopted a string of pearls strategy and today it

runs a portfolio of port assets across the 7500 km coastline. Today 60% of the traffic comes

from the western part of the country with the remaining being contributed by the ports on the

eastern coast.

West-East coast parity


150

200

250

300

350

400

450

500

550

3,000

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000


Revenue

EBIDTA



40

45

50

55

60

65

150

250

350

450

550

650

750



Vol. (MMT)


West East

FY02 - 100% West coast

H1FY22 - 60% West, 40% East coast

8282

( 0 9 t h D e c 2 0 2 1 )


Harbour services

Harbour services include the marine activities like pilotage and tug hire at the port locations of

Mundra, Hazira, Dahej, Kattupalli, Dhamra and Krishnapatnam (will include Gangavaram,

Vizhinjam and WCT in future).

Earnings growth of harbor services is directly linked with the consolidated volumes handle by

the company and EBITDA margin is ~85%. Since this is dollar denominated, it is impacted by

the currency volatility.

During FY21-24E, we expect the Harbour services revenue to grow at 20.4% CAGR to INR 2,459

cr. EBIDTA is expected to grow at 18.4% CAGR to INR 2,102 cr. Margins are expected to remain

stable at 85.5%.

Harbour service segment financial snapshot


82

83

84

85

86

87

88

89

90

91

500

1,000

1,500

2,000

2,500

3,000

3,500


Harbour Services Revenue (Rs.Cr) Harbour Services EBIDTA (Rs.Cr.)

EBIDTA Margin (%) (RHS)

8383

( 0 9 t h D e c 2 0 2 1 )


Logistics sector huge headroom for growth

According to industry estimates, the logistics sector in India is pegged at upwards of $160

billion, with an annual growth rate of 10.5%. The logistics industry is highly fragmented and

the organized sector accounts for a mere 10% of the total share. Strong growth supported by

government reforms, transportation sector development plans, growing retail sales and the E-

commerce sector are likely to be the key drivers of the logistics industry in India over the next

decade.

The logistics industry got recognition as a full fledge department only in 2019 under the Modi

government, when a draft National Logistic Policy was initiated. The policy aims to

• lower prohibitively high costs from 13% of the country’s GDP to 8% over five years,

• ensure faster movement of goods, and

• boost exports

The logistic sector remains extremely fragmented, involving 12 million employees, 200

shipping agencies and 36 logistics services. Any outcome of the national logistics policy will be

positive for large logistic companies, which have a presence across the entire value chain.

The future demand is for integrated end-to-end Logistics solutions which would include

development of Multimodal Logistics Parks (MMLPs), streamlined economic corridor routes

for efficient freight movement, and intermodal stations to connect various transportation

modes to ensure service integration.

Warehousing - exponential growth in the offing

The domestic warehousing space is highly fragmented and controlled by the unorganized

players, having small-sized warehouses (average size <10,000 SFT) with limited mechanization.

Warehousing has become one of the major segments of the rapidly growing Indian logistics

industry driven by the manufacturing and e-commerce industry. The sector is evolving fast,

with both the nature of the business and technology driving it, and undergoing dynamic

changes.

Sector-wise share of warehousing transactions

Source: AL Consulting, CARE Ratings, Company Reports & Ventura Research

26

36

17

7

14

E-commerce 3PL Engineering Retail Others

FY2131

61

2 3 3

E-commerce 3PL Engineering Retail Others

FY25E

8484

( 0 9 t h D e c 2 0 2 1 )


The e-commerce market in India, which was growing at a CAGR of 19.6% since FY20 has

suddenly shown a sharp increase of 25.9% since the lockdown. This growth is primarily led by

market giants like Amazon, Flipkart and other platform companies.

The current Grade A warehousing capacity is 164 mn Sqft and expected to increase to 370 mn

Sqft. In addition, over the next couple of years, industrial warehousing is expected to see a

surge in demand as global manufacturing units look to shift or diversify out of China. India, as

part of its plan to attract such manufacturing units, is looking at building warehouses at a

frantic pace.

Warehousing growth


Gati Shakti plan to give a boost to multimodal connectivity

The Prime Minister Narendra Modi launched Gati Shakti - National Master Plan for Multi-

modal Connectivity. This is essentially a digital platform to bring 16 Ministries, including

Railways and Roadways, together for integrated planning and coordinated implementation of

infrastructure connectivity projects. The multi-modal connectivity will provide integrated and

seamless connectivity for the movement of people, goods and services from one mode of

transport to another. It will facilitate the last mile connectivity of infrastructure and also reduce

travel time for people.

It will incorporate infrastructure schemes of various Ministries and State Governments like

Bharatmala, Sagarmala, inland waterways, dry/land ports, UDAN etc. Economic Zones like

textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial

corridors, fishing clusters, agri zones will be covered to improve connectivity and make Indian

businesses more competitive. It will also leverage technology extensively, including spatial

planning tools with ISRO imagery developed by BiSAG-N (Bhaskaracharya National Institute for

Space Applications and Geoinformatics).

4.4

1.090.8

0.020.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

USA UK China India

Per capita warehousing stock (Sq.ft.)

40

5561

6876

85

24

3337

4145

50

0

10

20

30

40

50

60

70

80

90

FY21 FY22E FY23E FY24E FY25E FY26E

Demand to reach ~370 mn Sqft. in next 5 years for Grade A

Total warehouse absorption Grade A warehouse absorption

8585

( 0 9 t h D e c 2 0 2 1 )


“In the coming days, we will launch PM Gati Shakti Plan, a 100-lakh crore national

infrastructure master plan which will make a foundation for holistic infrastructure and give an

integrated pathway to our economy,” PM Modi said.

As on 25th Nov, 2021, the Ministry of Ports, Shipping and Waterways identified 101 projects

under PM Gati Shakti National Master Plan to enhance port connectivity with consumption

and production centres.

Gati Shakti plan targets up to 2024-25

Source: PIB, Ventura Research

8686

( 0 9 t h D e c 2 0 2 1 )


Adani logistics

Adani Logistics (ALL) will be a one stop solution for providing integrated logistics solutions from

port gate to customer gate and return. Thus, providing a bouquet of services under logistics

platform including end mile connectivity. ALL is one of the leading end-to-end logistics service

providers in the country with a presence across all major markets. It is the leading private rail

operator in containerized transportation connecting all major seaports across India. The

company also provides customized solutions for automobiles, steel coil and liquid logistics.

APSEZ is focused on providing integrated supply chain solutions with a one stop customer

centric approach to capture higher wallet share. This will result in sustainable growth going

forward.

The present assets of the logistics verticals include the following

• The operational logisticspParks of the company includes those at Patli, Kishangarh,

Kila-Raipur, Malur and Nagpur with more in the pipeline, across India.

• 60 rakes (43 - container, 21 - GPWIS, 1 AFTO and 7 Agri Rakes),

• 800,000 sq ft of warehousing space,

• 5,000 + containers,

• 0.9 million metric tonnes of grain silos, and

• 6 inland waterways vessels

• 620 km of rail line

8787

( 0 9 t h D e c 2 0 2 1 )


Integrated end-to-end logistics solution offered by APSEZ


8888

( 0 9 t h D e c 2 0 2 1 )


Logistics Park

The company operates multi-modal logistics parks with rail connectivity at Patli, Kishangarh,

Kilaraipur, Kanech and Malur with a cumulative capacity of ~500,000 TEUs spread across 400

acres. The company’s ICD services (custom clearance) are available at Patli & Kilaraipur. In

addition, storage solutions for containers, bulk & break-bulk cargo and automobiles are also

provided. The company provides value-added services like sorting, labelling, packing, etc.

Logistics parks, currently under development at Nagpur and Mundra, are expected to be

operationalized in FY22.

Auto Logistics

This segment operates 1 BCA-CBM rake (JV with NYK Logistics) for rail transportation of

automobiles. This service helps to connect auto manufacturing hubs with gateway ports and

consumption centers (and storage yard options available pan-India). It also provides last mile

distribution to dealer locations. The company is specializing in the rail movement of finished

cars in containers using patented equipment designed especially for a large automobile

customer. It has dedicated RO-RO facility available at Adani Port, Mundra with pre-dispatch

storage capacity of 20,000 cars.

Inland Waterways

The company has dedicated inland vessels for cargo transportation using inland waterways. It

has Fleet of 6 inland vessels and also looking to expand this offering. Vessel capacities range

from 64 TEUs to 68 TEUs.

The company also undertakes transportation of bulk, break bulk and containers on National

Waterways 1 and National Waterways 2 (through Indo Bangladesh Protocol Route).

8989

( 0 9 t h D e c 2 0 2 1 )


Inland Waterways Locations


Bulk Cargo Rail Logistics Solutions

The company operates 21 BOXN-HL rakes (under GPWIS) for transportation of bulk cargo viz.

coal, limestone, iron ore, etc. It also provides assurance of rake supply through dedicated rakes

for various customers viz. steel, cement & power plants to address their supply chain

requirements. This service provide cost savings to end customers in the form of reduced

demurrage charges (vessel/ rake), handling loss, idle freight loss, etc.

This service is currently deployed on the east coast of India for easing logistics of bulk material

between the ports and major industrial units. There is further scope for pan-India deployment

for connecting gateway ports, mines or production centres with consumption centres.

9090

( 0 9 t h D e c 2 0 2 1 )


Bulk cargo rail logistics locations


Container Rail Logistics Solutions

APSEZ is India’s largest private container train operator – it operates 43 container trains (BLCM)

under Category-I license issued by Indian Railways. It provides transportation of container

cargo from Gateway ports (Mundra, Pipapav, Ennore & Dhamra) to logistics parks located in

Patli, Kishangarh, Kilaraipur, Kanech, Malur and other network locations. It also provides

customized solutions for containerized rail transportation of automobiles, steel coil and liquid

cargo.

9191

( 0 9 t h D e c 2 0 2 1 )


Container Rail Logistics Locations


9292

( 0 9 t h D e c 2 0 2 1 )


Rail assets of APSEZ


Sarguja Rail Corridor (SRCPL)

APESZ is consolidating its rail track assets by acquiring Sarguja Rail Corridor (SRCPL). SRCPL has

70 km of track length, capacity to handle 16 rakes per day. SRCPL has 50 years of land lease till

2065. The company has 30 years of Track Access & Usage Agreement (TAUA) with Rajasthan

Rajya Vidyut Utpadan Nigam Limited (RRVUNL) Till 2044. This asset has the potential to handle

~100 MMTPA with ~40 MMTPA of visibility for the near to mid-term. Acquisition of SRCPL will

resulted in equity dilution of ~7 cr shares.

SRCPL track capacity


The company has plan to expand into the logistics segment to enhance its integrated logistics

market share. Also, the company has entered the warehousing business which has huge

growth potential going forward with higher profitability margin.

9393

( 0 9 t h D e c 2 0 2 1 )


ICDs building on DFC corridors

There was an open bidding process run by DFCCIL and the company has acquired eight strategic

assets on these DFC corridors, on the western DFC as well as the eastern DFC. The company

will have to sign the formal Letter of Agreement (LOA) in the next few months. After that the

company will construct ICD in these eight strategic locations in the next three years, which

means acquisition of land, making the detail project report, commencing the construction, and

operationalizing this asset. The company is well poised to complete these 8 stations within the

stipulated lines of three years and this will add on to the current fleet of ICD. This may need a

tentative capex of INR 50-150 cr depending on the size of the land and facility to be build there.

ICDs of APSEZ locations are New Palghar, New Sanjali, New Dadri, New Chawapail, New

Bhimsen, New Gholwad, New Gothangam and New Phulerain at WDFC and EDFC.

Each of the ports in Gujarat has its own strength and captive cargo catchment. Mundra with

adequate capacity does stand to gain more initially. Predominantly, Mundra Port would pose

a challenge to JNPT once the partial commissioning of DFC is done.

All the above enumerated logistics services are clubbed under container revenues. While the

container revenues over FY18-21 grew at 1% CAGR to INR 848 cr, EBIDTA has experienced

35.7% CAGR to INR 190 cr due to the operationalization of the value enhancing services. Going

ahead, we expect an upward trajectory of 45.7% CAGR in revenues to INR 2,620 cr with a

50.1% CAGR in EBIDTA to INR 642 cr over FY21-24. Margins too are set to expand by 209bps

to 24.5% over the forecast period.

Container segment financial snapshot


Warehousing

The company has the capability to deliver warehousing solutions pan-India. Its current

warehousing capacity of 800,000 sq. ft. is expected to witness a quantum jump to reach 60mn+

5

10

15

20

25

30

50

550

1,050

1,550

2,050

2,550

3,050


Container Revenue Container EBIDTA EBIDTA Margin (%) (RHS)

9494

( 0 9 t h D e c 2 0 2 1 )


sq.ft. by 2025 by way of organic expansion (50%) and inorganic acquisition (50%). Additional

warehousing projects are being developed at Taloja (Mumbai), Nagpur, Patli (Gurugram),

Chennai and Mundra.

At its warehouses, several options such as bonded, domestic, FTWZ, cargo-specific, as well as

built to suit facilities are offered. It also provides value-added services like sorting, quality

inspection, labelling, packing, omni-channel distribution, etc. Particularly at the FTWZ at

Mundra, benefits include duty deferment, tax exemptions, ease of re-exporting and other

value-added services.

Strategic partnership with Flipkart

Flipkart, India’s leading e-commerce marketplace, it has announced a strategic and commercial

partnership with the APSEZ. In this two-pronged partnership, Flipkart will work with Adani

Logistics Ltd, a wholly owned subsidiary of APSEZ, to strengthen Flipkart’s supply chain

infrastructure and further enhance its ability to serve its rapidly growing base of customers.

As part of this partnership, Adani Logistics will construct a massive 534,000 sq. ft. fulfilment

centre in its upcoming logistics hub in Mumbai that will be leased to Flipkart to address the

growing demand for e-commerce in Western India and support market access of several

thousands of sellers and MSMEs in the region. The centre is expected to be operational in

Q3FY22 and will have the capacity to house 10 million units of sellers’ inventory at any point.

Warehousing locations


9595

( 0 9 t h D e c 2 0 2 1 )


Aspirational inorganic growth footprint for warehousing


During FY21-24E, we expect the warehousing capacities to grow at 225.5% CAGR to 14 SFT

leading to 278% CAGR growth in revenue to INR 514 cr. EBIDTA is expected to grow at 280.2%

CAGR to INR 437 cr. Margins are expected to remain stable at 85%.

9696

( 0 9 t h D e c 2 0 2 1 )


Warehousing segment financial snapshot


Agri Logistics

The company operates 7 BCBFG rakes for transportation of food grains from base depots in

the North to field depots across numerous locations in India. It has 21 storage infrastructure

facilities (14 operational, 3 under implementation & 4 awarded) in 9 states across India. Also,

the company has 1.275 MMT Silo Capacity (69% operational, 31% contracted & under

implementation).

These facilities are connecting major food grain producing states viz. Punjab, Haryana &

Madhya Pradesh with major consumption centers located in Karnataka, Tamil Nadu,

Maharashtra, West Bengal & Gujarat through a pan-India network of procurement &

distribution silos.

APSEZ has setup India’s first integrated bulk handling, storage, and logistics system for food

grains. The scope includes

• procurement in bulk from farmers,

• cargo cleaning,

• storage in steel silos,

• high-tech preservation,

• real-time monitoring, and

• transport to field depots by rail wagons in bulk

The company provides a seamless end-to-end bulk supply chain to The Food Corporation of

India.

It also provides quality assurance where incoming cargo from farmers is checked for eight

quality parameters set out by the Government of India prior to storage and preservation in

silos. Outgoing cargo is also checked on similar quality parameters to ensure quality of food

grains distributed through PDS and other welfare schemes of GOI.

250

270

290

310

330

350

370

390

20

120

220

320

420

520

620

FY22E FY23E FY24E

Warehousing Revenue

Warehousing EBIDTA

Net Sales Realisation (Rs./Sq.Ft) (RHS)

EBIDTA (Rs./Sq.Ft) (RHS)

1

3

5

7

9

11

13

15

FY22E FY23E FY24E

Installed capacity (Sq.Ft)

9797

( 0 9 t h D e c 2 0 2 1 )


Agri logistics Locations


During FY21-24E, we expect the agri logistics revenue to grow at 30.6% CAGR to INR 245 cr.

EBIDTA is expected to grow at 26.9% CAGR to INR 74 cr. Margins are expected to remain stable

at 30%.

9898

( 0 9 t h D e c 2 0 2 1 )


Agri logistics segment financial snapshot


During FY21-24E, we expect the logistics revenue to grow at 52.2% CAGR to INR 3,380 cr.


stable at 34.1%.

Logistics segment financial snapshot


20

25

30

35

40

45

50

55

60

25

45

65

85

105

125

145

165

185

205

FY20 FY21 FY22E FY23E FY24E

Agri logistics Revenue (Rs.Cr.) Agri logistics EBIDTA (Rs.Cr.)

EBIDTA Margin (%) (RHS)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


Growing logistics segmental revenue (Rs.Cr.)

Container Agri logistics Warehousing

0

20

40

60

80

100

120


Logistics revenue mix (%)

Container Agri logistics Warehousing

9999

( 0 9 t h D e c 2 0 2 1 )


Logistics assets and expansion plan


Bidding for CONCOR

CCEA granted in-principal approval for the strategic disinvestment of the Government of India

(GoI) share in Container Corporation of India (CONCOR). The GoI is looking to divest 30.8% in

CONCOR, along with transfer of management control.

The acquisition of CONCOR is a strategic fit, considering the ambitious growth plans of APSEZ.

The company is focusing on the acquisition of CONCOR, which will help to gain market share.

The company has plans to gain market share with or without winning CONCOR. If it wins

CONCOR then it will reduce organic capex to build capacity. By winning CONCOR it will become

the first logistic company of India. And if it does not win CONCOR, it will be the second largest,

post CONCOR. The company foresees immense competition over the next few years, which

will eliminate many logistics players from the business. Consolidation will take place due to

price wars, etc.

Special Economic Zone (SEZ)

Spanning an area of 15,000 hectares, the Mundra Economic Hub offers investment options at

the largest multi-product Special Economic Zone (SEZ), Free Trade and Warehousing Zone

(FTWZ) and Domestic Industrial Zone. It is well connected via all forms of connectivity,

including an Airport at Mundra, which can handle large passenger and cargo planes.

A ready ecosystem is available for future development. Businesses can set up their factories

on a turn-key basis.

100100

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SEZ segment growth in numbers


FY21 peak of balance sheet leverage. Strong cashflow generation to enable

APSEZ become net debt free by FY27

The company has been in an extremely rapid growth phase which has been funded primarily

by debt. Despite the aggressive expansion, the balance sheet leverage continues to be under

control with the net debt/equity of 0.9x and net debt/EBIDTA of 3.6x as of FY21. The strong

cashflow generation FY21 onwards should enable the company to not only finance its growth

through internal accruals but achieved a net debt free status by FY27.

Balance sheet - significant deleveraging on the cards


0

100

200

300

400

500

600

700

800

900


SEZ Revenue SEZ EBIDTA

0

1

1

2

2

3

3

4

4

5

0

10,000

20,000

30,000

40,000

50,000


Stable balance sheet strength

Total Debt Net Debt


0

20

40

60

80

100

120

140

160

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000


Strong cash flow generation

CFO FCF


INR (Cr) INR (Cr) % X

101101

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APSEZ is committed to improving at ESG front

In line with the In line with India's commitment to net zero targets at COP26 of the Government

of India, APSEZ developed a vision of emerging as a zero waste Company in 2014 by adopting

the 5R principles of waste management.

In FY18-19, 5718 MT of waste was disposed of. In FY19-20, this declined to 2610 MT and in

FY20-21 it declined to 2042 MT.

APSEZ businesses and future investments are aligned to sustainable growth with a focus on

preserving the environment and inclusive growth. The ESG framework rests on three pillars –

firm commitments, guiding principles and policies.

• Climate change, biodiversity conservation, the safety of the workforce, sustainable

livelihood, sustainable supply chain, customer centricity and ensuring world-class

corporate governance structure continues to be APSEZ’s focus areas.

• APSEZ is the first port company in India to become a supporter of TCFD. Thus, it is

aligning disclosures to global standards.

• APSEZ is the first port company in India to come out with its vision of achieving carbon

neutrality by 2025.

• In the area of bio-diversity, APSEZ is the largest corporate in India that have carried

out massive mangrove afforestation to the tune of 2989 hectares and also is

conserving mangrove of over 2596 Hectares at Mundra. APSEZ is committed to

increasing mangrove afforestation area of up to 4000 hectares and 1200 hectares of

terrestrial plantation area by FY2025.

• The company consider safety as a value and APSEZ is committed to ensuring zero

fatalities at its ports, safety is one of the KPIs for CEO of various locations with their

annual incentives linked to it.

APSEZ’s environmental commitments


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APSEZ’s social philosophy


APSEZ’s governance policy


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Management Quality 8 Low The management is of decent quality. It has been able to deliver growth by taking calculated risks.

Promoters Holding Pledge 5 Moderate The promoter holding is 63.83% and there is 15.33% of promoter pledging as of Sept 2021.

Board of Directors Profile 7 Low The average experience of directors is >20 years with significant experience in industry. Also, many of the board members have been working since inception with the company.


Industry Growth 7 Low

Ports are the gateways for EXIM trade and they play a crucial role in India’s international trade. According to the Ministry of Shipping, approximately 95% of the country’s trade by volume and 70% by value moves through maritime transport.

Regulatory Environment or Risk 6 Moderate The company is impacted by the global trades environment and any disruption in global trades could have an adverse impact. The company is exposed to a range of environmental laws & regulations.

Entry Barriers / Competition 8 Low Entry of a new company in the port industry would require a strong capital base and a huge investment.

Business Prospects

New Business / Client Potential 8 Low

The company has a leading market share in private port players in India and is working on becoming the larger integrated logistics player. Also, working aggressively towards gaining market share which will resulted into further growth.

Business Diversification 7 Low The company is focusing on providing entire integrated logistics solutions which diversify the business from being only a port player.

Market Share Potential 8 Low APSEZ is the largest private port player.

Margin Expansion Potential 7 Low Cost rationalization, diversifying revenue, improving utilization of recently acquired assets will helps to APSEZ to improve its profitability and financial strength.

Earnings Growth 8 Low Higher economic growth and growth of EXIM trades will result into higher profitable growth.

Valuation and Risk

Balance Sheet Strength 6 Moderate Higher debt on the balance sheet drags down its strength, return ratio and higher interest burden but better revenue mix and higher growth can provide support to sustain its financial profile.

Debt Profile 6 Moderate Moderate debt on the balance sheet and fruit of aggressive capex plans will help to strengthen balance sheet.

FCF Generation 7 Low With all the key drivers in place, we are expecting positive FCF generation.

Dividend Policy 6 Moderate The company has paid dividend in the past 6 years but higher debt and aggressive capex can lower dividend payments.

Total Score

Ventura Score (%)

104

70 Moderate

The overall risk profile of the company is good and we consider it as a Moderate risk company for investments


104104

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We analyzed the FY21 annual report of APSEZ and our key observations are as follows:

Key Takeaways

• Inorganic growth: The Company completed 75% acquisition of Krishnapatnam port

and entered into a definitive agreement for the acquisition of the balance 25% stake

for an Enterprise Value of INR 13,675 crore. The company is operating at a capacity of

64 MMT; the port has an approved master plan for 300 MTPA; the company plans to

take annual throughput above 100 MMT in a few years. The company completed the

acquisition of Dighi port in February 2021 for INR 705 crore under the Corporate

Insolvency Resolution Plan. The company plans to invest INR 10,000 cr and develop

Dighi port as an alternative gateway to Jawaharlal Nehru Port Trust (JNPT) operations

in Navi Mumbai. The company emerged as India’s first private sector rail track

Company by acquiring SRCPL to invest in strategic rail lines under the PPP model. It

also announced the setting up of a container terminal at Colombo port in partnership

with John Keells and SLPA.

• Opex cost optimisation: The company is moving from fixed costs to variable costs

wherever possible, renegotiating operational contracts through re-engineering,

reducing built-in escalation and redeploying manpower and machines. The Company

digitized processes and improved resource utilization to optimize costs, which

strengthened EBIDTA margins by 100 bps and is likely to expand 200-250 bps following

increased volumes in the next few years.

• Mundra, the largest container port: The Company’s Mundra port, the largest

commercial port in India, emerged as the largest container handling port in FY 2020-

21 (surpassing JNPT) with a market share of 32% (gain of around 5%).

• New growth from entering into the warehousing segment: Adani Logistics (ALL)

forayed into the warehousing sector with the vision to become the largest player in

this sector in five years. ALL set target to build 30 million sq. ft. warehousing capacity

during this period. As a part of this plan, ALL announced a strategic and commercial

partnership with e-commerce major Flipkart to strengthen its supply chain

infrastructure. ALL will construct a massive 5,34,000 sq. ft. fulfilment center by

leveraging state-of-the-art technologies in its proposed logistics hub in Mumbai.

• Winning bid for ICDs at DFC corridor: As a part of expansion into the Inland Freight

Terminal business, ALL emerged as a successful bidder and received Letter of Award

from DFCCIL for the development of freight terminals with exclusive station

connectivity across eight locations (New Palghar, New Sanjali, New Dadri, New

Chawapail, New Bhimsen, New Gholwad, New Gothangam and New Phulerain WDFC

and EDFC). Once developed, these terminals on WDFC will enjoy direct DFC corridor

connectivity.

• Goal of the company: Emerge as India’s largest ports company with 500 MMT cargo

throughput by 2025 and emerge as the world’s largest ports company by 2030.

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Pay Grades

The remuneration growth of KMP is in line with the performance of the company. The

Chairman has not taken any hike in remuneration in the last five years.

Remuneration in the last 5 years


Management & Leadership Team Turnover

Details on Board of Director and KMPs


Auditor qualifications & significant notes to accounts

Deloitte Haskins & Sells LLP is the auditor and there were no qualifications/emphasis of

matters highlighted by them in the FY21 Annual Report.

Parameter (Fig in INR Cr) FY17 FY18 FY19 FY20 FY21 CAGR%

Chairman & MD 2.8 2.8 2.8 2.8 2.8 0.0

Share in Total Employee Cost (%) 0.7 0.6 0.5 0.5 0.5

Chief Financial Officer 3.5 5.1 5.7 7.1 7.0 18.7


Remuneration of SVP/VP/GM 11.6 13.1 11.7 14.5 14.7 6.1


Employee Cost 383.1 447.3 529.8 546.5 615.1 12.6

Employee Cost as % of Revenue (%) 4.5 4.0 4.8 4.8 4.9

Board of Director & KMP FY17 FY18 FY19 FY20 FY21

Gautam S Adani CM & MD CM & MD CM & MD CM & MD CM & MD

Avantika Singh Aulakh NED NED

Rajesh S Adani NED NED NED NED NED

Malay Mahadevia WTD WTD WTD WTD WTD

Karan Adani WTD WTD WTD WTD WTD

Ganesan Raghuram ID ID ID ID ID

Gopal Krishna Pillai ID ID ID ID ID

Nirupama Rao ID ID ID

Bharat Sheth ID ID ID

P S Jayakumar ID

Kamlesh Bhagia CS CS CS CS

Dipti Shah CS

Mukesh Kumar NED NED

Radhika Haribhakti ID ID ID

Sanjay Lalbhai ID ID

Deepak Maheshwari CFO CFO CFO CFO

CM-Chairman NED-Non Executive Director

MD-Managing Director ID-Independent Director

CFO-Chief Financial Officer CS-Company Secretary

WTD-Whole Time Director

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Major Related Party Transactions with promoters and KMPs

In the last five years, we can see higher related party transactions.

Related Party Transactions are relatively low



Contingent liabilities were rather high in FY17-20 compared to the net worth and revenue,

which has reduced in FY21. These are mostly from disputes on Income Tax.

Contingent Liabilities are reasonably high


Management Team



• Concession period of Mundra port

Concession period of Mundra port will end in 2031. The company is confident of

renewing the concession. However, in case the concession lapses then the company

will face adverse financial impact as the Mundra port is the mainstay of its operations.

• Exit of Myanmar business can be at a discount to book value

Parameter (Fig in INR Cr) FY17 FY18 FY19 FY20 FY21

Related Party Trans 3,116.3 5,084.5 4,953.9 3,947.4 3,052.6

Compensation to KMP 18.9 21.3 20.8 24.4 24.3

Transactions as % of Revenue (%) 37.1 45.1 45.5 34.7 24.5

Parameter (Fig in INR Cr) FY17 FY18 FY19 FY20 FY21

Claims against the company not acknowledged 1,331.2 1,272.3 1,834.6 1,445.9 631.6

Transactions as % of Revenue (%) 15.8 11.2 16.8 12.6 5.0

Transactions as % of Net Worth (%) 7.6 6.0 7.5 5.6 2.1


Mr. Gautam Adani Chairman & MD

Mr. Gautam Adani has over 36 years of business experience. Under his leadership, the

Adani Group has emerged as a global integrated infrastructure player with interests

across resources, logistics and energy verticals.

Mr. Rajesh Adani Non-Executive Director

Mr. Rajesh Adani has been associated with Adani Group since its inception. He is in-

charge of the operations of the Group and is responsible for developing its business

relationships.

Mr. Karan Adani CEOMr. Karan Adani holds a degree in economics from Purdue University, USA. He started

his career by learning about the intricacies of port operations at Mundra.

Dr. Malay Mahadevia Whole-Time Director

Dr. Malay Mahadevia holds a master’s degree in dental surgery from Nair Hospital

Dental College. He completed his Doctor of Philosophy in coastal ecology around

Mundra area, Kutch District, from the Gujarat University in 2008.

107107

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To accomplish its business goals in Myanmar, the company established a 100%

subsidiary, Adani Yangon International Terminal Company Limited (AYITCL) in February

2019. In May 2019, the company announced its intent to set up a container terminal

at Yangon, Myanmar, and entered into a lease agreement with the democratically

elected government at that time. The military coup and subsequent violence in

Myanmar have resulted in uncertainty. APSEZ will abandon the project and write down

project investments in full. The write-down will not materially impact the Balance

Sheet as it is equivalent to about 1.3% of the total assets of APSEZ.

• Promoters stake at Pledge

Promoter's pledge at APSEZ has come down significantly in past 12 months from the

high of 50%+ of promoter's holding to currently the same is less than 10% of total

holding and 15% of promoter's holding as per last fillings. The promoters have pledged

stake worth of Rs.19933 cr. The promoters intend to revoke the the entire pledge in

12-18 months.

Pledge as a % of total Shares held by Promoters


• Higher related party transactions

APSEZ has higher receivables from the related party which is keeping its receivables

days relatively high compared to its peers. The company has started working on an

issue that has resulted in a fall in the related party’s receivables as a % of total

receivables. Receivable from related parties like Adani Power and Adani enterprises

have been coming down progressively and help improve working capital cycle as well

as improve DSO.

10

20

30

40

50

60

70

Q3F

Y16

Q4F

Y16

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

Q3F

Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

Q1F

Y20

Q2F

Y20

Q3F

Y20

Q4F

Y20

Q1F

Y21

Q2F

Y21

Q3F

Y21

Q4F

Y21

Q1F

Y22

Q2F

Y22

108108

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Higher receivables from related parties


• The operation of the company has a direct dependency on the domestic and

international economic growth. Any slowdown in the economy will have an adverse

impact on the performance of the company.

• Ports are a gateway to the seas and any weather conditions can impact operations.

4

14

24

34

44

54

64

74

400

900

1,400

1,900

2,400

2,900

3,400

3,900

4,400

4,900

FY15 FY16 FY17 FY18 FY19 FY20 FY21

Total Receivables

Related party Receivables

Related Party receivable % of Total Receivables

Related Party receivable % of Revenue

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Fig in INR Cr (unless specified) Q1FY20 Q2FY20 Q3FY20 Q4FY20 FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 FY21 Q1FY22 Q2FY22 FY22E FY23E FY24E

Revenue from operations 2,794.5 2,821.2 2,902.0 2,921.2 11,438.8 2,292.7 2,902.5 3,746.5 3,607.9 12,549.6 4,556.8 3,532.4 16,917.3 19,954.7 24,106.2

YoY Growth (%) 4.7 (18.0) 2.9 29.1 23.5 9.7 98.8 21.7 34.8 18.0 20.8

Raw Material Cost 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

RM Cost to Sales (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Employee Cost 132.5 135.2 128.1 150.7 546.5 140.4 147.0 160.7 167.0 615.1 164.1 168.2 710.4 827.5 990.1

Employee Cost to Sales (%) 4.7 4.8 4.4 5.2 4.8 6.1 5.1 4.3 4.6 4.9 3.6 4.8 4.2 4.1 4.1

Other Expenses 818.9 1,374.8 632.0 2,130.8 5,387.5 794.4 905.0 1,097.8 1,130.0 3,951.1 2,161.7 1,157.4 5,359.4 6,214.9 7,600.7

Other Expenses to Sales (%) 29.3 48.7 21.8 72.9 47.1 34.7 31.2 29.3 31.3 31.5 47.4 32.8 31.7 31.1 31.5

EBITDA 1,843.0 1,311.1 2,141.8 639.7 5,504.7 1,357.9 1,850.6 2,488.0 2,311.0 7,983.4 2,231.0 2,206.8 10,847.5 12,912.3 15,515.4

EBITDA Margin (%) 66.0 46.5 73.8 21.9 48.1 59.2 63.8 66.4 64.1 63.6 49.0 62.5 64.1 64.7 64.4

Net Profit 1,022.4 1,054.2 1,352.2 334.4 3,763.1 758.0 1,387.0 1,561.5 1,287.8 4,994.3 1,306.7 951.7 5,591.7 6,762.3 8,769.9

Net Margin (%) 36.6 37.4 46.6 11.4 32.9 33.1 47.8 41.7 35.7 39.8 28.7 26.9 33.1 33.9 36.4

Adjusted EPS 5.0 5.2 6.7 1.6 18.5 3.7 6.8 7.7 6.3 24.6 6.4 4.7 27.5 33.3 43.2

P/E (X) 39.2 29.5 26.4 21.8 16.8

Adjusted BVPS 126.1 150.7 172.6 198.6 231.8

P/BV (X) 5.8 4.8 4.2 3.7 3.1

Enterprise Value 1,78,800.1 1,85,151.3 1,83,284.8 1,79,684.8 1,74,273.0

EV/EBITDA (X) 32.5 23.2 16.9 13.9 11.2

Net Worth 25,623.5 30,628.3 35,069.2 40,343.8 47,096.6

Return on Equity (%) 14.7 16.3 15.9 16.8 18.6

Capital Employed 55,699.3 65,569.1 82,030.0 87,373.8 94,270.5

Return on Capital Employed (%) 6.1 7.2 8.2 9.4 10.7

Invested Capital 48,373.5 59,729.5 62,304.0 63,978.5 65,319.6

Return on Invested Capital (%) 7.9 9.8 13.2 15.8 19.0

Cash Flow from Operations 7,401.8 7,555.8 8,563.2 13,508.9 16,148.7

Cash Flow from Investing (750.4) (14,142.7) (5,635.1) (6,333.3) (4,758.9)

Cash Flow from Financing (4,255.6) 3,513.9 8,658.7 (5,554.0) (6,018.2)

Net Cash Flow 2,395.8 (3,073.0) 11,586.8 1,621.6 5,371.6

Free Cash Flow 1,717.2 4,266.3 2,121.2 6,509.1 8,237.4

FCF to Revenue (%) 15.0 34.0 12.5 32.6 34.2

FCF to EBITDA (%) 31.2 53.4 19.6 50.4 53.1

FCF to Net Profit (%) 45.6 85.4 37.9 96.3 93.9

FCF to Net Worth (%) 6.7 13.9 6.0 16.1 17.5

Total Debt 30,075.8 34,940.8 46,960.8 47,030.0 47,173.9

Net Debt 22,750.0 29,101.3 27,234.8 23,634.7 18,223.0

Net Debt to Equity (X) 0.9 1.0 0.8 0.6 0.4

Net Debt to EBITDA (X) 4.1 3.6 2.5 1.8 1.2

Interest Coverage Ratio (X) 2.0 2.6 2.5 2.4 3.0

110110

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Q2FY21

Business Performance POSITIVE Revenues up 2.9% YoY to INR 2,903 cr, EBITDA up 75.1% to INR 2,296 cr, PAT up 31.6% YoY to INR 1,387 cr.

Port revenue up 3% YoY to INR 2,432 cr, Logistics revenue down 9.8% YoY to INR 231 cr.

Outlook & Strategy POSITIVE Sales guidance for FY22: INR 12,500-13,000 cr. EBITDA guidance for FY22: INR 8,000-8,500 cr.

Q3FY21

Business Performance POSITIVE Revenue up 12% YoY to INR 3,746 cr. On the back of 37% growth of cargo volume, Port revenue grew by 35% and port EBITDA by 38%. Logistics revenue up 8% YoY to INR 259 cr.

Outlook & Strategy POSITIVE Sales guidance for FY22: ~INR 12,700 cr. EBITDA guidance for FY22: ~INR 8,200 cr.

Q4FY21

Business Performance POSITIVE Revenue up 24% YoY to INR 3,608 cr. On the back of 27% growth of cargo volume, Port revenue grew by 30% and port EBITDA by 42%. Logistics revenue down 7% YoY to INR 268 cr.

Outlook & Strategy POSITIVE Sales guidance for FY22: INR 16,000-16,800 cr. EBITDA guidance for FY22: INR 10,200-10,700 cr.

Q1FY22


Revenues up 98.8% YoY to INR 4,556.8 cr, EBITDA up 64.3% to INR 2,231.0 cr, PAT up 72.4% YoY to INR 1,306.7 cr. Port revenue up 110.3% YoY to INR 3,811.8 cr, Logistics revenue up 34.0% YoY to INR 268 cr, Harbour services revenue up 70.4% YoY to INR 477 cr.


Logistics revenue increased on account of higher rail volume (up 10%), terminal volume (up 13%) and higher bulk cargo handled through GPWIS (up 59%). Mundra port continues to be the largest commercial port, 19% ahead of the second largest port Deendayal (Kandla) Port. Sales guidance for FY22: INR 18,000-18,800 cr (including inorganic acquuisition). EBITDA guidance for FY22: INR 11,500-12,000 cr.

Q2FY22

Business Performance POSITIVE Revenues up 21.7% YoY to INR 3,532.4 cr, EBITDA up 19.3% to INR 2,206.8 cr, PAT down 31.4% YoY to INR 951.7 cr.

Port revenue up 21.3% YoY to INR 2,805.4 cr, Logistics revenue up 20.3% YoY to INR 278 cr, Harbour services revenue up 25.1% YoY to INR 449 cr.

Due to exceptional item the company has to face lower PAT in Q2FY22

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Volume has improved YoY due to improvement in EXIM trades. Acquisition of 10.4% stake in Gangavaram Port (GPL) held by Government of Andhra Pradesh is completed for a consideration of Rs.645 Cr. With this APSEZ holds 41.9% stake in GPL. The Board has decided to actively work on a plan on exiting Company’s investment in Myanmar including divestment opportunities. Sales guidance for FY22: INR 18,000-18,800 cr (including inorganic acquuisition). EBITDA guidance for FY22: INR 11,500-12,000 cr.


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Appendix

Cluster-wise potential Coal Traffic by 2030


Cluster-wise potential POL Traffic by 2030


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Cluster-wise potential Iron Ore Traffic by 2030


Cluster-wise potential Container Traffic by 2030


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Fig in INR Cr (unless specified) FY19 FY20 FY21 FY22E FY23E FY24E Fig in INR Cr (unless specified) FY19 FY20 FY21 FY22E FY23E FY24E

Income Statement Per share data & Yields

Revenue 10,925.4 11,438.8 12,549.6 16,917.3 19,954.7 24,106.2 Adjusted EPS (INR) 18.6 17.5 23.2 26.0 31.5 40.8

YoY Growth (%) 4.7 9.7 34.8 18.0 20.8 Adjusted Cash EPS (INR) 25.0 25.3 33.0 38.1 44.6 55.1

Raw Material Cost 0.0 0.0 0.0 0.0 0.0 0.0 Adjusted BVPS (INR) 115.1 120.2 149.3 170.0 194.5 225.9

RM Cost to Sales (%) 0.0 0.0 0.0 0.0 0.0 0.0 Adjusted CFO per share (INR) 28.1 34.4 35.2 39.8 62.8 75.1

Employee Cost 529.8 546.5 615.1 710.4 827.5 990.1 CFO Yield (%) 3.9 4.7 4.8 5.5 8.7 10.3

Employee Cost to Sales (%) 4.8 4.8 4.9 4.2 4.1 4.1 Adjusted FCF per share (INR) 17.7 8.0 19.8 9.9 30.3 38.3

Other Expenses 3,804.1 5,387.5 3,951.1 5,359.4 6,214.9 7,600.7 FCF Yield (%) 2.4 1.1 2.7 1.4 4.2 5.3

Other Exp to Sales (%) 34.8 47.1 31.5 31.7 31.1 31.5

EBITDA 6,591.6 5,504.7 7,983.4 10,847.5 12,912.3 15,515.4 Solvency Ratio (X)

Margin (%) 60.3 48.1 63.6 64.1 64.7 64.4 Total Debt to Equity 1.1 1.2 1.1 1.3 1.1 1.0

YoY Growth (%) (16.5) 45.0 35.9 19.0 20.2 Net Debt to Equity 0.9 0.9 0.9 0.7 0.6 0.4

Depreciation & Amortization 1,373.5 1,680.3 2,107.3 2,599.4 2,830.4 3,077.1 Net Debt to EBITDA 3.2 4.1 3.6 2.5 1.8 1.2

EBIT 5,218.1 3,824.4 5,876.1 8,248.1 10,082.0 12,438.3

Margin (%) 47.8 33.4 46.8 48.8 50.5 51.6 Return Ratios (%)

YoY Growth (%) (26.7) 53.6 40.4 22.2 23.4 Return on Equity 16.3 14.7 16.3 15.9 16.8 18.6

Other Income 1,405.5 2,433.2 2,685.5 1,847.0 2,350.9 2,533.7 Return on Capital Employed 7.9 6.1 7.2 8.2 9.4 10.7

Finance Cost 1,428.3 1,950.6 2,255.3 3,276.1 4,135.6 4,145.0 Return on Invested Capital 11.4 7.9 9.8 13.2 15.8 19.0

Interest Coverage (X) 3.7 2.0 2.6 2.5 2.4 3.0

Exceptional Item (69.0) (58.6) 0.0 0.0 0.0 0.0 Working Capital Ratios

PBT 5,126.3 4,248.3 6,306.3 6,819.1 8,297.3 10,827.1 Payable Days (Nos) 19 23 29 25 25 25

Margin (%) 46.9 37.1 50.3 40.3 41.6 44.9 Inventory Days (Nos) 27 9 29 29 29 29

YoY Growth (%) (17.1) 48.4 8.1 21.7 30.5 Receivable Days (Nos) 93 102 85 75 73 71

Tax Expense 1,081.5 459.4 1,243.3 1,227.4 1,535.0 2,057.1 Net Working Capital Days (Nos) 101 88 84 79 77 75

Tax Rate (%) 21.1 10.8 19.7 18.0 18.5 19.0 Net Working Capital to Sales (%) 27.7 24.1 23.1 21.6 21.1 20.5

PAT 4,044.8 3,788.9 5,063.0 5,591.7 6,762.3 8,769.9

Margin (%) 37.0 33.1 40.3 33.1 33.9 36.4 Valuation (X)

YoY Growth (%) (6.3) 33.6 10.4 20.9 29.7 P/E 39.1 41.5 31.2 27.9 23.1 17.8

Min Int/Sh of Assoc (54.6) (25.8) (68.7) 0.0 0.0 0.0 P/BV 6.3 6.0 4.9 4.3 3.7 3.2

Net Profit 3,990.2 3,763.1 4,994.3 5,591.7 6,762.3 8,769.9 EV/EBITDA 26.9 32.5 23.2 16.9 13.9 11.2

Margin (%) 36.5 32.9 39.8 33.1 33.9 36.4 EV/Sales 16.2 15.6 14.8 10.8 9.0 7.2

YoY Growth (%) (5.7) 32.7 12.0 20.9 29.7

Cash Flow Statement

Balance Sheet PBT 5,126.3 4,248.3 6,306.3 6,819.1 8,297.3 10,827.1

Share Capital 414.2 406.4 406.4 429.9 429.9 429.9 Adjustments 668.4 3,350.3 2,634.8 3,729.4 7,294.7 8,122.5

Total Reserves 24,334.0 25,436.7 31,690.4 36,107.8 41,382.4 48,135.2 Change in Working Capital 1,316.2 262.6 (142.0) (757.8) (548.1) (743.7)

Shareholders Fund 24,748.1 25,843.1 32,096.7 36,537.7 41,812.3 48,565.1 Less: Tax Paid (1,081.5) (459.4) (1,243.3) (1,227.4) (1,535.0) (2,057.1)

Long Term Borrowings 19,883.3 26,181.3 32,935.5 45,935.5 45,935.5 45,935.5 Cash Flow from Operations 6,029.4 7,401.8 7,555.8 8,563.2 13,508.9 16,148.7

Deferred Tax Assets / Liabilities (812.4) (922.7) 321.4 305.4 305.4 305.4 Net Capital Expenditure (2,886.7) (3,558.4) (2,347.9) (6,483.8) (3,990.0) (4,171.0)

Other Long Term Liabilities 1,324.4 2,187.6 1,845.7 2,214.9 2,612.5 3,156.1 Change in Investments (1,537.5) 2,808.0 (11,794.8) 848.8 (2,343.3) (587.9)

Long Term Trade Payables 0.0 0.0 0.0 0.0 0.0 0.0 Cash Flow from Investing (4,424.2) (750.4) (14,142.7) (5,635.1) (6,333.3) (4,758.9)

Long Term Provisions 3.9 8.2 26.7 30.8 35.9 42.9 Change in Borrowings 4,160.1 354.9 5,769.4 13,085.4 69.3 143.8

Total Liabilities 45,147.4 53,297.6 67,226.1 85,024.3 90,701.6 98,005.0 Less: Finance Cost (1,428.3) (1,950.6) (2,255.3) (3,276.1) (4,135.6) (4,145.0)

Net Block 28,121.4 32,714.5 48,136.9 52,021.4 53,181.0 54,274.9 Proceeds from Equity 0.0 0.0 0.0 23.5 0.0 0.0

Capital Work in Progress 4,483.5 3,216.3 3,697.1 0.0 0.0 0.0 Buyback of Shares 0.0 (1,960.0) 0.0 0.0 0.0 0.0

Intangible assets under development 0.0 0.0 0.0 0.0 0.0 0.0 Dividend Paid (418.5) (699.9) (0.2) (1,174.2) (1,487.7) (2,017.1)

Non Current Investments 268.5 1,166.1 1,097.4 1,646.1 1,941.6 2,345.6 Cash flow from Financing 2,313.3 (4,255.6) 3,513.9 8,658.7 (5,554.0) (6,018.2)

Long Term Loans & Advances 6,031.1 6,518.2 6,342.9 7,611.4 9,133.7 10,960.5 Net Cash Flow 3,918.6 2,395.8 (3,073.0) 11,586.8 1,621.6 5,371.6

Other Non Current Assets 1,963.5 2,559.0 2,337.1 3,388.8 3,997.2 4,828.9 Forex Effect 0.0 0.0 0.0 0.0 0.0 0.0

Net Current Assets 4,279.5 7,123.4 5,614.7 20,356.6 22,448.0 25,595.2 Opening Balance of Cash 823.5 4,798.2 7,195.5 4,201.0 15,787.7 17,409.4

Total Assets 45,147.4 53,297.6 67,226.1 85,024.3 90,701.6 98,005.0 Closing Balance of Cash 4,742.1 7,194.0 4,122.4 15,787.7 17,409.4 22,780.9

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116116

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Adani Transmission Ltd

A frontrunner in the rapidly expanding Power T&D space

117117

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Adani Transmission Ltd (ATL) is India’s leading private sector transmission player with

a 35% market share. ~INR 3 trillion of TBCB projects are expected to be allocated to

the private players over FY21-30. ATL with its superior execution and O&M skills,

demonstrated high ‘total availability factor’, best in class EBIDTA margins of 92% and

capital management excellence is best placed to benefit from this. The 35-year TBCB

contracts provide for long term visibility. Over FY21-24, we expect a 33.4%/26.1%

CAGR in the operational asset base and revenues to INR 41,560 crore /INR 6,257 crore

respectively.

ATL’s distribution business has a strong capex commitment of 9,600 cr over FY21-25

(part of INR 16,000 cr capex the next 10 years) for upgradation and modernization of

the 90 year old infrastructure of Adani Electricity Mumbai Ltd (AEML). This capex led

increase in the RAB - regulated asset base (financed by 70:30 debt to equity) earns a

fix annual return of 15.5% on equity and is EBIDTA accretive. Another trigger is the

INR 6,000 – 7,000 cr ROA framework based HVDC transmission Asset (form Mumbai)

which is to be operationalized over the next three years providing for an annual

contribution of approx. INR 1,400 cr. We expect a revenue CAGR of 11.4% to INR

8,358 cr during FY21-24E.

With the government keen on privatization of the inefficient existing discoms, there

exists a significant scope for non linear growth of ATL’s distribution business through

acquisitions.

We initiate coverage on ATL with a BUY for a DCF based price target of INR 2,797 per

share, implying a 48.2% upside from the CMP of INR 1,887. Our conviction is

underpinned by the following.

Risks to our optimism stem from delay in the execution of under construction

transmission projects and any changes in tariff regulations.


Revenue EBITDA

Net Profit

EBITDA (%)

Net Profit

(%)

EPS (₹)

BVPS (₹)

RoE (%)

RoIC (%)

Debt to EBITDA

(X)

P/E (X)

P/BV (X)

EV/ EBITDA

(X)

FY20 11,416.0 4,253.9 741.8 37.3 6.5 6.7 86.9 8.7 10.2 5.1 274.9 21.3 53.0

FY21 9,926.3 4,533.2 1,224.0 45.7 12.3 11.1 91.1 13.7 9.3 5.6 166.6 20.3 50.6

FY22E 11,485.1 5182.0 1,813.7 45.1 15.8 16.5 107.7 16.9 11.5 4.2 112.4 17.2 43.5

FY23E 13,486.2 6350.3 2,297.1 47.1 17.0 20.9 127.6 17.9 11.1 4.3 88.8 14.5 36.5

FY24E 15,906.0 7891.5 2,764.0 49.6 17.4 25.1 150.9 18.1 10.8 4.6 73.8 12.3 30.4

BUY @ CMP INR 1,887 Target: INR 2,797 in 24 months Upside Potential: 48.2%

A frontrunner in rapidly expanding Power T&D space

Industry Power T&D

Scrip Details



Price (INR) 1,887

No of Shares O/S (Cr) 109.98

3M Avg Vol (000) 33

52W High/Low (INR) 2,025/345



Promoter 74.9

Institution 23.6

Public 1.5

TOTAL 100.0

Price Chart

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ATL Sensex

Adani Transmission Ltd

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ATL PGCIL GE T&D KEC Kalpataru

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ATL commands premium valuation to Power Grid Corp, which has significantly expanded in

the past 1 year

Despite substantial recent outperformance, attractive decadal outlook portends substantial room for growth

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Valuation

ATL is amongst the largest private transmission players and second only to PGCIL in India. With

its growth DNA, ATL is expected to grow its transmission network aggressively through both

organic and inorganic routes. Further, with INR 3.0 trillion worth of upcoming opportunities in

the private TBCB space, there is strong visibility growth of its power transmission business.

We have used the DCF model to value ATL since its TBCB contracts throw up significant cash

over the next 35 (typical life of a TBCB contract). We have discounted back the future cash

flows to FY24 and value the company at INR 2,797, presenting an upside of 48.2% from the

CMP of 1,887 (32.1X FY24 EV/EBIDTA)

DCF Valuation



Risk Free Rate 6.0%

Cost of Equity 7.1%

Interest Rate 7.0%

Tax Rate 25.2%

Cost of Debt 5.2%

WACC 6.9%



FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY35E FY40E FY45E FY50E FY55E

FCFF -6,116 -6,632 -356 -903 -1,273 -1,381 -1,196 6,736 17,708 31,723 48,868 69,034

Discount Factor from FY24 0.94 0.87 0.82 0.77 0.72 0.67 0.63 0.45 0.32 0.23 0.16 0.12

Discounted FCFF from FY24 -5,720 -5,802 -292 -691 -911 -925 -749 3,020 5,684 7,290 8,039 8,131

Total of Discounted FCFF FY24 1,29,727

FY24 PV of Terminal Value 2,14,030

FY24 Enterprise Value 3,43,758




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We have prepared a Bull and Bear case scenario based on ATL’s terminal value growth.

• Bull Case: India has a significant opportunity to grow the quality of earnings from its

power transmission assets by shifting from 220 KV lines to high voltage lines. Plus, ATL

is looking at acquisitions to grow its power distribution business. We have assumed a

terminal growth of 4%, which will result in a Bull case price target of INR 3,499 (upside

of 85.4% from CMP).

• Bear Case: We have assumed terminal value growth of 1%, which will result in a Bear

case price target of INR 2,106 (upside of 11.6% from CMP). Our base case implies a

significant margin of safety for buying at the current price


Investment Triggers

• Strong market share of 35% in private TBCB space

• Inorganic expansion route for the distribution business in other metro cities

Catalysts

• The government is expected to open INR 3.0 trillion worth of power transmission

projects for private players through the TBCB route.

• Rapid urbanization, rural electrification, Make in India and China+1are likely to

increase power consumption in India. This is expected to improve demand for high

voltage transmission lines.

Bull Case Price

INR 3,499 per share

Target Price

INR 2,797 per share

Bear Case Price

INR 2,020 per share

Current Price

INR 1,887 per share

4% terminal value growth.



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Valuation and Comparable Metric of Domestic and Global Power T&D companies (red & bold)


Company Name Mkt Cap PricePEG

20242022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024

Domestic Peers (Data in INR Cr, unless specified)

Adani Transmission Ltd 2,03,905 1,854.0 2.4 112.4 88.8 73.8 19.0 15.9 13.4 43.5 36.5 30.4 16.9 17.9 18.1 11.5 11.1 10.8 11,485 13,486 15,906 45.1 47.1 49.6 15.8 17.0 17.4

Power Grid Corp of India Ltd 1,42,892 205.0 1.3 10.7 10.2 9.7 1.8 1.7 1.7 7.2 6.6 6.4 17.1 16.8 17.0 11.6 12.2 12.9 41,241 43,538 44,061 88.3 87.3 87.3 32.3 32.0 33.3

GE T&D Ltd 3,197 125.0 0.3 31.5 20.4 18.5 2.7 2.5 2.2 18.4 13.9 12.6 8.5 12.0 12.0 8.1 11.2 11.4 3,638 3,952 4,348 5.2 6.3 6.3 2.8 4.0 4.0

Tata Power Co Ltd 73,285 229.0 1.0 35.7 30.5 25.3 3.3 3.0 2.9 14.3 12.3 10.4 9.2 9.9 11.3 8.3 9.7 11.5 41,262 45,816 51,167 19.1 20.0 20.8 5.0 5.2 5.7

NTPC Ltd 1,23,438 127.0 0.6 7.8 6.9 6.5 0.9 0.8 0.8 7.6 7.0 6.1 11.9 12.2 12.7 8.6 9.1 9.9 1,25,776 1,37,743 1,49,268 32.5 32.7 33.0 12.7 13.0 12.8

KEC International Ltd 11,646 453.0 0.5 20.8 14.3 11.6 3.1 2.6 2.2 11.3 8.3 6.8 14.7 18.2 18.7 18.7 23.6 26.8 14,681 16,422 18,279 8.0 9.5 9.9 3.8 5.0 5.5

Kalpataru Power Transmission Ltd 5,616 377.0 0.3 11.7 7.8 6.7 1.3 1.2 1.0 4.9 3.7 3.0 11.6 15.1 15.1 19.5 24.0 29.6 13,682 15,652 16,007 10.9 11.6 12.5 3.5 4.6 5.2

Torrent Power Ltd 28,019 583.0 1.8 20.4 18.0 17.8 2.5 2.3 2.2 9.3 8.4 8.0 12.3 12.8 12.2 13.4 14.5 14.4 13,535 14,547 15,314 27.2 27.4 27.2 10.2 10.7 10.3

CESC Ltd 10,994 88.0 0.6 7.7 7.1 6.3 1.0 1.0 0.9 6.3 5.7 5.0 13.7 14.0 14.9 13.0 14.1 15.1 12,775 13,350 14,001 28.2 27.5 27.4 11.2 11.6 12.4

Global Peers (Data in USD Mn, unless specified)

Verbund AG (Austria) 34,761 100.1 1.9 29.8 29.7 27.9 4.4 4.1 3.8 16.4 16.3 14.6 14.7 13.9 13.7 17.8 16.2 17.7 4,862 4,912 5,025 46.4 46.1 49.9 24.0 23.9 24.8

Elia Group SA (Belgium) 7,949 115.8 1.6 24.5 22.6 20.6 1.6 1.4 1.3 13.3 12.9 11.7 6.4 6.2 6.2 5.2 5.1 5.4 3,083 3,184 3,503 41.8 43.3 43.3 10.5 11.0 11.0

Centrais Electricas Brasilier (Brazil) 9,228 5.9 0.4 8.5 4.5 4.1 0.7 0.7 0.6 4.3 3.4 3.1 8.8 15.8 15.8 16.5 18.4 18.7 6,191 6,276 6,903 48.8 52.2 52.2 17.5 32.9 32.9

Fortis Inc (Canada) 21,081 44.6 2.4 19.3 18.1 17.1 1.5 1.4 1.3 11.9 11.4 11.1 7.5 7.8 7.5 6.3 6.5 6.6 7,873 8,044 8,412 46.0 48.3 48.2 13.9 14.5 14.7

CLP Holdings Ltd (China) 24,578 9.7 2.2 15.8 15.4 14.0 1.6 1.5 1.4 9.3 9.1 8.2 9.9 9.9 9.9 10.1 9.8 10.0 11,094 11,370 12,507 28.9 28.8 28.8 14.0 14.0 14.0

HK Electric Investments (China) 8,687 1.0 3.2 22.9 21.8 19.8 1.4 1.4 1.3 15.3 14.9 13.6 6.2 6.4 6.4 3.6 3.3 3.5 1,475 1,497 1,647 67.2 68.9 68.9 25.7 26.6 26.6

Fortum OYJ (Finland) 25,044 28.2 4.4 15.4 15.1 13.2 1.5 1.4 1.4 8.2 8.2 7.5 9.4 9.3 10.8 9.7 9.7 11.2 79,803 78,465 73,005 4.7 4.7 5.5 2.0 2.1 2.6

EDF (France) 44,320 14.0 1.0 7.7 7.2 7.4 0.8 0.7 0.7 4.2 4.1 4.1 10.0 10.4 9.6 9.5 10.0 9.3 91,148 92,849 95,234 25.5 26.0 25.6 6.4 6.6 6.3

Terna-Rete Electrica Naziona (Italy) 14,855 7.4 5.1 17.4 16.7 15.2 2.7 3.2 2.5 13.1 13.0 12.8 15.2 19.4 16.5 7.4 7.8 7.3 2,917 3,018 3,181 70.6 71.5 72.1 29.2 29.6 30.7

Kansai Electric Power Co (Japan) 8,413 9.0 3.1 12.6 10.4 7.6 0.5 0.5 0.5 13.5 13.0 11.1 4.2 4.9 6.5 1.6 2.0 2.7 23,073 23,582 23,544 15.8 16.4 19.2 2.9 3.4 4.7

Tenaga Nasional BHD (Malaysia) 12,998 2.3 0.5 11.1 10.7 7.4 0.9 0.9 0.8 4.6 4.6 4.0 8.5 8.3 11.2 10.2 9.9 10.9 11,807 12,014 12,905 38.2 37.1 38.0 9.9 10.1 13.6

Mercury NZ Ltd (New Zeeland) 5,486 4.0 1.3 40.9 34.2 30.4 1.7 1.8 1.8 15.8 14.3 13.1 4.3 5.1 5.8 5.1 6.2 7.2 1,502 1,612 1,549 28.6 29.4 33.0 8.9 10.0 11.6

Saudi Electricity Co (S Arabia) 27,499 6.6 5.0 12.7 11.6 12.4 0.6 0.6 0.4 10.1 9.0 9.2 4.6 4.9 3.1 3.8 4.3 3.2 18,525 19,993 19,485 52.5 54.2 54.9 11.7 11.9 11.3

Korea Electric Power Corp (S Korea) 12,056 18.8 2.6 -4.3 -81.1 -185.0 0.2 0.2 0.2 10.6 6.9 7.1 -5.3 -0.3 -0.1 -3.0 0.8 1.3 53,954 55,871 56,710 13.4 20.1 19.6 -5.2 -0.3 -0.1

Endesa SA (Spain) 22,814 21.5 3.2 12.2 11.2 11.1 2.7 2.5 2.4 7.5 7.2 7.2 22.2 22.7 21.7 13.6 13.8 13.3 22,090 22,616 22,650 20.2 21.0 21.4 8.5 9.0 9.1

Acciona SA (Spain) 9,833 179.2 0.9 19.3 16.8 15.2 2.3 2.1 2.0 9.0 8.5 8.6 11.8 12.6 13.3 10.0 10.4 9.8 9,250 9,622 10,163 18.8 20.1 20.6 5.5 6.1 6.4

Next Era Energy Inc (UK) 47,928 13.3 1.0 16.8 15.1 14.6 1.7 1.6 1.5 13.6 11.8 12.1 10.0 10.4 10.4 6.0 6.9 6.6 21,083 21,942 22,564 35.9 38.7 38.4 13.5 14.5 14.6

SSE PLC (UK) 22,959 21.5 0.5 19.0 16.2 16.4 2.5 2.4 2.1 12.6 11.7 11.2 13.1 14.6 13.0 9.2 9.4 9.3 10,615 11,551 12,133 25.8 26.1 26.2 11.4 12.3 11.5

Duke Energy Corp (USA) 75,685 98.4 2.8 18.0 17.0 16.0 1.5 1.5 1.4 11.9 11.3 10.7 8.5 8.8 9.0 5.7 5.8 5.1 26,405 27,181 27,225 46.2 48.3 52.6 15.9 16.3 17.4

Southern Company (USA) 66,418 62.7 1.8 17.5 16.1 14.8 2.1 2.0 2.1 12.1 11.8 12.3 12.2 12.7 14.3 7.2 7.4 7.2 22,468 23,291 23,854 44.2 44.2 42.4 16.9 17.7 18.8

The National Grid PLC (USA) 47,912 66.2 1.0 16.8 15.1 14.6 1.5 1.4 1.4 13.6 11.8 12.1 9.2 9.5 9.5 5.9 6.7 6.4 21,083 21,942 22,564 35.9 38.7 38.4 13.5 14.5 14.6

Eversouce Energy (USA) 28,832 83.9 2.2 20.3 18.9 17.5 1.9 1.8 1.7 13.5 13.1 13.9 9.2 9.4 9.6 6.7 6.8 6.5 9,793 10,122 10,601 36.5 37.4 35.6 14.5 15.1 15.6

Edison International (USA) 24,656 64.9 2.0 13.7 12.7 12.1 1.6 1.5 1.5 9.5 9.1 9.2 11.6 11.9 12.2 7.1 7.4 7.0 14,789 15,355 15,593 37.2 38.8 39.7 12.2 12.6 13.1

PG & E Corp (USA) 24,579 12.4 0.8 10.6 9.3 8.4 1.0 1.0 1.0 7.5 6.9 6.6 9.7 10.5 11.9 7.3 7.5 7.1 20,902 21,573 22,132 40.3 42.5 44.2 11.1 12.3 13.1

XCEL Energy Inc (USA) 35,068 65.1 2.3 20.4 19.0 17.6 2.2 2.1 1.9 12.5 12.0 11.7 10.7 10.9 10.7 6.2 6.3 5.7 12,791 13,259 13,435 37.6 38.9 40.3 13.5 14.0 14.8

Entergy Corp (USA) 21,294 106.0 1.7 16.3 15.1 14.0 2.2 2.0 1.6 10.8 10.7 10.2 13.3 13.3 11.4 7.1 6.7 6.7 10,872 11,136 11,293 38.9 39.8 41.8 12.0 12.7 13.5

PPL Corp (USA) 21,320 28.4 1.7 17.9 16.1 15.1 1.5 1.4 1.3 10.3 9.6 9.1 8.1 8.7 8.4 7.5 7.7 7.4 6,703 7,031 7,169 46.8 48.4 50.0 17.8 18.9 19.7

Firstenergy Corp (USA) 20,976 38.5 2.6 14.7 13.7 12.9 2.2 2.1 1.9 10.8 10.5 10.4 15.2 15.0 14.5 8.2 8.3 8.2 11,637 11,895 12,141 35.0 35.9 36.0 12.3 12.9 13.4

Avangrid Inc (USA) 19,806 51.2 1.7 21.7 20.2 19.1 1.0 0.9 0.9 11.9 11.7 10.0 4.4 4.6 4.5 4.4 4.5 4.9 7,524 7,817 8,213 35.9 36.3 35.6 12.1 12.5 12.6

Evergy Inc (USA) 14,893 65.6 3.6 18.4 17.2 16.0 1.6 1.5 1.5 11.2 10.7 10.2 8.7 9.0 9.3 6.7 6.9 7.2 5,261 5,435 5,509 44.2 45.4 48.2 15.4 15.9 16.8

American Electric Power (USA) 41,994 83.4 1.8 16.3 15.2 14.2 1.8 1.7 1.6 11.9 11.5 11.5 10.8 11.1 11.5 6.2 6.4 6.4 17,160 17,756 18,769 39.9 41.1 40.2 15.0 15.6 15.7

Alliant Energy Corp (USA) 14,218 56.8 3.2 20.7 19.4 18.3 2.2 2.1 1.9 13.7 13.2 12.7 10.8 11.0 10.6 6.5 6.6 6.7 3,640 3,766 3,897 44.5 45.0 46.5 18.8 19.5 20.0

EBITDA Margin (%) Net Margin (%)P/E (X) P/B (X) EV/EBITDA (X) RoE (%) RoIC (%) Sales


( 9 t h D e c 2 1 )


ATL managed to sustain double digit RoIC in its high growth phase


ATL

PGCIL

GE T&D Tata PowerNTPC

KEC Int

Kalpataru Power

Torrent PowerCESC

Verbund

Elia SA

Centrais Electricas

Fortis

CLP Holdings

HK Electric

EDF Terna-Rete

Kansai Electric

Tenaga Nasional

Mercury

Saudi ElectricityKorea Electric

Endesa

Acciona

Next Era Energy

Duke Energy

Southern CoNational Grid

Eversouce Energy

Edison IntPG&E Corp

XCEL Energy

EntergyPPL

Firstenergy Corp

Avangrid

Evergy

American ElectricAlliant Energy

0

5

10

15

20

25

30

35

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

FY24

Ro

IC (

%)

FY24 EV/EBITDA to FY21-24 EBITDA CAGR (X)

ATL

PGCIL

GE T&D

Tata Power

NTPC

KEC Int

Kalpataru Power

Torrent Power

CESC

0

2

4

6

8

10

12

14

16

18

20

0 10 20 30 40 50 60 70 80 90 100

FY2

1-2

4 R

eve

nu

e C

AG

R (

%)

FY24 EBITDA Margin (%)

123123

( 9 t h D e c 2 0 2 1 )


ATL’s Financial Summary


Fig in INR Cr (unless specified) FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E

Transmission Asset Base 12,940 12,940 13,160 16,430 17,510 19,580 28,970 41,560 56,560 66,560 78,560 92,560 1,08,560 1,26,560 1,45,560

YoY Growth (%) 141.9 0.0 1.7 24.8 6.6 11.8 48.0 43.5 36.1 17.7 18.0 17.8 17.3 16.6 15.0

Transmission Revenue 2,120 3,129 2,193 2,815 3,122 3,877 4,945 6,257 8,620 10,091 11,777 13,647 15,875 18,520 21,373

Transmission Revenue 0.0 0.0 -29.9 28.4 10.9 24.2 27.5 26.5 37.8 17.1 16.7 15.9 16.3 16.7 15.4

Avg Yiled on Asset Base (%) 16.4 24.2 16.7 17.1 17.8 19.8 17.1 15.1 15.2 15.2 15.0 14.7 14.6 14.6 14.7

No of Customers (nos mn) 0.00 0.00 3.03 3.05 3.06 3.07 3.17 3.27 3.37 3.47 3.57 3.67 3.77 3.87 3.97

Power Consumption (mn units) 0 0 6,022 8,434 7,169 8,311 9,193 10,301 11,458 12,666 13,923 15,231 16,588 17,996 19,453

Distribution Revenue 0 0 4,270 7,676 6,048 6,808 7,521 8,358 9,228 10,131 11,066 12,034 13,035 14,070 15,138

Trading Revenue 756 816 842 925 757 800 1,020 1,291 1,778 2,082 2,430 2,816 3,275 3,821 4,410

Revenue from operations 2,876 3,944 7,305 11,416 9,926 11,485 13,486 15,906 19,626 22,304 25,272 28,497 32,185 36,411 40,920

YoY Growth (%) 30.9 37.2 85.2 56.3 (13.0) 15.7 17.4 17.9 23.4 13.6 13.3 12.8 12.9 13.1 12.4

Power Exp & Material Cost 764 816 3,130 4,622 3,643 4,523 5,149 5,829 7,049 7,908 8,834 9,822 10,906 12,099 13,358

RM Cost to Sales (%) 26.6 20.7 42.8 40.5 36.7 39.4 38.2 36.6 35.9 35.5 35.0 34.5 33.9 33.2 32.6

Employee Cost 46 42 587 973 931 1,015 1,086 1,161 1,238 1,319 1,404 1,492 1,583 1,677 1,774


Other Expenses 83 261 826 1,567 819 765 901 1,025 1,100 1,282 1,455 1,610 1,805 2,058 2,341


EBITDA 1,983 2,826 2,762 4,254 4,533 5,182 6,350 7,892 10,239 11,795 13,579 15,573 17,892 20,577 23,447

EBITDA Margin (%) 69.0 71.6 37.8 37.3 45.7 45.1 47.1 49.6 52.2 52.9 53.7 54.6 55.6 56.5 57.3

Depreciation 569 579 882 1,174 1,329 1,482 1,857 2,361 2,961 3,361 3,841 4,401 5,041 5,761 6,521

PBIT 1,414 2,247 1,880 3,080 3,204 3,700 4,493 5,531 7,278 8,434 9,738 11,172 12,852 14,816 16,926

PBIT Margin (%) 49.2 57.0 25.7 27.0 32.3 32.2 33.3 34.8 37.1 37.8 38.5 39.2 39.9 40.7 41.4

Transmission EBIT 1,414 2,246 1,348 1,873 2,192 2,666 3,313 4,192 5,775 6,761 7,890 9,143 10,636 12,408 14,320

Transmission EBIT Margin (%) 66.7 71.8 61.5 66.5 70.2 68.8 67.0 67.0 67.0 67.0 67.0 67.0 67.0 67.0 67.0

Distribution EBIT 0 0 624 1,206 1,012 1,034 1,180 1,339 1,503 1,673 1,848 2,029 2,216 2,408 2,607

Distribution EBIT Margin (%) 0 0 14.6 15.7 16.7 15.2 15.7 16.0 16.3 16.5 16.7 16.9 17.0 17.1 17.2

Trading EBIT 0 0 -92 0 1 0 0 0 0 0 0 0 0 0 0

Other Income 22 111 351 265 533 458 548 781 911 1,097 1,223 1,359 1,485 1,639 1,904

Finance Cost 904 886 1,391 2,238 2,117 1,769 1,972 2,618 3,332 3,874 4,219 4,619 5,075 5,659 6,229

PBT 532 1,472 840 1,107 1,620 2,389 3,070 3,694 4,857 5,657 6,742 7,912 9,261 10,796 12,601

PBT Margin (%) 18.5 37.3 11.5 9.7 16.3 20.8 22.8 23.2 24.7 25.4 26.7 27.8 28.8 29.7 30.8

Tax Paid 116 329 281 400 330 561 773 930 1,222 1,424 1,697 1,991 2,331 2,717 3,172

Tax Rate (%) 21.7 22.3 33.4 36.2 20.4 23.5 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2

Net Profit 416 1,143 559 742 1,224 1,814 2,297 2,764 3,634 4,233 5,045 5,920 6,930 8,079 9,430

Net Margin (%) 14.5 29.0 7.7 6.5 12.3 15.8 17.0 17.4 18.5 19.0 20.0 20.8 21.5 22.2 23.0

Adjusted EPS 4 10 5 7 11 16 21 25 33 38 46 54 63 73 86

P/E (X) 502.6 183.1 374.3 282.1 171.0 115.4 91.1 75.7 57.6 49.4 41.5 35.4 30.2 25.9 22.2

Adjusted BVPS 27 55 73 77 81 98 116 139 167 199 237 280 329 385 448

P/BV (X) 71.0 34.6 26.0 24.6 23.5 19.5 16.4 13.7 11.4 9.6 8.0 6.8 5.8 4.9 4.2

Enterprise Value 2,17,770 2,19,057 2,28,514 2,30,930 2,34,790 2,30,815 2,36,870 2,45,467 2,55,706 2,59,681 2,64,705 2,70,667 2,77,502 2,85,095 2,92,198

EV/EBITDA (X) 109.8 77.5 82.7 54.3 51.8 44.5 37.3 31.1 25.0 22.0 19.5 17.4 15.5 13.9 12.5

Net Worth 2,947 6,056 8,043 8,499 8,919 10,733 12,800 15,233 18,358 21,914 26,051 30,787 36,193 42,332 49,310

Return on Equity (%) 14.1 18.9 7.0 8.7 13.7 16.9 17.9 18.1 19.8 19.3 19.4 19.2 19.1 19.1 19.1

Capital Employed 11,921 16,485 28,180 32,745 35,880 34,319 45,548 57,295 71,501 79,464 89,049 99,769 1,12,223 1,27,989 1,41,628

Return on Capital Employed (%) 9.3 10.6 4.4 6.0 7.1 8.2 7.4 7.2 7.6 7.9 8.2 8.4 8.6 8.7 8.9

Invested Capital 11,423 15,819 27,263 30,135 34,416 32,254 40,376 51,406 64,771 72,301 81,462 92,160 1,04,401 1,18,133 1,32,214

Return on Invested Capital (%) 12.4 14.2 6.9 10.2 9.3 11.5 11.1 10.8 11.2 11.7 12.0 12.1 12.3 12.5 12.8

Cash Flow from Operations 2,189 2,198 2,591 5,437 3,784 4,345 5,591 7,008 8,702 10,649 12,183 13,928 15,864 18,119 20,699

Cash Flow from Investing -1,761 -3,211 -3,138 -5,643 -4,025 25 -9,686 -12,948 -15,550 -10,396 -12,439 -14,477 -16,546 -18,625 -19,667

Cash Flow from Financing -455 1,589 38 1,250 -745 -3,958 6,960 6,364 7,240 -144 321 179 449 2,028 -2,019

Net Cash Flow -27 577 -509 1,045 -986 411 2,865 424 392 109 65 -369 -232 1,522 -988

Free Cash Flow 311 1,310 1,359 482 -352 -911 -4,129 -6,116 -6,632 -356 -903 -1,273 -1,381 -1,196 140

FCF to Revenue (%) 10.8 33.2 18.6 4.2 (3.5) (7.9) (30.6) (38.5) (33.8) (1.6) (3.6) (4.5) (4.3) (3.3) 0.3

FCF to EBITDA (%) 15.7 46.4 49.2 11.3 (7.8) (17.6) (65.0) (77.5) (64.8) (3.0) (6.7) (8.2) (7.7) (5.8) 0.6

FCF to Net Profit (%) 74.7 114.6 243.0 64.9 (28.7) (50.2) (179.7) (221.3) (182.5) (8.4) (17.9) (21.5) (19.9) (14.8) 1.5

FCF to Net Worth (%) 10.6 21.6 16.9 5.7 (3.9) (8.5) (32.3) (40.1) (36.1) (1.6) (3.5) (4.1) (3.8) (2.8) 0.3

Total Debt 8,975 10,428 20,137 24,246 26,961 23,586 32,748 42,062 53,143 57,550 62,999 68,981 76,031 85,656 92,317

Net Debt 8,477 9,763 19,221 21,636 25,496 21,521 27,576 36,174 46,412 50,387 55,411 61,373 68,208 75,801 82,904

Net Debt to Equity (X) 2.9 1.6 2.4 2.5 2.9 2.0 2.2 2.4 2.5 2.3 2.1 2.0 1.9 1.8 1.7

Net Debt to EBITDA (X) 4.3 3.5 7.0 5.1 5.6 4.2 4.3 4.6 4.5 4.3 4.1 3.9 3.8 3.7 3.5

Interest Coverage Ratio (X) 1.6 2.5 1.4 1.4 1.5 2.1 2.3 2.1 2.2 2.2 2.3 2.4 2.5 2.6 2.7

124124

( 9 t h D e c 2 0 2 1 )


1.46

1.47

1.48

1.49

1.50

1.51

1.52

1.53

1.54

0

10,000

20,000

30,000

40,000

50,000


Strong opportunity in TBCB bidding expected to drive transmission asset growth

Transmission Line (ckm) Asset Base (INR Cr)

Asset Base to Line (X)

ckm/INR Cr INR

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2.90

2.95

3.00

3.05

3.10

3.15

3.20

3.25

3.30


AEML operating metrics are expected to remain consistent and steady

No of Connections (mn)

Unit Consumption per Connection

Nos in mn Units

(20)

0

20

40

60

80

100

0

5,000

10,000

15,000

20,000


Revenue growth to bounce back after a pandemic induced slowdown

Transmission Distribution

Others YoY Growth (%)

INR Cr %

73 79

30 25 31 34 37 39

58 67 61 59 56 52

26 20 11 8 8 7 8 8

0

20

40

60

80

100

120


With upcomming TBCB auctions, transmission business to enhance its revenue share

Transmission Revenue Distribution Revenue Trading Revenue

%

0

10

20

30

40

50

60

70

80

0

2,000

4,000

6,000

8,000

10,000


Improvement in transmission revenues to generate better profit margins

EBITDA Net Profit


INR Cr %

0

5

10

15

20

0

10,000

20,000

30,000

40,000

50,000

60,000


Return ratios - RoE and RoIC to follow profitability trend


RoE (%) RoIC (%)

INR Cr %

ATL Story in Charts

125125

( 9 t h D e c 2 0 2 1 )



0

1

2

3

4

5

6

7

8

0

10,000

20,000

30,000

40,000

50,000


Rise in asset base is expected to enhance absolute debt on balance sheet

Total Debt Net Debt


INR Cr X

60

70

80

90

100

110

120

130

140

(8,000)

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000


Transmission capex cycle is expected to pickup strongly in the coming years

CFO FCF CFO to EBITDA (%)

INR Cr %

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50


Aggressive TBCB bidding to keep turnover ratios under pressure in the coming years

Fixed Asset Turnover Total Asset Turnover

Capital Turnover

X

(15)

(10)

(5)

0

5

10

15

20

25

30

0

10

20

30

40

50

60

70


Working capital ratios to remain manageable at current levels

Payable Days Inventory Days

Receivable Days Net Working Days

Days %

126126

( 9 t h D e c 2 0 2 1 )


Company Overview

ATL is the largest private transmission company and operates more than 13,000 ckm of

transmission lines and around 18,000 MVA of power transformation capacity. ATL has further

set an ambitious target to set up 20,000 ckm of transmission lines by 2022 by leveraging both

organic and inorganic growth opportunities.

ATL’s Holding Structure at a glance


ATL’s Key Milestones

• India’s first private power sector player to secure an international investment grade

rating

• India’s first and only private HVDC transmission line

• First private company in India to execute 765 KV transmission lines and substations in

the state of Maharashtra

Adani Transmission

Contracted Assets in Transmission Business

Fixed Tariff TBCB Assets

(100%)

15 Operating Assets

9 Under Construction

Assets

ROA Assets in Transmission & Distribution Business

ROA Transmission Assets

(100%)

2 Operating and 1 Under

Construction HVDC Line

AEML

74.9% is with ATL

25.1% is with Qatar

Investment Authority

INR 1,220 cr of Equity

INR 2,000 cr of Subordinated

Debt

127127

( 9 t h D e c 2 0 2 1 )


• The first company to have executed a typical π (Pi) shape tower at Sami substation

with 6 phases of Quad Moose strung on the same beam

• First private company to use a prefabricated steel structure valve hall in India

Performance so far – ATL rose like the phoenix in the last five years In the past 5 years, while the revenues of all leading power transmission (including EPC) and distribution companies have grown at a single-digit CAGR, ATL has soared like a phoenix with its revenues growing at 35.2% CAGR. Despite weak macroeconomic scenario in the past 5 years, ATL improved its business performance due to

• inorganic expansion in the transmission business

• aggressive bidding in TBCB auctions

• acquisition of Mumbai electricity distribution

However, its margins declined significantly due to the addition of the Mumbai electricity distribution business, where the profitability is typically lower than the transmission business.

ATL sustained asset turnover and maintained working capital at a comfortable level

Source: ACE Equity

ATL’s best in class receivable days and cash conversion cycle helped lower working capital. This enabled borrowing limits to be used for business expansion

Particulars FY17 FY18 FY19 FY20 FY215 yrs

CAGR (%)FY17 FY18 FY19 FY20 FY21

Adani Transmission 30.9 37.2 85.2 56.3 -13.0 35.2 69.0 71.6 37.8 37.3 45.7

Power Grid Corp of India 24.4 16.6 17.0 7.7 5.0 13.9 87.4 86.7 76.8 87.1 88.2

GE T&D 22.7 6.9 -2.6 -25.1 9.3 0.9 1.4 6.3 10.8 -6.2 5.0

Tata Power Co -6.5 -2.7 11.3 -2.5 11.4 1.9 19.8 8.6 10.3 18.2 18.1

NTPC 11.8 7.4 13.9 9.2 1.9 8.7 26.3 25.5 22.6 28.9 30.5

KEC International 0.8 17.1 9.4 8.8 9.6 9.0 10.6 10.9 11.2 11.1 9.5

Kalpataru Power 4.3 17.0 24.5 16.9 2.2 12.6 12.4 12.6 13.0 12.2 12.2

Torrent Power -14.7 15.6 14.2 3.7 -10.8 0.8 24.8 27.3 24.5 26.4 28.6

CESC -31.0 22.9 3.8 14.0 -4.3 -0.8 34.1 29.6 27.4 26.8 28.4

India Macro Factors

Power Consumption Growth (%) 4.1 6.1 5.2 1.3 -1.1 3.1

GDP Growth - Nominal (%) 11.8 11.0 10.5 7.8 -3.0 7.5

GDP Growth - Real (%) 8.3 6.8 6.5 4.0 -7.3 3.5

Core Sector Growth (%) 5.3 4.5 5.8 -8.6 12.6 0.0

Revenue Growth (%) EBITDA Margin (%)

128128

( 9 t h D e c 2 0 2 1 )


ATL sustained asset turnover and maintained working capital at a comfortable level

Source: ACE Equity

➢ ATL’s Power Transmission business

ATL has a power transmission network of 18,336 ckm (13,720 ckm operational + 4,616 under

construction) and a transmission capacity of 33,141 MVA (20,405 MVA operational + 12,736

MVA under construction), making it India’s largest private sector power transmission company.

All its assets have regulatory approval and their weighted average life is 32 years. This provides

good long term visibility cash flow. ATL also has a strong operational track record of total

availability factor (TAF) of more than 99.5%.

ATL’s total availability factor in power transmission business


During FY17-21, ATL’s power transmission line network expanded from 8,511 ckm to 11,588

ckm (CAGR of 8.0%), which was higher than the industry growth of 4.7%. It improved ATL’s

market share from 6.7% in FY17 to 7.6% in FY21 in the power transmission space. This also led

to an increase in its market share of the private TBCB transmission projects to 36.3% (+170)

over the same period.

Particulars FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21

Adani Transmission 0.3 0.4 0.3 0.5 0.4 24 24 36 32 37 26 23 -7 -7 0

Power Grid Corp of India 0.2 0.2 0.2 0.2 0.2 42 41 44 47 40 40 43 47 53 48

GE T&D 6.2 7.4 8.2 5.9 7.0 186 169 165 226 201 112 96 104 172 144

Tata Power Co 0.6 0.6 0.7 0.6 0.6 48 45 44 55 53 -11 -25 -17 -6 -8

NTPC 0.8 0.7 0.7 0.6 0.5 38 37 39 54 62 36 29 29 46 56

KEC International 7.5 9.0 9.3 8.9 9.4 185 166 164 157 150 92 83 68 47 37

Kalpataru Power 2.4 2.8 3.5 3.7 3.7 151 153 138 127 136 70 70 58 55 58

Torrent Power 0.6 0.6 0.7 0.8 0.7 37 33 33 34 40 19 19 23 19 18

CESC 0.3 0.4 0.5 0.5 0.5 39 55 56 54 65 15 42 49 47 54

Net Working Capital Days (nos)Net Fixed Asset Turnover (X) Receivable Days (nos)

99.4

99.7

99.9

99.8

100.0

99.8

FY16 FY17 FY18 FY19 FY20 FY21

129129

( 9 t h D e c 2 0 2 1 )


ATL’s share in transmission lines has improved significantly

Source: Central Electricity Authority

The network growth and market share gain weres driven by the acquisition of strategic assets

from power transmission EPC companies and under-utilized state-owned transmission assets.

ATL’s power transmission inorganic growth story


The Indian government is expected to open bidding for ~INR 10 trillion worth of power

transmission lines in the next 10 years, and in our opinion, the allocation would be

• ~INR 5 trillion to Power Grid Corp

• ~INR 2 trillion to state transmission companies

• ~INR 3 trillion to private transmission companies, where ATL has ~35% market share

Data in circuit kms FY1997 FY2002 FY2007 FY2012 FY2017 FY2018 FY2019 FY2020 FY2021FY2022

(till Sept)FY2022E

Transmission Line 1,17,376 1,52,269 1,96,123 2,57,481 3,67,851 3,90,970 4,13,407 4,25,071 4,41,821 4,50,552 4,75,000

5 years CAGR (%) 5.3 5.2 5.6 7.4 5.2

Center 31,199 42,017 64,295 91,950 1,41,033 1,50,243 1,58,833 1,63,322 1,70,488 1,74,792 1,84,277

State 86,177 1,10,252 1,31,828 1,57,116 2,02,197 2,13,799 2,23,806 2,30,113 2,37,770 2,41,711 2,54,827

Private 0 0 0 8,415 24,621 26,928 30,768 31,636 33,563 34,049 35,897

Share of Private Players (%) 0.0 0.0 0.0 3.3 6.7 6.9 7.4 7.4 7.6 7.6 7.6

ATL Transmission Line 8,511 8,511 8,854 10,938 11,588 12,361 12,799

ATL's share in Industry (%) 2.3 2.2 2.1 2.6 2.6 2.7 2.7

ATL's share in Private Lines (%) 34.6 31.6 28.8 34.6 34.5 36.3 35.7

2016: WTPL and WTGL Transmission (3,063)

Maru & Aravali Transmission (397 ckm)

2019: Bikaner-Sikar Transmission (343 ckm)

2020: Waroral-Kurnoo (1,060 ckm) and Alipurdaur Transmission (650 ckm)

130130

( 9 t h D e c 2 0 2 1 )


India’s Power Transmission Line growth


The increase in allocation can be attributed to the fact that India’s electricity demand is

expected to surge 2.3X by 2030. As per an independent think tank Council on Energy,

Environment and Water (CEEW), for net zero emissions by 2070 we would need to put up 5630

GW (or ~14.5X the current installed capapcity of 388 GW). This demand is being driven by

• India despite being the 3rd largest energy consumer, has the lowest per capita spend

leading to multi-year growth prospects.

India’s per capita electricity consumption is one of the lowest

Source: ATL’s Annual Report, Industry Reports & Ventura Research

• Penetration of electric consumer durable devices in Indian households is at an

inflection point. Despite a consumption driven economy, the penetration of consumer

3,67,851 3,90,970 4,13,407 4,25,071 4,41,821

4,75,000

8,28,000

FY17 FY18 FY19 FY20 FY21 FY22E FY34E

Data in ckm

1,149

2,395

3,492 3,600 3,991

6,445

7,499

9,803

11,730

India Brazil S Africa Global Avg China Germany Japan S Korea USA

Data in KWh units

131131

( 9 t h D e c 2 0 2 1 )


durables in India is significantly lower than that of US and China. Share of households

equipped with

o Air-conditioners – 90% in the US, 60% in China and 5% in India

o Washing machines – 85% in the US, 80% in China and 11% in India

o Refrigerators – 99.8% in the US, 90% in China and 29% in India

o Laptops/computers – 87% in the US, 53.2% in China and 11% in India.

Over the past 5 -7 years, Indian consumers have shown a big apettite for embracing

technology as indicated by the swift growth of the domestic smartphone market,

usage of online services and rising EV penetration. The technologically advanced

futuristic lifestyle will depend on the seamless and sustainable flow of electricity,

which requires a stable GT&D infrastructure.

• India is expected to install 450 GW of renewable energy capacity by 2030 and 80% of

this new capacity is expected to be installed over the next 5 years. These new

renewable energy centres would mean an entirely virgin transmission network to be

the put in place.

India’s Renewable Energy Capacities

Source: IBEF & Company Reports

• Nearly 65.5% of India’s energy demand emerges from Tier-II/III/IV cities and towns.

Unlike cosmopolitan and Tier-I cities, which have a mature power consumption profile,

the new consumption centres have an upward trajectory in demand which should play

out for years, as the affordability and per capita income expand.

• There are brownfield expansion/acquisition opportunities, especially where

competing transmission assets are sub-optimally utilized or operated at a cost higher

46 57 69 78 87 94

150 175

450

FY16 FY17 FY18 FY19 FY20 FY21 Nov 2021 FY22 FY30

Data in GW

132132

( 9 t h D e c 2 0 2 1 )


than sectoral standards. Also, a large portion of the transmission infrastructure is up

for replacement given the outdated technology and/or expiry of useful life.

• India has proposed One Sun, One World, One Grid (OSOWOG), a transnational solar

power grid, that will be laid all over the globe to transmit solar power generated across

the globe to different load centres. It will be a significant opportunity for Indian

transmission companies to lay HVDC lines, which are useful in renewable power

transmission.

• Increasing demand for higher voltage power transmission lines, which is to

benefit experienced players like ATL

There has been substantial growth in the transmission system of higher voltage grdaes

(above 220 KV) due to the increased requirement of the transmission network to

transmit power over longer distances. It minimizes the distribution losses and

improves grid reliability, which enhances the profitability of transmission companies.

In the past 10 years, India’s power transmission network has expanded at a CAGR of

5.8% to 450,552 ckm, however, the mix of KV lines has significantly changed. The share

of 220 KV lines has declined from 52.8% in FY12 to 42.1% in FY22 (till Oct 2021), while

the share of 765 KV lines has increased from 2.0% to 10.8% over the same period.

Strong growth in the length of high voltage transmission line (above 220 KV)

Source: Central Electricity Authority

To reduce power loss, higher voltage KV lines and HVDC lines are used to transmit

power from remote power plants and renewable capacities (mostly located far away

from load centres). ATL has experience of operating Asia’s longest and India’s 1st

private HVDC line between Mundra to Mohindergarh (990 ckm), which the company

could be utilized as an advantage in high voltage or HVDC TBCB bidding.

Data in circuit kms FY1997 FY2002 FY2007 FY2012 FY2017 FY2018 FY2019 FY2020 FY2021FY2022

(till Oct)

220 KV AC Line 79,600 96,993 1,14,629 1,35,980 1,63,268 1,68,755 1,75,296 1,80,141 1,86,446 1,89,783

Share of 220 KV AC Line (%) 67.8 63.7 58.4 52.8 44.4 43.2 42.4 42.4 42.2 42.1

400 KV AC Line 36,142 49,378 73,438 1,06,819 1,57,787 1,71,600 1,80,746 1,84,521 1,89,910 1,92,605


765 KV AC Line 0 1,160 2,184 5,250 31,240 35,059 41,809 44,853 46,090 48,789


320 KV HVDC Line 0 0 0 0 0 0 0 0 288 288

Share of 320 KV HVDC Line (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1

500 KV HVDC Line 1,634 4,738 5,872 9,432 9,432 9,432 9,432 9,432 9,432 9,432


800 KV HVDC Line 0 0 0 0 6,124 6,124 6,124 6,124 9,655 9,655


133133

( 9 t h D e c 2 0 2 1 )


• MVA to MW ratio is one of the lowest in India. Improvement in this ratio

requires new transformation capacities and additional transmission lines

To ensure an uninterrupted flow of power, every MW of new generation capacity needs

a certain transformation capacity added to the system. In the Indian context, grades

220 kV and above, the transformation to generation ratio (MVA:MW) has remained low

over the years. The ratio has improved from 1.1X in FY92 to 2.6X in FY20 and is expected

to reach 2.8X by FY25. However, it is still lower than the average of 8-10X of the

developed countries

Outlook on Transformation Capacity Addition

Source: CEA and PFC

We are expecting a double-barrel growth of rise in ckm transmission line length along

with a higher transformation to generation ratio. This will enhance power density,

reduce losses and efficiently deliver bulk power. It also reduces the requirement of the

right of way, a key challenge facing the transmission sector and delivers better

profitability.

• Government has launched various schemes and policies to strengthen transmission &

distribution industry, which will remain independent of ruling political parties. A brief

snippet of schemes are:

o Integrated Power Development Scheme (IPDS):

The Government approved the scheme in Nov 2014 having a total outlay of INR

32,612 cr with the following objectives:

➢ Strengthening of sub-transmission and distribution networks in the urban

areas

➢ Metering of distribution transformers / feeders / consumers in the urban area.

1.1

1.7

2.12.2

2.62.8

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

200

400

600

800

1,000

1,200

1,400

FY1992 FY2002 FY2012 FY2015 FY2020 FY2025

Generation Capacity (GW) Transformation Capacity (GVA)

Trans to Gen Ratio (MVA:MW)

134134

( 9 t h D e c 2 0 2 1 )


The component of IT enablement and strengthening of distribution network

approved in June, 2013 in the form of RAPDRP for 12th and 13th Plans got

subsumed in this scheme and approved the scheme outlay of C 44,011 Crore under

the new IPDS scheme.

o Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY):

The Government approved the Scheme in Nov 2014 having a total outlay of INR

44,033 Crore with the following objectives:

➢ Separation of agriculture and non-agriculture feeders

➢ Strengthening of sub-transmission and distribution networks in the rural

areas;

➢ Metering of distribution transformers / feeders / consumers in the rural area.

➢ Rural Electrification

The component of Rural Electrification approved in the form of RGGVY for 12th

and 13th Plans got subsumed in this scheme.

o National Electricity Fund

To promote investment in the distribution sector, government has set up National

Electricity Fund in Mar 2012 to provide interest subsidy on loans disbursed to the

discoms – both in public and private sector, to improve the distribution network

for areas not covered by RGGVY and R-APDRP project areas.

o Ujwal DISCOM Assurance Yojana (UDAY)

The financial health of discoms has always been a grave concern for providing 24X7

quality, reliable and affordable power supply to the end consumers. To combat

this issue, the Ministry of Power, launched UDAY in Nov 2015 under which States

have taken over 75% of the discom debt. In lieu of that, States issued bonds with

maturity period of 10-15 years. The scheme envisages the following benefits:

➢ Financial Turnaround through elimination of ACS-ARR gap

➢ Operational improvement through reduction in AT&C losses enabled by

metering at all levels

➢ Reduction of Power generation cost enabled by increased domestic coal

supply, allocation of coal linkages at notified prices, coal linkage

rationalization, allowing coal swaps, supply of washed and crushed coal etc.

➢ Development of Renewable Energy

➢ Energy efficiency & conservation

The UDAY Scheme has yielded some short term benefits in terms of reduction in

interest burden.

135135

( 9 t h D e c 2 0 2 1 )


Given the gargantuan opportunity, ATL has been the most aggressive private player and it is

expected to be the biggest beneficiary. We expect ATL’s ckm to reach 82,729 by FY30 (CAGR

of 24.4%) leading to ATL’s transmission asset portfolio growing by 24.6% CAGR to INR

1,26,560 cr. Given its successful track record of blitzkrieg operational asset creation, we

believe that this is not a daunting task.

ATLs Power transmission asset base to grow by leaps and bounds


ATL operates its power transmission assets across two revenue models:

• Regulated transmission tariff

The revenue recognition is based on the annual revision of operations & maintenance

(O&M) cost and interest expense. It provides flexibility against interest rate volatility

and O&M variability. However, it carries the risk of uncertain future cash flows.

ATL’s regulated transmission tariff assets

o ATIL (Mundra – Dehgam, Mundra – Mohindergarh and Tiroda – Warora)

o MEGPTCL (Tiroda – Aurangabad)

Power transmission regulated tariff methodologies


1,26

,560

82,7

29

136136

( 9 t h D e c 2 0 2 1 )


• Fixed transmission tariff

It’s an annuity-based business model where the transmission company gets a fixed

payment for its asset for its entire residual life. Benefits of fixed transmission tariffs:

o Fixed and predictable cash flow

o Payment through pooling mechanism (no counterparty risk)

ATL’s fixed transmission tariff assets

o Maru & Aravali

o WTPL & WTGL - Gujarat & Maharashtra

o Bikaner - Sikar (Acquired from KEC International)

o Alipurduar (acquired from Kalpataru Power Transmission)

o Suratgadh - Sikar - ATRL

o Raipur - Rajnandgaon - Warora

o Chhatisgarh

o Sipat - Rajnandgaon

o Hadoti - Barmer - Thar

o Fatehgarh - Bhadia

o Bikaner - Khetri

ATL’s operational asset portfolio


137137

( 9 t h D e c 2 0 2 1 )


ATL’s under construction asset portfolio


ATL’s Power Transmission Network


138138

( 9 t h D e c 2 0 2 1 )


Financial Analysis & Projections for Power Transmission business

During FY16-21, the power transmission line length and asset base of operational projects

increased to 13,027 ckm (from 4,231 ckm) and INR 17,510 cr (from INR 5,350 cr), respectively.

Over the same period, segmental revenue and EBIT grew at a CAGR of 8.8% to INR 3,122 cr and

9.9% to INR 2,192 cr, respectively.

Power Transmission Performance


During H1FY22, power transmission line length and asset base of operational projects

increased to 13,720 ckm (from 13,027 ckm in FY21) and INR 18,910 cr (from INR 17,510 cr in

FY21), respectively. Over the same period, segmental revenue and EBIT grew at a YoY rate of

8.0% to INR 1,834 cr and 7.0% to INR 1,338 cr, respectively, while EBIT margin improved from

66.7% to 70.2% (+348bps) over the same period.

Over the period of FY21-24E, we expect the operational asset base of the power transmission

business to grow at a CAGR of 33.4% to INR 41,560 cr, due to the improving share of private

players in upcoming TBCB bidding. It would result in a revenue CAGR of 25.4% to INR 6,155 cr

over the same period. The company is bidding for only ‘fixed tariff’ transmission projects where

the revenues are fixed for 35 years, compared to volatile cash flow in ‘regulated return’

projects.

ATL enjoys strong contractual protection from discoms and gets paid through

a pooling mechanism In interstate transmission projects, the counterparty risk is largely mitigated through the point

of connection (POC) mechanism, under which, transmission charges are pooled and distributed

among transmission companies in proportion to their annual transmission charges, which

ensures 100% protection of their tariffs. The involvement of a central transmission utility (CTU)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Growth in transmission assets to remain robust in the current decade

Transmission Length (ckm) Asset Base (INR Cr)

55

60

65

70

75

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E

Revenue growth and profitability to follow business performance

Transmission Revenue Transmission EBIT

EBIT Margin (%)

139139

( 9 t h D e c 2 0 2 1 )


in billing, collection and disbursement of transmission charges among transmission companies

further reduces risk. Currently, Power Grid Corpplays the role of CTU

Procedure for payment pooling mechanism


Comparison of power transmission assets with other power segments

Source: Industry Reports & Ventura Research

Customers

•State Discoms

•Power Generation Companies

Central Payment Pool (Escrow account

•Managed and Guaranteed by Power Grid Corp of India

•Collects payment on monthly basis

Transmission Service Providers

•State Transmission Companies

•Private Transmission Companies

Power TransmissionConventional Power

GenerationSolar Power Generation

Wind Power

Generation

100 50 100 100Payments through

pooling mechanism

Offtake & Cost of Fuel Driven by long term

aggrements

Driven by long term

aggrements

75 50 75 75Faster clearence to

payments

Direct exposure to debt

laden SEBs

Faster clearence to

payments

Faster clearence to

payments

100 50 100 75Limited O&M

requirements

Substantial periodic

maintenance needs

Moderate O&M

requirements

High O&M requirements

100 50 100 100High growth potential Moderate potential

from baseload demand

High growth potential High growth potential

100 50 50 50Few credible players High competitiveness

given multiple players

High competitiveness


High competitiveness


Certainty of Cash Flow

Counterparty Risk

Operational Risk

Future Growth

Potential

Competitive

Environment

140140

( 9 t h D e c 2 0 2 1 )


Debt restructuring and extended maturities to improve future cash flow visibility on

ATL’s power transmission and distribution assets

Power transmission and distribution is a capital-intensive business, which requires long term

debt for project funding. The longer is the repayment tenure of the debt, the better is the

operating cash flow.

In FY21, the company raised USD 2.3 bn from the international debt markets across several

transactions to secure and strengthen its cash flow. Below are the details:

• Concluded its maiden US private placement (USPP) of a 30-year paper worth USD 400

mn, the first of its kind in India’s power transmission sector.

• AEML raised the first USD bond issuance of USD 1 bn. It also secured funding lines for

the capex plans drawn up, in addition to a rolling capex facility of USD 400 mn.

• Raised USD 500 mn, amortized over 17 years in the second tranche, to eliminate short-

term refinance risks.

USD denominated long term debt has reduced interest burden on cash flows


With this debt raising activity, the company mobilized 10-years, 17-years and 30-years global

debt paper and extended the maturity of its debt to strengthen future cash flows. The average

long term debt maturity of ATL improved from 68 months in FY16 to 116 months in FY21.

141141

( 9 t h D e c 2 0 2 1 )


US denominated long term debt obtained at the sovereign rating has reduced interest burden

Source: ACE Equity

Over the past 5 years, ATL changed its borrowing mix and raised the debt instruments of longer

maturities.

The maturity profile of ATL’s outstanding debt


0

1

2

3

4

5

6

7

8

0

10,000

20,000

30,000

40,000

50,000


Rise in asset base is expected to enhance absolute debt on balance sheet

Total Debt Net Debt


INR Cr X

(4)

(2)

0

2

4

6

8

(8,000)

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000


Transmission capex cycle is expected to pickup strongly in the coming years

CFO FCF NWC to Sales (%)

INR Cr %

Fig in INR Cr FY16 FY17 FY18 FY19 FY20 FY21

Less than 1 year 3,491.2 1,245.7 1,833.8 3,832.9 3,198.1 4,637.5

Share of less than 1 year in Total Debt (%) 40.7 13.9 17.6 19.0 8.8 12.0

1-5 years 4,490.5 4,566.2 3,623.3 5,300.3 7,237.1 7,927.1

Share of 1-5 years in Total Debt (%) 52.3 50.9 34.7 26.3 19.9 20.5

Over 5 years 603.3 3,162.9 4,971.2 11,003.9 25,863.2 26,166.3

Share of more than 5 years in Total Debt (%) 7.0 35.2 47.7 54.6 71.3 67.6

142142

( 9 t h D e c 2 0 2 1 )


➢ ATL’s Power Distribution – AEML

In Dec 2017, ATL signed a share purchase agreement for the acquisition of the Mumbai T&D

business from Reliance Infrastructure. In Mar 2018, the shareholders of Reliance Infrastructure

approved the sale of its power business for INR 13,251 cr. This resulted in the founding of

AEML, a 100% wholly-owned subsidiary of ATL in FY19. In Feb 2020, Qatar Investment

Authority acquired a 25.1% stake in AEML for INR 1,220 cr (along with subordinated debt of

INR 2,000 cr. AEML serves more than 3.0 mn consumers across a license area of approximately

400 sq km in the city of Mumbai.

Power Distribution regulated tariff methodologies


After considering return on equity (RoE, 15.5% of equity involved in the business), interest

expense, depreciation costs, O&M and power purchase expenses, AEML derive its aggregate

revenue. While it provides flexibility against cost variability, it carries the risk of uncertain

future cash flows. However, operating profit is insulated from any cash flow mismatch which

may arise in exceptional cases as the business is based on the rate of return model with the

majority of the costs being pass-through. Any shortfall or excess cash collection get adjusted

in mid-year review with MERC through true-up mechanism.

In addition, the business also protects the RoE of the company even in the decline in

throughput. Equity covers ~30% of the annual capex while the rest ~70% is funded through

debt (payable in 13 years). The higher the equity involvement of the company, the higher

would be the assured return and profitability.

AEML is planning to incur a capex of INR 9,600 cr during FY21-25E, which is expected to

increase the asset base to INR 15,800 cr (from the current INR 6,915 cr).

143143

( 9 t h D e c 2 0 2 1 )


Equity involvement in AEML improves the share of fixed returns in revenue and improve profits


Units sold & per unit realization, distribution loss, collection efficiency, online payment


Particulars FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E

Asset Base (INR Cr) 6,915 8,915 10,975 13,097 15,282 17,533 19,852 22,240 24,700 27,233

Equity (INR Cr) 3,212 3,812 4,430 5,067 5,722 6,398 7,093 7,810 8,548 9,308

Return on Equity (%) 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5

Return on Equity (INR Cr) 498 591 687 785 887 992 1,099 1,210 1,325 1,443

Debt (INR Cr) 3,703 5,103 6,545 8,030 9,560 11,136 12,759 14,430 16,152 17,926

Revenue (INR Cr) 6,808 7,521 8,358 9,228 10,131 11,066 12,034 13,035 14,070 15,138

Share of RoE in Revenue (%) 7.3 7.9 8.2 8.5 8.8 9.0 9.1 9.3 9.4 9.5

EBIT 1,034 1,180 1,339 1,503 1,673 1,848 2,029 2,216 2,408 2,607

EBIT Margin (%) 15.2 15.7 16.0 16.3 16.5 16.7 16.9 17.0 17.1 17.2

-40

-30

-20

-10

0

10

20

30

0

500

1,000

1,500

2,000

2,500

3,000

AEML's electricity volume in Mumbai

Units Sold (mn units) YoY Growth (%)

8.397.53 7.85 7.78 8.18 8.69

5.58

13.47

3.19

6.707.56

6.887.64

0

2

4

6

8

10

12

14

16

Distribution Loss (%)

Distribution Loss (%)

144144

( 9 t h D e c 2 0 2 1 )


AEML servicing 85% of Mumbai’s geography


Multiple triggers for power demand in place

We are expecting a surge in power demand in the coming years due to the rapid urbanization

and development of Smart Cities, which will also increase the usage of electronic gadgets.

Triggers for power demand from various sectors

Source: Industry Reports & Ventura Research

•Area: 400 sq km

•Households: 3.1 mn

•Population: 12 mn

•Demand: 1,964 MW

Adani Transmission

•Area: 210 sq kim

•Households: 1.5 mn

•Population: 13 mn

•Demand: 1,500 MW

Other Distributors

Smart Cities, Housing for all and Rural Electrification

Under PMAY, 8 mn urban and 10 mn rural houses to be consctructed in cities and rural areas by FY25

Rapid urbanization and rising disposable income to increase the usage of

electronic gadgets

Significantly improve the per capita power

consumption

Make in India, China+1 and New

Capital Goods Policy

GOI is targeting to increase the share of manufacturing in GDP

from 18% to 25%

GOI is aiming to increase the export of capital goods from 25% of production to

40%

Support electricity consumption by industrial

and allied segments

Infrastructure Developement, DFCs

and Metro lines

Eastern & Western DFC with planned capital outlay of INR 735 bn

Railway electrificationa and Metro rail projects in

cities across India

Significantly increase the power demand from railways and metros

145145

( 9 t h D e c 2 0 2 1 )


Power Distribution – Growth opportunities from unregulated segments

AEML is planning to enhance its product offerings in Mumbai. The focus would be on high

margin consumer durables and services to diversify its business, which is completely

unregulated today.

ATL’s Unregulated Business Plan


Financial Analysis & Projections for Power Distribution business

During FY21, ATL sold 7,169 mn units of power (YoY decline of 15.0% over FY20) and clocked a

revenue of INR 6,048 cr. FY20 and FY21 financial numbers are not comparable as AEML sold a

25% stake to QIA and adjusted its revenue under IND AS 18. Segmental EBIT stood at INR 1,012

cr and EBIT margin was at 16.7%.

Power Distribution Performance

Source: ACE Equity

• Energy management solutions to optimize power consumption and cost reduction

Efficient Appliances & Demand Side Management (DMS)

• Smart home solutions to integerate smart home devices and optimize power cost

Smart Home Products

• DTH services with a complete entertainment package

E-Security & Entertainment on Demand

• Broadband home internet connectionFiber to Home

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

2,000

4,000

6,000

8,000

10,000

12,000


Expecting a sustainable growth in power consumption

Unit Sold (nos mn)

Power Consumption per Household (nos)

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

0

2,000

4,000

6,000

8,000

10,000


Distribution business generates a sustainable midteen EBIT margins

Distribution Revenue Distribution EBIT

EBIT Margin (%)

146146

( 9 t h D e c 2 0 2 1 )


During H1FY22, ATL sold 4,011 mn units of power (YoY growth of 15.6%) and posted YoY

revenue growth of 18.2% to INR 3,432 cr. Segmental EBIT stood at INR 513 cr (YoY growth of

14.4%) and EBIT margin was at 15.0% (-49bps).

Power consumption in Mumbai has grown at a CAGR of 5% to 3,000 MW during FY16-20 (FY21

was an exceptional year) due to

• Improving infrastructure (metro rail projects and office spaces) and

• Increase in the usage of consumer goods and electronic gadgets due to rise in income

levels.

The power consumption growth could sustain in the coming years and hence we expect AEML’s

units to grow at a CAGR of 10.7% to 9,734 units, which would result in a revenue CAGR of 10.8%

to INR 8,231 cr during FY21-24E. AEML operates at a fixed RoE, which is expected to sustain its

EBIT margin at 15.5%. As a result, EBIT is expected to grow at a CAGR of 8.0% to INR 1,276 cr

throughout FY21-24.

ATL is committed to improve ESG Score

Since FY16, ATL has worked on ESG parameters and disclosures, which has improved its overall

ESG score, which is now equivalent to the market leader Power Grid Corp of India. ATL aligned

its ESG reporting standards with the Global Reporting Initiative (GRI), increased its public

disclosures in the annual report, management systems and business excellence initiatives, and

remains committed to improving its ESG performance by further refining its policies and

practices, as well as strengthening information disclosure procedures.

Maintained a Strong ESG Score

Source: Bloomberg

ATL has set an ambitious plan to increase its renewable energy share in the power distribution

business from the current 10% to 70% by FY30. The goal will be achieved through a long-term

tie-up with solar and wind capacities.

44.2 41.1 26.4 43.425.6 28.7 28.7 14.7 15.5

70.249.1

50.943.9

43.9 36.8 28.122.8 22.8

66.1

62.567.9 57.1

53.6 48.248.2

53.6 51.8

Tata Power NTPC PGCIL ATL GE T&D KECInternational

CESC Torrent Power KalpataruPower

Transmission

Environment Social Governance

147147

( 9 t h D e c 2 0 2 1 )


AEML’s ambitious plan to increase the share of renewable energy to 70% by FY30


ATL’s Environmental Commitments


10

30

40

60

70

FY21 FY23E FY25E FY27E FY30E

Data in %

148148

( 9 t h D e c 2 0 2 1 )


ATL’s Social Philosophy


ATL’s Governance Philosophy


149149

( 9 t h D e c 2 0 2 1 )


Ventura Business Quality Score



Management Quality 8 Low The management is of high quality, it has been able to deliver on stated guidance; investor-friendly with timely updates on developments

Promoters Holding Pledge 7 Low The promoter holding is 74.92% and it has a pledge of 6.12% (declined from 40.18% as on 31st Mar 2020) as on 30th Sept 2021

Board of Directors Profile 7 Low The average experience of directors is >27 years with significant experience in manufacturing, accounts/finance, strategic planning and operations


Industry Growth 10 Low Private players have only a 7.5% share in India’s power T&D space, which provides a significant opportunity for them to grow in the coming years

Regulatory Environment or Risk 3 High Highly regulated market with government intervention

Entry Barriers / Competition 8 Low The entry of a new company in the power T&D space would require a strong capital base and a huge investment.

Business Prospects

New Business / Client Potential 8 Low ATL has been very aggressive in TBCB bidding and maintained >35% market share in TBCB auctions. We are expecting this trend to sustain in the coming years.

Business Diversification 8 Low ATL has a significant presence in the power transmission business. However, planning to diversify its business in power distribution and unregulated products such as electric appliances, smart home products, etc

Market Share Potential 10 Low ATL has a 35% stake in private power transmission space, which has been growing in the past 4-5 years.

Margin Expansion Potential 8 Low India is gradually improving its transmission lines to high voltage lines, where the power losses are low, which eventually generates better margins

Earnings Growth 8 Low High voltage lines along with expansion in power transmission network provide significant scope for earnings growth

Valuation and Risk

Balance Sheet Strength 3 High Power T&D is a capital intensive business that requires huge debt to fund capex and project execution, which impacts balance sheet health

Debt Profile 3 High ATL has INR 30,000 cr of total debt which is expected to grow at a CAGR of ~10% in the next 2-3 years.

FCF Generation 3 High ATL is in a growth phase, hence the capex is expected to remain high for the next 10 years, which could impact FCF

Dividend Policy 3 High The company has never paid a dividend in the past and its fund requirements are expected to remain high in the coming years

Total Score

Ventura Score (%)

97

65 Low

The overall risk profile of the company is good and we consider it as a LOW risk company for investments


150150

( 9 t h D e c 2 0 2 1 )



We analyzed the FY21 annual report of ATL and our key observations are as follows:

Key Takeaways

• Transmission network expansion: ATL’s transmission network expanded from 14,740

ckm in FY20 to 18,336 ckm in FY21, while network availability increased from 99.76%

to 99.87% during the period.

• Acquired two transmission lines: ATL made two acquisitions – Alipurdaur

Transmission Ltd (length of 650 ckm and an asset base of INR 1,080 cr) and Warora

Kurnool Transmission Ltd (length of 1,060 ckm and an asset base of INR 1,200 cr) – in

FY21. Alipurdaur Transmission is operational, while the Warora Kurnool Transmission

line will become operational by FY23.

• One time impact on Mumbai power distribution: AEML power distribution volumes

in Mumbai declined by 15% in FY21, due to pandemic and an unprecedented power

outage on 12th Oct 2020. The snapping of a conductor in MSETCL’s Kalwa-Padhage

Line-2 and manual tripping of the Talegon-Kharghar Line by the operator resulted in a

partial grid failure. As a result, ~3,500 MW of load was affected in Maharashtra; 2,200

MW was affected in Mumbai alone.

• Inorganic growth opportunities: ATL believes that there are significant inorganic

growth opportunities in India’s power transmission space, especially where competing

transmission assets are being sub-optimally utilised or are being operated at costs

higher than the sectorial standard.

• Debt restructuring: ATL raised USD 2.3 bn from the international debt market with

extended maturities. Below are the details:

o Concluded its maiden US private placement (USPP) of a 30-year paper worth

USD 400 mn, the first of its kind in India's power transmission sector.

o Completed the first USD bond issuance of USD 1 bn through AEML. It also

secured funding lines for the capex plans drawn up by AEML, in addition to a

rolling capex facility of USD 400 mn.

o Raised USD 500 mn, amortized over 17 years in the second tranche, to

eliminate short-term refinance risks.

Auditors qualifications and significant notes to accounts

Deloitte Haskins & Sells LLP is the auditor and there were no qualifications/emphasis of

matters highlighted by them in the FY21 Annual Report.

Royalty Payments

ATL is not paying royalty to any organization or company

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Board of Directors

ATL has a stable team in place and no one left the board in the past 4 years, which reflects the

leadership stability in the company.

Details of Board of Directors


Related Party Transactions and Balances

Related party transactions remained stable in the past 3 years and have not increased with the

business.

Related Party Balances with Subsidiaries and Group Companies



Contingent Liabilities of the company are very high compared to the net worth and revenue of

the company. Most of the elements are related to disputes with government and regulatory

authorities which is a major risk to the company.

Particulars FY18 FY19 FY20 FY21

Gautam S Adani C C C C

Anil Sardana MD MD MD MD

Rajesh S Adani ED ED ED ED

K Jairaj NEID NEID NEID NEID

Ravindra H Dholakia NEID NEID NEID NEID

Meera Shankar NEID NEID NEID NEID

Jaladhi Shukla CS CS CS CS

C - Chairman MD - Managing Director

ED - Executive Director NEID - Non Executive Independent Director

Balances with Subsidiaries FY18 FY19 FY20 FY21 Balances with Group Companies FY18 FY19 FY20 FY21

Loans Payable 0.0 0.0 0.0 33.3 Loans Payable 319.2 35.8 0.0 350.8

Loans Receivables 4,674.0 5,320.9 4,952.9 4,818.0 Loans Receivables 0.0 0.0 0.0 0.0

Interest Accrued but not due 0.0 0.0 0.0 0.0 Interest Accrued but not due 25.4 2.4 0.0 0.0

Interest Receivables 512.0 296.4 234.1 252.7 Interest Receivables 0.0 0.0 0.0 0.0

Interest Payables 0.0 0.0 0.0 1.6 Interest Payables 0.0 0.0 0.0 0.0

Account Payable 3.6 0.1 23.1 0.0 Account Payable 0.0 24.0 0.1 0.0

Account Receivables 27.7 0.0 3.3 8.2 Account Receivables 0.4 0.3 0.1 0.0

Compulsorily Convertible Debentures 639.6 639.6 31.6 81.6 Compulsorily Convertible Debentures 0.0 0.0 0.0 0.0

Share Application pending allotment 4.0 0.0 0.0 0.0 Share Application pending allotment 0.0 0.0 0.0 0.0

Bank Guarantee 0.0 232.3 352.0 361.8 Bank Guarantee 0.0 0.0 0.0 0.0

Unsecured Perpetual Equity Instrument 0.0 0.0 0.0 0.0 Unsecured Perpetual Equity Instrument 1,848.6 3,408.0 3,279.4 2,829.7

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Particulars FY18 FY19 FY20 FY21

Direct Tax 1.0 1.0 1.1 0.9

VAT & Entry Tax 9.5 9.5 9.5 14.4

Demand disputed by the Group relating to Service tax on street light

Maintenance, wheeling charges and cross subsidy surcharges0.0 353.6 353.6 353.6

Claims raised by the Government authorities towards unearned income arising on

alleged transfer of certain land parcels0.0 127.7 127.7 127.7

Demand towards fixed charges payable in respect of power drawn from the state

pool0.0 124.6 99.7 0.0

Claims raised by Vidarbha Industries Power Limited (VIPL) in respect of increase in

fuel cost for the financial year ended 31st March, 20190.0 1,381.3 1,381.3 1,381.3

Way Leave fees claims disputed by the Group relating to rates charged 0.0 20.6 28.4 28.4

Other claims against the Group not acknowledged as debts 0.0 2.1 36.0 36.0

Property related disputes 0.0 2.6 0.0 0.0

Stamp duty payment 0.0 27.8 0.0 0.0

Total Reserves 6,056.5 4,634.9 5,219.5 6,089.6

Contingent Liabilities to Total Reserves (%) 0.2 44.2 39.0 31.9

Total Revenue 3,944.5 7,305.5 11,416.0 9,926.3

Contingent Liabilities to Total Revenue (%) 0.3 28.1 17.8 19.6

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Management Team



• ATL has 10 under construction power transmission projects (9 TBCB fixed tariff and 1

HVDC RoA project). Such projects typically require substantial capex and a long

gestation period of 18 – 60 months before the commencement of commercial

operation. The cash flow starts after the commencement of commercial operation.

Any delay due to various reasons could impact future cash flows.

• Private participation in TBCB based bidding picked up since FY16, which is attracting

more private players in annuity based fixed tariff model. Increased competitive

pressure could adversely affect the pricing and ability of ATL to successfully bid for

projects and execute the growth story

• Power transmission business is subject to extensive regulatory risk which includes a

wide variety of laws, rules, directives, standards and codes issued by the government

and relevant regulatory authorities. To conduct transmission business, companies

must obtain various licenses, permits and approvals. Even when they get the required

licenses, permits and approvals, the operations are subject to continued review and

the governing regulations.


Mr Anil SardanaMD & CEO - Adani

Transmission

He holds a degree of Bachelors in Engineering from Delhi College of Engineering.

He also holds a Post-Graduate degree in Cost Accountancy (ICWAI) and a PGDBM

and has attended Top Management Program at the IIM Ahmedabad. He has more

than 40 years of experience in the infrastructure space, particularly in the Energy

and Telecom sectors having managed complex transitions, developments &

operations as well as EPC assignments. He has worked with NTPC (for 7 years),

BSES (for 14 years) and Tata Power (for 18 years).

Mr Kandarp Patel MD & CEO AEML

He graduated with Bachelor’s Degree in Electrical Engineering from Birla

Viswakarma Mahavidhyalaya Engineering College in 1994 and an MBA in Finance

from G.H. Patel PG Institute of Business Management in 1997. He has more than

two decades of multi-faceted experience in the areas of Power Trading, Fuel

Management, Legal and Regulatory and Commercial aspects of the Power

Business.

Mr Vivek SinglaPresident - Transmission &

Distribution

He has a Bachelor of Engineering degree in Electronics from Delhi University, a

Management degree in Finance from FMS, Delhi University and completed one

year course on Sr. Leadership from ISB, Hyderabad. He has worked with various

capacities in Tata Power, Uttaranchal Jal Vidyut Nigam, BSES, Siemens and BHEL.

Mr Rohit Soni CFO

He is a Chartered Accountant and Alumni of Harvard Business School, Boston, USA

(General Management Program GMP). He has over 19 years of rich experience in

managing complex businesses in Metal & Mining industry, both in India & overseas.

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• Due to the long construction periods of power transmission systems and substation

projects, the O&M costs of projects may change significantly after the commissioning

of the assets. As the terms and conditions, including the tariff structure, are generally

fixed (in annuity-based projects), ATL may not be able to offset increases in costs.

• ATL has a substantial amount of outstanding gross debt (INR 23,663 cr) and intends to

finance the majority of the cost of future transmission projects through debt therefore

expecting to incur substantial additional borrowings in the future. It will require a

sustainable cash flow to service the debt in future and any interruption in annual cash

could impact debt servicing. Any significant change in interest rates could also impact

the profitability of the project.

• Opposition from local communities and other parties may adversely affect the project

execution and financial condition of the company.

• The company has very high contingent liabilities, which are more than 30% of its net

worth. Any adverse judgement could significantly impact the financial health of the

company.

• ATL raised USD 2.3 billion in loans with long term maturity. Volatility in the USD INR

rate and significant depreciation in INR could impact the balance sheet health of the

company.

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Fig in INR Cr (unless specified) FY19 FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 FY21 Q1FY22 Q2FY22 Q3FY22E Q4FY22E FY22E FY23E FY24E

Transmission Asset Base 13,160 16,430 16,430 16,430 17,510 17,510 17,510 17,510 18,910 18,910 18,910 19,580 28,970 41,560

Transmission Revenue 2,193 2,815 1,009 688 704 720 3,122 1,045 789 973 973 3,779 4,826 6,155

Avg Yiled on Asset Base (%) 16.7 17.1 6.1 4.2 4.0 4.1 17.8 6.0 4.2 5.1 5.1 19.3 16.7 14.8

No of Customers (nos mn) 3.03 3.05 3.05 3.05 3.06 3.06 3.06 3.06 3.06 3.07 3.07 3.07 3.08 3.09

Power Consumption (mn units) 6,022 8,434 1,728 1,741 1,874 1,826 7,169 2,036 1,975 2,100 2,200 8,311 8,932 9,734

Distribution Revenue 4,270 7,676 1,437 1,467 1,588 1,556 6,048 1,742 1,690 1,662 1,662 6,756 7,380 8,231

Trading Revenue 842 925 0 1 305 451 757 43 62 348 348 800 1,022 1,303

Revenue from operations 7,305 11,416 2,447 2,156 2,597 2,727 9,926 2,830 2,541 2,982 2,982 11,335 13,228 15,689

YoY Growth (%) 85.2 56.3 (14.4) (16.9) (6.5) (14.4) (13.0) 15.7 17.9 14.8 9.4 14.2 16.7 18.6

Power Exp & Material Cost 3,130 4,622 776 585 1,033 1,249 3,643 862 1,018 1,322 1,322 4,523 5,209 6,067

RM Cost to Sales (%) 42.8 40.5 31.7 27.1 39.8 45.8 36.7 30.5 40.0 44.3 44.3 39.9 39.4 38.7

Employee Cost 587 973 223 254 219 236 931 229 245 263 263 1,001 1,071 1,144

Employee Cost to Sales (%) 8.0 8.5 9.1 11.8 8.4 8.6 9.4 8.1 9.6 8.8 8.8 8.8 8.1 7.3

Other Expenses 826 1,567 53 322 230 215 819 348 123 114 114 699 713 717

Other Expenses to Sales (%) 11.3 13.7 2.2 14.9 8.9 7.9 8.3 12.3 4.8 3.8 3.8 6.2 5.4 4.6

EBITDA 2,762 4,254 1,395 996 1,115 1,027 4,533 1,390 1,156 1,283 1,283 5,112 6,235 7,760

EBITDA Margin (%) 37.8 37.3 57.0 46.2 43.0 37.7 45.7 49.1 45.5 43.0 43.0 45.1 47.1 49.5

Depreciation 882 1,174 378 314 325 312 1,329 342 353 393 393 1,482 1,857 2,361

PBIT 1,880 3,080 1,017 682 790 715 3,204 1,048 803 890 890 3,631 4,377 5,399

PBIT Margin (%) 25.7 27.0 41.6 31.6 30.4 26.2 32.3 37.0 31.6 29.8 29.8 32.0 33.1 34.4

Transmission EBIT 1,348 1,873 787 463 462 480 2,192 801 537 632 632 2,602 3,234 4,124

Transmission EBIT Margin (%) 61.5 66.5 78.0 67.2 65.6 66.6 70.2 76.6 68.1 65.0 65.0 68.9 67.0 67.0

Distribution EBIT 624 1,206 230 219 328 235 1,012 248 266 258 258 1,029 1,144 1,276

Distribution EBIT Margin (%) 14.6 15.7 16.0 14.9 20.7 15.1 16.7 14.2 15.7 15.5 15.5 15.2 15.5 15.5

Trading EBIT -92 0 0 0 0 1 1 0 0 0 0 0 0 0

Other Income 351 265 96 150 137 149 533 106 134 109 109 458 536 634

Finance Cost 1,391 2,238 631 536 455 494 2,117 614 540 406 406 1,967 2,084 2,647

PBT 840 1,107 482 296 472 370 1,620 540 396 592 592 2,121 2,829 3,387

PBT Margin (%) 11.5 9.7 19.7 13.7 18.2 13.6 16.3 19.1 15.6 19.9 19.9 18.7 21.4 21.6

Tax Paid 281 400 149 105 32 138 330 97 98 149 149 494 712 852

Tax Rate (%) 33.4 36.2 30.9 35.6 6.7 37.4 20.4 18.0 24.7 25.2 25.2 23.3 25.2 25.2

Net Profit 559 742 361 183 372 214 1,224 445 282 443 443 1,613 2,117 2,534

Net Margin (%) 7.7 6.5 14.8 8.5 14.3 7.8 12.3 15.7 11.1 14.9 14.9 14.2 16.0 16.2

Adjusted EPS 5.1 6.7 11.1 14.7 19.3 23.0

P/E (X) 374.3 282.1 171.0 129.7 98.9 82.6

Adjusted BVPS 42.1 47.5 55.4 70.0 87.4 107.6

P/BV (X) 45.2 40.1 34.4 27.2 21.8 17.7

Enterprise Value 2,31,922 2,34,209 2,37,620 2,33,793 2,39,981 2,48,795

EV/EBITDA (X) 84.0 55.1 52.4 45.7 38.5 32.1

Net Worth 4,635 5,220 6,090 7,703 9,608 11,839

Return on Equity (%) 12.1 14.2 20.1 20.9 22.0 21.4

Capital Employed 28,180 32,745 35,880 34,125 42,718 54,347

Return on Capital Employed (%) 4.4 6.0 7.1 8.2 7.7 7.4

Invested Capital 27,263 30,135 34,416 32,202 40,295 51,339

Return on Invested Capital (%) 6.9 10.2 9.3 11.3 10.9 10.5

Cash Flow from Operations 2,591 5,437 3,784 4,391 5,549 6,793

Cash Flow from Investing -3,138 -5,643 -4,025 47 -9,670 -12,954

Cash Flow from Financing 38 1,250 -745 -4,150 4,392 6,449

Net Cash Flow -509 1,045 -986 288 271 288

Free Cash Flow 1,359 482 -352 -954 -4,215 -6,215

FCF to Revenue (%) 18.6 4.2 (3.5) (8.4) (31.9) (39.6)

FCF to EBITDA (%) 49.2 11.3 (7.8) (18.7) (67.6) (80.1)

FCF to Net Profit (%) 243.0 64.9 (28.7) (59.1) (199.1) (245.2)

FCF to Net Worth (%) 29.3 9.2 (5.8) (12.4) (43.9) (52.5)

Total Debt 23,545 27,525 29,791 26,422 33,109 42,509

Net Debt 22,629 24,916 28,326 24,499 30,687 39,501

Net Debt to Equity (X) 4.9 4.8 4.7 3.2 3.2 3.3

Net Debt to EBITDA (X) 8.2 5.9 6.2 4.8 4.9 5.1

Interest Coverage Ratio (X) 1.4 1.4 1.5 1.8 2.1 2.0

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Key Criteria View Comments Q3FY21


Operational transmission line length increased by 650 ckm to 11,588 ckm, while transmission assets increased from INR 16,430 cr in Q2FY21 to INR 17,510 cr in Q3FY21. Transmission revenue for the quarter stood at INR 704 cr (YoY growth of 3.8%). Segmental EBIT reported YoY growth of 1.6% to INR 462 cr.

AEML sold 1,874 mn units in Q3FY21, compared to 1,741 mn units in Q2FY21 and 2,068 mn units in Q3FY20. Distribution revenue and EBIT for the quarter stood at INR 1,588 cr and INR 328 cr (not comparable due to stake sale to QIA).

Acquired Alipurdaur Transmission line (line length: 650 ckm and asset base: INR 1,080 cr) from Kalpataru Power Transmission

Outlook & Strategy POSITIVE No revenue or capex guidance due to uncertain economic conditions. The company would continue to grow inorganically in future

Q4FY21

Business Performance NEGATIVE

Operational transmission line length and transmission assets remained the same at 11,588 ckm and INR 17,510 cr respectively in Q4FY21. Transmission revenue for the quarter stood at INR 720 cr (YoY decline of 9.3%). Segmental EBIT reported a YoY decline of 7.7% to INR 480 cr.

AEML sold 1,826 mn units in Q4FY21, compared to 1,874 mn units in Q3FY21 and 1,808 mn units in Q4FY20. Distribution revenue for the quarter stood at INR 1,742 cr (YoY growth of 21.2%). Segmental EBIT reported a YoY decline of 10.9% to INR 235 cr.

Outlook & Strategy POSITIVE Planning to raise long term maturity (10-20 years) global bonds to reduce the payment risk for the next 10 years.

Q1FY22


Operational transmission line length and transmission assets remained the same at 11,588 ckm and INR 17,510 cr respectively in Q1FY22. Transmission revenue for the quarter stood at INR 1,045 cr (YoY growth of 3.6%). Segmental EBIT reported YoY growth of 1.7% to INR 801 cr.

AEML sold 2,036 mn units in Q1FY22, compared to 1,826 mn units in Q4FY21 and 1,728 mn units in Q1FY21. Distribution revenue for the quarter stood at INR 1,742 cr (YoY growth of 21.2%). Segmental EBIT reported YoY growth of 7.8% to INR 248 cr.

AEML raised USD 300 mn through a global medium-term note of 10 years term. This is the first tranche of USD 2.0 bn of the fund raising plan.


AEML has slated to do a capex of INR 16,300 cr in the next 8-10 years. The overall capex in FY22 would be in the range of INR 5,000 cr, out of which INR 2,000 cr will be for AEML and the rest INR 3,000 cr will be for transmission business.

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Q2FY22


Operational transmission line length increased by 773 ckm to 12,361 ckm, while transmission assets increased from INR 17,510 cr in Q1FY22 to INR 18,910 cr in Q2FY22. Transmission revenue for the quarter stood at INR 789 cr (YoY growth of 14.6%). Segmental EBIT reported YoY growth of 16.0% to INR 537 cr.

AEML sold 1,975 mn units in Q2FY22, compared to 2,036 mn units in Q1FY22 and 1,741 mn units in Q2FY21. Distribution revenue for the quarter stood at INR 1,690 cr (YoY growth of 15.2%). Segmental EBIT reported YoY growth of 21.3% to INR 266 cr.

RoE and RoIC increased to 21.6% (+1253bps YoY) and 10.1% (+9bps YoY) respecitvely

Commissioned two fixed tariff lines – Fatehgarh to Bhadia and Bikaner to Khetri. The annual revenues from both the projects would be INR 177 cr


The company got approval from NERC for the HVDC transmission line for Mumbai. The project has the potential to generate INR 1,400 cr revenue annually. The project is expected to start operations from FY25

The capex in FY22 would be in the range of INR 5,000 cr


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Fig in INR Cr (unless specified) FY20 FY21 FY22E FY23E FY24E Fig in INR Cr (unless specified) FY20 FY21 FY22E FY23E FY24E


Revenue 11,416.0 9,926.3 11,485.1 13,486.2 15,906.0 Adjusted EPS (INR) 6.7 11.1 16.5 20.9 25.1

YoY Growth (%) 56.3 -13.0 15.7 17.4 17.9 Adjusted Cash EPS (INR) 17.4 23.2 30.0 37.8 46.6

Raw Material Cost & Power Cost 4,621.6 3,643.0 4,522.8 5,149.0 5,829.1 Adjusted BVPS (INR) 86.9 91.1 107.7 127.6 150.9

RM Cost to Sales (%) 40.5 36.7 39.4 38.2 36.6 Adjusted CFO per share (INR) 49.4 34.4 39.5 50.8 63.7

Employee Cost 973.2 930.8 1,015.1 1,086.1 1,160.5 CFO Yield (%) 2.7 1.9 2.1 2.7 3.4

Employee Cost to Sales (%) 8.5 9.4 8.8 8.1 7.3 Adjusted FCF per share (INR) 4.4 -3.2 -8.3 -37.5 -55.6

Other Expenses 1,567.3 819.4 765.2 900.8 1,024.8 FCF Yield (%) 0.2 -0.2 -0.4 -2.0 -3.0

Other Exp to Sales (%) 13.7 8.3 6.7 6.7 6.4

EBITDA 4,253.9 4,533.2 5,182.0 6,350.3 7,891.5 Solvency Ratio (X)

Margin (%) 37.3 45.7 45.1 47.1 49.6 Total Debt to Equity 2.5 2.7 2.0 2.3 2.5

YoY Growth (%) 54.0 6.6 14.3 22.5 24.3 Net Debt to Equity 2.3 2.5 1.8 2.0 2.2

Depreciation & Amortization 1,174.0 1,328.9 1,481.6 1,857.2 2,360.8 Net Debt to EBITDA 5.1 5.6 4.2 4.3 4.6

EBIT 3,079.8 3,204.3 3,700.4 4,493.1 5,530.7

Margin (%) 27.0 32.3 32.2 33.3 34.8 Return Ratios (%)

YoY Growth (%) 63.8 4.0 15.5 21.4 23.1 Return on Equity 8.7 13.7 16.9 17.9 18.1

Other Income 265.3 532.6 458.0 548.4 781.3 Return on Capital Employed 6.0 7.1 8.2 7.4 7.2

Finance Cost 2,238.5 2,117.0 1,769.2 1,971.7 2,618.4 Return on Invested Capital 10.2 9.3 11.5 11.1 10.8

Interest Coverage (X) 1.4 1.5 2.1 2.3 2.1

Exceptional Item 0.0 0.0 0.0 0.0 0.0 Working Capital Ratios

PBT 1,106.7 1,619.9 2,389.2 3,069.8 3,693.7 Payable Days (Nos) 56 46 37 36 35

Margin (%) 9.7 16.3 20.8 22.8 23.2 Inventory Days (Nos) 17 9 5 5 5

YoY Growth (%) 31.7 46.4 47.5 28.5 20.3 Receivable Days (Nos) 32 37 39 36 35

Tax Expense 400.2 330.3 561.4 772.7 929.7 Net Working Capital Days (Nos) -7 0 7 5 5

Tax Rate (%) 36.2 20.4 23.5 25.2 25.2 Net Working Capital to Sales (%) -1.8 0.1 1.9 1.4 1.4

PAT 706.5 1,289.6 1,827.8 2,297.1 2,764.0

Margin (%) 6.2 13.0 15.9 17.0 17.4 Valuation (X)

YoY Growth (%) 26.3 82.5 41.7 25.7 20.3 P/E 274.9 166.6 112.4 88.8 73.8

Min Int/Sh of Assoc 35.3 -65.5 -14.1 0.0 0.0 P/BV 21.3 20.3 17.2 14.5 12.3

Net Profit 741.8 1,224.0 1,813.7 2,297.1 2,764.0 EV/EBITDA 53.0 50.6 43.5 36.5 30.4

Margin (%) 6.5 12.3 15.8 17.0 17.4 EV/Sales 19.8 23.1 19.6 17.2 15.1

YoY Growth (%) 32.7 65.0 48.2 26.7 20.3

Cash Flow Statement

Balance Sheet PBT 1,106.7 1,619.9 2,389.2 3,069.8 3,693.7

Share Capital 1,099.8 1,099.8 1,099.8 1,099.8 1,099.8 Adjustments 4,661.8 2,708.5 2,726.3 3,251.6 4,268.9

Total Reserves 8,461.3 8,923.1 10,746.6 12,930.7 15,500.0 Change in Working Capital 68.9 -213.7 -209.0 42.0 -25.4

Shareholders Fund 9,561.1 10,022.9 11,846.5 14,030.5 16,599.8 Less: Tax Paid -400.2 -330.3 -561.4 -772.7 -929.7

Long Term Borrowings 22,289.7 23,808.8 21,500.0 30,500.0 39,500.0 Cash Flow from Operations 5,437.2 3,784.3 4,345.1 5,590.7 7,007.6

Deferred Tax Assets / Liabilities 971.4 1,186.4 1,186.4 1,186.4 1,186.4 Net Capital Expenditure -2,762.7 -3,952.3 -5,000.0 -9,390.0 -12,590.0

Other Long Term Liabilities 697.9 910.5 1,053.5 1,237.0 1,459.0 Change in Investments -2,880.2 -73.0 5,024.6 -296.0 -357.9

Long Term Trade Payables 29.4 31.9 36.9 43.4 51.2 Cash Flow from Investing -5,642.9 -4,025.3 24.6 -9,686.0 -12,947.9

Long Term Provisions 275.6 584.5 637.5 682.1 728.8 Change in Borrowings 3,488.9 1,372.3 -2,189.1 9,161.8 9,314.4

Total Liabilities 33,824.9 36,545.0 36,260.7 47,679.4 59,525.1 Less: Finance Cost -2,238.5 -2,117.0 -1,769.2 -1,971.7 -2,618.4

Net Block 24,924.2 26,986.6 30,505.0 38,037.8 48,267.0 Proceeds from Equity 0.0 0.0 0.0 0.0 0.0

Capital Work in Progress 2,209.0 5,239.7 0.0 0.0 0.0 Buyback of Shares 0.0 0.0 0.0 0.0 0.0

Intangible assets under development 3.3 15.4 0.0 0.0 0.0 Dividend Paid 0.0 0.0 0.0 -229.7 -331.7

Non Current Investments 0.0 267.2 309.2 363.1 428.2 Cash flow from Financing 1,250.4 -744.7 -3,958.2 6,960.3 6,364.4

Long Term Loans & Advances 757.1 2,023.1 2,340.8 2,748.6 3,241.8 Net Cash Flow 1,044.7 -985.6 411.5 2,865.1 424.1

Other Non Current Assets 3,132.2 3,702.1 4,283.4 5,029.7 5,932.2 Forex Effect 0.0 0.0 0.0 0.0 0.0

Net Current Assets 2,799.2 -1,689.2 -1,177.7 1,500.1 1,655.8 Opening Balance of Cash 188.3 1,249.3 263.7 675.1 3,540.2

Total Assets 33,824.9 36,545.0 36,260.7 47,679.4 59,525.1 Closing Balance of Cash 1,233.0 263.7 675.1 3,540.2 3,964.3

159159

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160160

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Adani Total Gas Ltd

Leapfrogging to become a pan India CGD player

161161

( 9 t h D e c 2 0 2 1 )


Adani Total Gas Ltd (ATGL) has seen a sharp spurt in its stock price, outperforming

the broader index and its peers by a wide margin. Despite this outperformance, we

believe that there exists significant room for further upside. We initiate coverage

on ATGL with a BUY for a FY24 DCF based price target of INR 2,012 per share,

implying a 14.7% upside from the CMP of INR 1,754.

ATGL, a JV (equal stake of 37.4%) between Adani Group and French energy major

TotalEnergies (TOTAL), is India’s largest private-sector city gas distributor (CGD), with

19 standalone operational geographical areas (GAs). In addition, ATGLs equal stake

JV with Indian Oil Corporation (IOC) – IOAGPL houses another 19 GA thus enabling

ATGL to emerge as a true pan India CGD player. Both JV partners, Total (which has

operations in 108 countries) and IOC (parent of Petronet LNG), bring rich experience

in sourcing LNG at competitive prices besides ensuring availability.

We expect ATGL’s gas volumes (excluding IOAGPL) to grow at a CAGR of 41.3% to

1,451 mmscm over FY21-24E, while its revenue/ EBITDA/ net profit is expected to

record a CAGR growth of 45.6%/ 34.1%/ 38.7% to INR 5,238 cr/ INR 1,688 cr/ INR

1,228 cr, respectively, over the same period. Return ratios – RoE and RoIC – too are

expected to improve by 411bps (to 28.0%) and 217bps (to 28.8%) respectively by

FY24E

Our conviction is underpinned by:

• Strong traction in CNG and PNG industrial/commercial volumes as the rollout

objectives of the 9th & 10th rounds are quite aggressive.

• Adani Group’s superior execution skills will ensure faster than expected

rollout leading to early paybacks and advancing of cash flows

• Leader by far in operational efficiencies as ably demonstrated by its EBIDTA

per scm which is the highest among peers.

• New wins (if any) from the 11th round will be earnings and profitability

accretive as they are not factored in our estimates.


Net

Revenue Operating

EBITDA Net

Profit EBITDA

(%)

Net Profit

(%)

EPS (₹)

BVPS (₹)

RoE (%)

RoIC (%)

Debt to EBITDA

(X)

P/E (X)

P/BV (X)

EV/ EBITDA

(X)

FY20 1,874.6 594.8 436.3 31.7 23.3 4.0 13.4 29.7 30.5 0.5 424.7 126.0 312.1

FY21 1,695.6 704.3 462.8 41.5 27.3 4.2 17.6 23.9 26.6 0.7 400.4 95.8 263.8

FY22E 2,642.6 985.9 731.0 37.3 27.7 6.6 23.6 28.2 32.7 0.2 253.5 71.5 188.2

FY23E 3,965.2 1,312.1 971.1 33.1 24.5 8.8 31.1 28.4 29.3 0.4 190.8 54.2 141.7

FY24E 5,237.8 1,688.1 1,272.3 32.2 24.3 11.6 40.3 28.7 28.8 0.5 145.7 41.8 110.3

BUY @ CMP INR 1,754 Target: INR 2,012 in 24 months Upside Potential: 14.7%

Leapfrogging to become a pan India CGD player

Industry City Gas

Scrip Details



Price (INR) 1,754


3M Avg Vol (000) 74

52W High/Low (INR) 1,715/315



Promoter 74.8

Institution 22.5

Public 1.7

TOTAL 100.0

Price Chart

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ATGL Sensex

Adani Total Gas Ltd

162162

( 9 t h D e c 2 0 2 1 )



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ATGL commands permium valuation over IGL & GGL, which has significantly expanded in 1 year

ATGL to IGL ATGL to GGL Average

Despite substantial recent outperformance, attractive decadal outlook portends substantial room for growth

163163

( 9 t h D e c 2 0 2 1 )


Valuation

ATGL is the largest private CGD player and second only to GGL in India. With the recently

acquired GAs in the 9th & 10th rounds of CGD auctions, ATGL is expected to grow its CGD

network aggressively. Further, with the ambitious target set by the government to increase

the share of natural gas in India’s energy basket, there is strong visibility of gas volume growth

in the coming years. In addition, the Adani Group’s execution skills and TOTAL’s operational

efficiency will lead to a faster rollout of the gas network at optimum cost, thereby increasing

profitability.

We have used the DCF model to value standalone ATGL (excluding IOAGPL) since its CGD

contracts throw up significant cash over the next 25 years (which is the typical life of a CGD

contract). We have discounted back the future cash flows to FY24 and value the company at

INR 2.012 per share, presenting an upside of 14.7% from the CMP of 1,754 (110X FY24

EV/EBIDTA).

DCF Valuation


Our Bear case valuation analysis (done overleaf) suggests a significant margin of safety from

the current market price.


Risk Free Rate 6.0%

Cost of Equity 7.9%

Interest Rate 7.0%

Tax Rate 25.2%

Cost of Debt 5.2%

WACC 7.8%



FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY35E FY40E FY46E

FCFF 296 717 1,346 2,149 2,911 3,800 4,717 10,846 17,930 28,509

Discount Factor from FY24 0.93 0.86 0.80 0.74 0.69 0.64 0.59 0.41 0.28 0.18

Discounted FCFF from FY24 274 617 1,074 1,590 1,997 2,418 2,784 4,393 4,984 5,044

Total of Discounted FCFF FY24 84,839

FY24 PV of Terminal Value 1,37,247

FY24 Enterprise Value 2,22,086

FY24 Net Debt 807



164164

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We have prepared a Bull and Bear case scenario based on ATGL’s terminal growth.

• Bull Case: With the acquisition of 15 GAs in the 9th and 10th rounds of CGD auctions,

ATGL has a significant opportunity to grow its business in the coming years. We have

assumed a terminal growth of 5%, which will result in a Bull case price target of INR

2,471 (upside of 47% from the CMP).


price target of INR 1,568 (downside of 7% from the CMP). Our base case implies a



Investment Triggers

• ATGL’s target is to open over 501 CNG stations by 2025 and over 2.5 mn PNG

connections by 2028.

• Adani Group’s execution skills and TOTAL’s operational efficiencies will help in the

faster rollout of the network at an optimum cost, thereby improving profitability.

Catalysts

• Surge in gas consumption due to change in India’s energy mix. The government is

planning to raise the contribution of gas in the total energy mix from the current 7%

to 15% by FY30. There is strong traction in CNG and PNG industrial/commercial

volumes as the rollout objectives of the 9th & 10th rounds are quite aggressive. This is

expected to provide impetus to ATGL in its operational GAs, keeping in mind the clean

fuel policy of the government.

Bull Case Price

INR 2,471 per share

Target Price

INR 2,012 per share

Bear Case Price

INR 1,685 per share

Current Price

INR 1,754 per share

5% terminal value growth.



165165

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Valuation and Comparable Metric of Domestic and Global Gas Distribution Companies


Company Name Mkt Cap PricePEG

20242022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024

Domestic Peers (fig in INR cr, unless specified)

Adani Total Gas Ltd 1,85,316 1,685.0 3.9 253.5 190.8 145.7 71.5 54.2 41.8 188.2 141.7 110.3 28.2 28.4 28.7 32.7 29.3 28.8 2,643 3,965 5,238 37.3 33.1 32.2 27.7 24.5 24.3

Petronet LNG Ltd 33,907 226.0 1.1 11.6 10.1 9.7 2.6 2.3 2.1 6.7 5.9 4.9 22.5 22.9 21.3 39.8 39.6 48.7 35,382 25,980 38,472 12.8 19.6 14.3 8.3 12.9 9.1

Gujarat State Petronet Ltd 17,180 304.0 0.4 8.9 6.9 6.7 2.2 1.7 1.6 4.9 3.8 3.1 24.4 25.2 24.1 43.2 46.6 51.2 12,205 11,493 15,042 28.6 36.0 30.8 15.8 21.6 17.2

GAIL Ltd 59,346 133.7 0.3 6.6 6.7 6.3 1.0 0.9 0.9 5.5 5.8 5.7 15.6 14.0 13.8 15.1 12.6 12.0 72,355 57,152 80,722 16.6 20.7 15.4 12.4 15.6 11.7

Gujarat Gas Ltd 45,747 664.6 1.1 32.1 26.3 22.0 8.0 6.2 5.2 20.3 16.0 14.2 25.1 23.7 23.4 34.3 39.4 37.8 10,262 9,810 15,050 21.8 28.3 20.5 13.9 17.7 13.8

Indraprastha Gas Ltd 34,751 496.5 0.7 24.2 20.2 16.8 4.7 4.0 3.3 16.7 13.3 11.5 19.4 19.7 19.9 24.2 26.0 25.3 6,485 4,941 7,964 31.9 52.4 37.1 22.1 34.9 26.0

Mahanagar Gas Ltd 8,986 909.8 0.5 10.8 9.5 8.8 2.4 2.0 1.8 6.6 5.5 4.9 22.0 21.5 20.4 36.0 36.5 37.0 2,951 2,136 3,192 41.5 65.3 46.7 28.2 44.5 32.1

Global Peers (fig in USD mn, unless specified)

Kunlun Energy (China) 8,151 0.9 0.8 9.1 8.4 7.9 0.9 0.9 0.8 2.7 2.3 1.6 10.0 10.1 9.8 22.3 23.9 27.7 15,850 20,989 23,788 15.8 13.0 12.6 5.7 4.6 4.3

China Gas (China) 9,953 1.8 0.7 6.5 6.3 5.7 1.1 1.0 0.9 6.5 5.8 4.6 17.7 16.3 15.8 13.9 14.7 16.7 7,617 9,026 10,629 29.0 27.4 25.9 20.1 17.6 16.3

CR Gas (China) 11,974 5.2 1.3 13.5 12.3 11.6 2.1 1.9 1.7 6.7 6.2 5.6 15.5 15.4 14.9 26.8 25.9 25.8 7,203 8,972 10,097 23.7 20.7 20.2 12.3 10.9 10.3

ENN Energy (China) 21,213 18.8 1.0 16.8 14.6 13.3 3.3 2.8 2.6 10.1 8.9 8.1 19.6 19.4 19.4 23.5 24.0 24.4 10,390 14,011 16,320 21.5 18.0 17.0 12.1 10.3 9.8

Town Gas (China) 2,144 0.7 0.4 8.1 6.8 6.2 0.7 0.7 0.6 10.4 9.6 10.7 8.4 9.8 9.8 5.8 6.4 6.7 1,654 2,096 2,360 25.0 23.1 18.4 15.9 15.0 14.6

Tian Lun Gas (China) 960 1.0 0.4 5.3 4.8 4.3 1.0 0.8 0.8 4.4 4.0 3.6 18.2 17.8 17.8 18.9 19.2 19.8 934 1,192 1,347 36.4 31.4 30.5 19.2 16.9 16.5

Korea Gas (S Korea) 2,721 29.5 -0.7 5.6 5.3 10.5 0.4 0.4 0.5 8.9 8.6 10.1 6.7 6.6 4.4 4.2 4.4 3.8 17,689 21,201 24,405 14.3 12.0 9.3 2.7 2.4 1.1

Perusahaan Gas Negara (Indonesia) 2,539 0.1 10.0 10.0 9.4 8.6 0.9 0.8 0.8 4.4 4.4 4.0 9.3 8.9 8.9 10.9 10.2 10.5 2,886 3,068 3,289 31.6 29.5 30.3 8.8 8.8 9.0

EBITDA Margin (%) Net Margin (%)P/E Ratio P/B Ratio EV/EBITDA Ratio RoE (%) RoIC (%) Sales


( 9 t h D e c 2 1 )


Upcoming growth opportunities justifies ATGL’s premium valuation


ATGL

Petronet LNGGSPL

GAIL

GGL

IGL

MGL

Kunlun Energy

China Gas

CR Gas

ENN Energy

Town Gas

Tian Lun Gas

PGN

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GSPL

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167167

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ATGL’s Financial Summary


Fig in INR Cr (unless specified) FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY30E FY31E

CNG Stations (nos) 82 115 217 317 417 517 617 717 814 908 954 995 1,033 1,067

CNG Volume (mmscm) 276.0 292.0 226.0 381.2 602.8 801.1 1,014.1 1,241.6 1,480.9 1,728.5 2,038.9 2,312.0 2,590.8 2,874.4

YoY Growth (%) 5.8 (22.6) 68.7 58.1 32.9 26.6 22.4 19.3 16.7 18.0 13.4 12.1 10.9

Avg CNG volume per staion (scmd) 9,757.0 8,121.8 3,730.0 3,912.1 4,500.0 4,700.0 4,900.0 5,100.0 5,300.0 5,500.0 6,000.0 6,500.0 7,000.0 7,500.0

CNG Revenue 850.4 948.0 739.0 1,343.4 2,124.1 2,823.0 3,573.3 4,375.1 5,218.2 6,090.6 7,184.5 8,146.9 9,129.2 10,128.5

YoY Growth (%) 11.5 (22.0) 81.8 58.1 32.9 26.6 22.4 19.3 16.7 18.0 13.4 12.1 10.9

CNG Revenue per kg (INR) 40.5 42.7 43.0 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4

PNG Domestic Connections (nos) 3.8 4.4 4.8 5.8 7.8 10.3 13.3 16.5 20.0 24.0 28.5 33.5 38.5 41.5

PNG Domestic Volume (mmscm) 44.1 51.8 56.9 60.6 98.7 148.0 214.6 271.7 333.2 401.7 479.2 565.9 657.2 730.2

YoY Growth (%) 17.5 9.9 6.5 62.8 49.9 45.0 26.6 22.7 20.5 19.3 18.1 16.1 11.1

Avg PNG domesitc volume per connection (scmd) 0.35 0.35 0.34 0.32 0.40 0.45 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50

PNG Domestic Revenue 108.5 136.7 153.9 194.3 316.3 474.2 687.8 870.5 1,067.9 1,287.2 1,535.8 1,813.6 2,106.0 2,339.9

YoY Growth (%) 26.0 12.6 26.3 62.8 49.9 45.0 26.6 22.7 20.5 19.3 18.1 16.1 11.1

PNG Domestic Revenue per scm (INR) 24.6 26.4 27.0 32.0 32.0 32.0 32.0 32.0 32.0 32.0 32.0 32.0 32.0 32.0

PNG Commercial Connections (nos) 2,561 2,986 3,300 3,731 4,231 4,731 5,231 5,731 6,231 6,731 7,231 7,731 8,231 8,731

PNG Commercial Volume (mmscm) 15.6 16.7 9.6 16.3 24.0 27.2 30.4 33.6 36.9 40.2 43.6 47.0 50.4 53.9

YoY Growth (%) 6.4 (42.3) 69.3 47.4 13.2 11.8 10.7 9.8 9.0 8.3 7.8 7.3 6.9

Avg PNG commercial volume per connection (scmd) 17.6 16.5 8.4 12.7 16.5 16.6 16.7 16.8 16.9 17.0 17.1 17.2 17.3 17.4

PNG Commercial Revenue 74.2 80.5 50.0 97.7 144.0 163.0 182.3 201.8 221.5 241.5 261.6 282.0 302.6 323.4

YoY Growth (%) 8.6 (37.9) 95.4 47.4 13.2 11.8 10.7 9.8 9.0 8.3 7.8 7.3 6.9

PNG Commercial Revenue per scm (INR) 47.4 48.4 52.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0

PNG Industrial Connections (nos) 1,287 1,480 1,666 1,863 2,163 2,563 3,163 3,863 4,663 5,563 6,563 7,593 8,653 9,743

PNG Industrial Volume (mmscm) 204.4 222.2 221.5 265.1 367.4 474.4 627.0 833.5 1,089.2 1,399.7 1,770.4 2,195.9 2,668.4 3,189.4

YoY Growth (%) 8.7 (0.3) 19.7 38.6 29.1 32.2 32.9 30.7 28.5 26.5 24.0 21.5 19.5

Avg PNG industrial volume per connection (scmd) 532.7 439.9 385.8 411.7 500.0 550.0 600.0 650.0 700.0 750.0 800.0 850.0 900.0 950.0

PNG Industrial Revenue 767.7 799.8 819.9 1,137.2 1,575.7 2,034.6 2,689.2 3,574.8 4,671.7 6,003.4 7,593.4 9,418.6 11,445.0 13,679.7

YoY Growth (%) 4.2 2.5 38.7 38.6 29.1 32.2 32.9 30.7 28.5 26.5 24.0 21.5 19.5

PNG Industrial Revenue per scm (INR) 37.6 36.0 37.0 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9

Total Gas Volume (mmscm) 540.2 582.6 514.0 723.3 1,092.8 1,450.7 1,886.1 2,380.3 2,940.2 3,570.0 4,332.1 5,120.8 5,966.8 6,847.8

YoY Growth (%) 7.9 (11.8) 40.7 51.1 32.7 30.0 26.2 23.5 21.4 21.3 18.2 16.5 14.8

Blended Avg Realization (INR per scm) 33.3 33.7 34.3 38.3 38.1 37.9 37.8 37.9 38.0 38.2 38.3 38.4 38.5 38.7

Revenue from operations 1,719.0 1,874.6 1,695.6 2,642.6 3,965.2 5,237.8 6,799.0 8,600.0 10,655.8 12,984.4 15,798.3 18,738.9 21,904.2 25,228.4

YoY Growth (%) 25.1 9.1 (9.5) 55.8 50.1 32.1 29.8 26.5 23.9 21.9 21.7 18.6 16.9 15.2

Raw Material Cost 1,092.7 1,060.0 769.6 1,316.7 2,076.4 2,770.7 3,621.2 4,594.1 5,704.0 6,961.6 8,490.9 10,088.1 11,814.2 13,627.2

RM Cost to Sales (%) 63.6 56.5 45.4 49.8 52.4 52.9 53.3 53.4 53.5 53.6 53.7 53.8 53.9 54.0

Employee Cost 42.0 47.5 51.5 79.3 198.3 288.1 407.9 473.0 532.8 586.1 642.9 703.4 767.4 834.9


Other Expenses 129.7 172.4 170.1 260.7 378.4 490.8 613.9 644.3 683.2 731.1 817.1 935.5 1,060.7 1,189.8


EBITDA 454.6 594.8 704.3 985.9 1,312.1 1,688.1 2,156.0 2,888.6 3,735.8 4,705.7 5,847.3 7,012.0 8,262.0 9,576.6

EBITDA per scm (INR) 8.4 10.2 13.7 13.6 12.0 11.6 11.4 12.1 12.7 13.2 13.5 13.7 13.8 14.0

EBITDA Margin (%) 26.4 31.7 41.5 37.3 33.1 32.2 31.7 33.6 35.1 36.2 37.0 37.4 37.7 38.0

Net Profit 228.7 436.3 462.8 731.0 971.1 1,272.3 1,660.1 2,227.7 2,945.0 3,738.5 4,678.0 5,653.0 6,728.5 7,890.7

Net Profit per scm (INR) 4.2 7.5 9.0 10.1 8.9 8.8 8.8 9.4 10.0 10.5 10.8 11.0 11.3 11.5

Net Margin (%) 13.3 23.3 27.3 27.7 24.5 24.3 24.4 25.9 27.6 28.8 29.6 30.2 30.7 31.3

Adjusted EPS 2.1 4.0 4.2 6.6 8.8 11.6 15.1 20.3 26.8 34.0 42.5 51.4 61.2 71.7

P/E (X) 810.3 424.7 400.4 253.5 190.8 145.7 111.6 83.2 62.9 49.6 39.6 32.8 27.5 23.5

Adjusted BVPS 10.0 13.4 17.6 23.6 31.1 40.3 51.6 65.8 83.2 103.6 127.0 152.7 181.5 213.0

P/BV (X) 168.2 126.0 95.8 71.5 54.2 41.8 32.6 25.6 20.2 16.3 13.3 11.0 9.3 7.9

Enterprise Value 1,85,551 1,85,630 1,85,794 1,85,492 1,85,902 1,86,123 1,86,134 1,85,808 1,85,049 1,84,007 1,82,728 1,81,205 1,78,818 1,76,138

EV/EBITDA (X) 408.1 312.1 263.8 188.2 141.7 110.3 86.3 64.3 49.5 39.1 31.2 25.8 21.6 18.4

Net Worth 1,102.0 1,470.9 1,933.8 2,591.7 3,417.1 4,434.9 5,680.0 7,239.4 9,153.7 11,396.8 13,969.7 16,796.2 19,958.6 23,430.5

Return on Equity (%) 20.8 29.7 23.9 28.2 28.4 28.7 29.2 30.8 32.2 32.8 33.5 33.7 33.7 33.7

Capital Employed 1,495.9 1,873.9 2,422.1 2,953.2 4,084.4 5,305.9 6,566.8 7,802.2 9,153.7 11,396.8 13,969.7 16,796.2 19,958.6 23,430.5

Return on Capital Employed (%) 16.6 23.1 19.8 22.9 21.5 21.3 22.1 25.2 28.1 28.7 29.3 29.4 29.4 29.2

Invested Capital 1,336.2 1,784.4 2,411.2 2,767.0 4,002.5 5,241.5 6,497.9 7,730.7 8,886.1 10,087.8 11,381.3 12,685.3 13,460.1 14,252.1

Return on Invested Capital (%) 29.0 30.5 26.6 32.7 29.3 28.8 29.8 34.0 38.7 43.3 48.1 52.1 58.2 64.1

Cash Flow from Operations 356.1 492.4 653.5 892.4 1,207.4 1,565.7 2,017.1 2,603.5 3,320.9 4,129.9 5,117.5 6,134.0 7,232.7 8,417.0

Cash Flow from Investing 791.0 (461.0) (770.5) (537.0) (1,426.0) (1,463.7) (1,534.8) (1,544.0) (1,506.8) (1,594.0) (1,734.0) (1,786.1) (1,280.3) (1,319.4)

Cash Flow from Financing (1,077.1) (102.0) 38.6 (180.5) 113.8 (120.0) (478.3) (1,057.6) (1,618.9) (1,495.4) (2,105.1) (2,826.5) (3,566.1) (4,418.8)

Net Cash Flow 70.0 (70.6) (78.4) 175.0 (104.8) (18.0) 3.9 2.0 195.3 1,040.5 1,278.3 1,521.4 2,386.4 2,678.7

Free Cash Flow 80.6 45.9 (104.2) (185.0) (6.4) 295.8 717.3 1,346.2 2,149.4 2,910.6 3,799.9 4,716.7 6,284.2 7,343.7

FCF to Net Profit (%) 35.3 10.5 (22.5) (25.3) (0.7) 23.2 43.2 60.4 73.0 77.9 81.2 83.4 93.4 93.1

FCF to Net Worth (%) 7.3 3.1 (5.4) (7.1) (0.2) 6.7 12.6 18.6 23.5 25.5 27.2 28.1 31.5 31.3

Total Debt 394.0 403.0 488.3 361.5 667.3 871.0 886.8 562.8 0.0 0.0 0.0 0.0 0.0 0.0

Net Debt 234.2 313.6 477.4 175.3 585.4 806.6 817.9 491.3 (267.6) (1,309.0) (2,588.4) (4,110.9) (6,498.5) (9,178.4)

Net Debt to Equity (X) 0.2 0.2 0.2 0.1 0.2 0.2 0.1 0.1 (0.0) (0.1) (0.2) (0.2) (0.3) (0.4)

Net Debt to EBITDA (X) 0.5 0.5 0.7 0.2 0.4 0.5 0.4 0.2 (0.1) (0.3) (0.4) (0.6) (0.8) (1.0)

Interest Coverage Ratio (X) 4.3 13.3 15.9 23.6 25.4 21.8 24.5 40.3 135.8 NA NA NA NA NA

168168

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(20)

(10)

0

10

20

30

40

50

60

0

200

400

600

800

1,000

1,200

1,400

1,600


Network rollout in new GAs to improve gas volumes

Total Gas Volume YoY Growth (%)

Vol in mmscm %

51 50 44 53 55 55

38 38 43 37 34 33

8 9 11 8 9 10 3 3 2 2 2 2


Steady volume mix to persis

CNG PNG Industrial PNG Domestic PNG Commercial

Vol share data in %

(20)

(10)

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60

70

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1,000

2,000

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Higher volumes to drive the revenue performance

Revenue YoY Growth (%)

INR Cr %

47 48 42 48 51 51

43 41 47 41 38 37

6 7 9 7 8 9 4 4 3 4 3 3


Steady revenue mix to persist


Revenue share data in %

0

10

20

30

40

50

0

500

1,000

1,500

2,000


Infrastructure rollout in new GAs to increase opex for the next 4 years

EBITDA Net Profit


INR Cr %

15

20

25

30

35

0

1,000

2,000

3,000

4,000

5,000

6,000


Return ratios to remain stable in the range of 25-30%


RoE (%) RoIC (%)

INR Cr %

ATGL Story in Charts

169169

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0

2

4

6

8

10

12

14

16

0

500

1,000

1,500

2,000


Expansion in new GAs would be partly funded by external debt

EBITDA PAT

EBITDA per scm (INR) Net per scm (INR)

INR Cr X

(40)

(20)

0

20

40

60

80

100

120

(400)

(200)

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Free cash flow generation to kick in from FY24

CFO FCF


Days %

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0


Higher capital requirement and asset base to drop turnover ratios

Fixed Asset Turnover Total Asset Turnover

Capital Turnover

X

0.0

0.5

1.0

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2.0

2.5

0

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10

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20

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30


Working capital to remain stable

Payable Days Inventory Days

Receivable Days Net Working to Sales (%)

Days %

170170

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Company Overview

ATGL, incorporated in 2005, is a JV between the Adani Group and French energy major TOTAL

(equal stakes of 37.4%). It is India’s largest private-sector CGD, with 19 standalone operational

GAs, 244 CNG stations, 5.1 lakhs PNG domestic connections, 5,264 PNG industrial/commercial

connections and a pipeline network of more than 5,669 km (850 km steel pipeline and 4,819

km PE pipeline) across India.

ATGL won 15 GAs in the 9th and 10th rounds of CGD auctions and committed to open 501 CNG

stations and connect 25.5 lakh households by 2027. ATGL also has a 50:50 JV with Indian Oil

Corp – IOAGPL. This JV acquired 10 GAs and committed to open 876 CNG stations and connect

23.2 lakh households over the same period.

ATGL’s Business Structure


171171

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Diversified Geographical Presence ATGL

Source: ACE Equity

Four key drivers for ATGL – Growth, Financial Strength, Execution and Efficiency

ATGL has four key drivers which are making it a unique play in India’s CGD space.

• Significant growth opportunity from the 9th & 10th round of CGD biddings,

• Strong balance sheet health,

• Demonstrated unparalleled execution skills of the Adani Group to expedite gas network roll out in 15 GAs in less than 7 years, and

• Superior operating efficiency which generates healthy cash flow.

Diversified Geographical Presence ATGL

Source: ACE Equity

Growth

•Govt's push to increase the share of natural gas in the total energy mix from current 7% to 15% by FY30

•ATGL's gas volumes to grow 9.4X in 10 years on account of network rollout in 15 new GAs acquired in recent biddings

Execution

•Adani Group is known for its superior project execution in various areas in infrastructure space, such as power, ports, logistics, etc

•We believe that gas network rollout will be faster in 15 GAs. ATGL is targeting to open 500 CNG stations by FY25 and 2.5 mn PNG connection by FY28

Financial Strength

•ATGL's net debt to equity is 0.2X and net debt to EBITDA is 0.7X, provides sufficient room to raise debt to fund the estimated capex of INR 9,000 cr in the next 10 years.

•ATGL generates INR 600-700 cr of CFO annually, which will increase with the network rollout in the new GAs. It accounts for 60-70% of annual capex requirement

Efficiency

•Expertise of Total Gas SE is helping the company in improving its operational efficiency

•ATGL is one of the most profitable CGD player in India and despite a fair mix of gas volumes it has sustained EBITDA per scm of >INR 12, which is higher than INR 7-8 of IGL and INR 4-5 of GGL.

172172

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Significant growth opportunities from newly acquired GAs Aggressive wins in the recent bidding rounds of PNGRB have paved the way for ATGL to become one of the leading pan-India CGD players. It is expected to significantly boost ATGL’s gas volumes in the next 10 years at a 29.6% CAGR to 6,848 mmscm by FY31 from 514 mmscm in FY21. As per the minimum work program (MWP) of the recent bidding, ATGL has to set up 501 CNG stations and 25.5 lakhs PNG household connections by FY27.

ATGL in 9th & 10th round of CGD bidding

Source: PNGRB

CNG business will be the early kicker Given the shortcomings of the EV infrastructure in India and the rise in the retail price of diesel & petrol, CNG powered vehicles are expected to be a better alternative in terms of running cost and emission control. Not just passenger vehicles, sales of CNG-based commercial vehicles (CVs) are rising and the trend is likely to continue. The recent rise in the retail price of diesel has also prompted a lot of transporters to shift to CNG from diesel.

Emission, mileage & price of a compact sedan in India

Source: PNGRB & Ventura Research

YearCNG Station

Progress (%)

Cummulative

CNG Stations

(nos)

PNG

Connection

Progress (%)

Cummulative

PNG Network

(nos)

Steel Pipeline

(km)

Cummulative

Steel Pipeline

(km)

FY20 0 0 0 0 5 671

FY21 15 75 10 2,54,968 20 2,682

FY22 30 150 20 5,09,935 40 5,365

FY23 45 225 30 7,64,903 60 8,047

FY24 60 301 40 10,19,870 70 9,388

FY25 75 376 60 15,29,806 80 10,730

FY26 90 451 80 20,39,741 90 12,071

FY27 100 501 100 25,49,676 100 13,412

Particulars LPG Diesel CNG Petrol

Carbon Dioxide (g/km) 61.7 70.2 53.1 48.3

Nitrogen Oxide (g/km) 0.3 0.6 0.1 0.4

Soot-PM10 (g/km) 0.015 0.025 0.010 0.005

Price - INR/ltr or INR/kg 37.3 101.4 49.4 111.3

Mileage - Km/ltr or Km/kg 21.0 20.0 21.0 16.0

Fule cost for 10,000 kms a year (INR) 17,762 50,700 23,524 69,563

Car Price (INR Lacs) 8.1 9.0 8.4 7.5

Cost of car + Running cost after 8 years (INR Lacs) 9.5 13.1 10.3 13.1

173173

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The management has anticipated the CNG opportunity and has preponed its timeline to achieve a complete rollout of the 501 CNG stations as early as possible, which will take its overall CNG network to over 720 stations. This will facilitate early pay back and faster cash flow generation.

ATGL’s CNG rollout in the next 7 years

Source: Annual Reports & Ventura Research

India has around 2.5-3.0 mn CNG vehicles, out of an estimated on-road vehicle population of 25-30 mn vehicles (3Ws, PVs and Buses), representing a penetration level of only 10%.

CNG penetration in PVs and buses is significantly lower than 3Ws, presenting a strong growth opportunity

Source: Vahan Parivahan (*Data updated till Nov 2021)

Fig in INR Cr (unless specified) FY19 FY20 FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E

CNG Stations (nos) 82 115 217 317 417 517 617 717 814 908

CNG Volume (mmscm) 276.0 292.0 226.0 381.2 602.8 801.1 1,014.1 1,241.6 1,480.9 1,728.5

YoY Growth (%) 5.8 (22.6) 68.7 58.1 32.9 26.6 22.4 19.3 16.7

Avg CNG volume per staion (scmd) 9,757.0 8,121.8 3,730.0 3,912.1 4,500.0 4,700.0 4,900.0 5,100.0 5,300.0 5,500.0

CNG Revenue 850.4 948.0 739.0 1,343.4 2,124.1 2,823.0 3,573.3 4,375.1 5,218.2 6,090.6

YoY Growth (%) 11.5 (22.0) 81.8 58.1 32.9 26.6 22.4 19.3 16.7

CNG Revenue per kg (INR) 40.5 42.7 43.0 46.4 46.4 46.4 46.4 46.4 46.4 46.4

3 Wheelers FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22*

CNG ONLY 12,760 13,424 10,154 3,632 137 2,799 34,570 57,529

DIESEL 2,37,825 2,30,611 2,21,135 2,18,664 2,51,421 2,90,185 91,099 41,800

EV 43 2,510 3,097 3,577 6,034 1,488 1,888 5,008

LPG ONLY 1,819 4,124 1,778 3,568 4,533 3,871 10,827 9,282

PETROL 28,939 24,082 23,136 22,081 23,807 18,843 9,184 5,185

PETROL+CNG 86,037 85,876 96,385 1,66,931 1,89,846 1,71,865 13,757 6,963

PETROL+LPG 38,280 36,734 46,408 61,893 93,189 90,634 10,289 2,878

Total 4,05,703 3,97,361 4,02,093 4,80,346 5,68,967 5,79,685 1,71,614 1,28,645

CNG Share (%) 24.4 25.0 26.5 35.5 33.4 30.1 28.2 50.1

4 Wheelers FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22*

CNG ONLY 2,456 2,823 1,583 1,062 719 317 46 10

DIESEL 11,40,651 10,86,718 10,50,418 10,68,987 9,76,643 8,22,686 3,84,085 3,09,148

DIESEL/HYBRID 13 1,756 18,914 51,214 59,800 19,807 164 15

EV 589 788 765 1,169 1,448 2,238 4,968 7,778

LPG ONLY 116 139 205 146 75 46 8 1

NOT APPLICABLE 2,603 4,525 4,228 3,567 1,845 475 21 2

PETROL 10,79,402 12,33,280 13,97,550 15,93,996 16,14,266 15,91,067 17,01,391 11,66,267

PETROL/CNG 1,41,230 1,55,878 2,01,743 1,78,868 2,05,790 1,92,260 1,72,101 1,31,205

PETROL/HYBRID 4 168 645 633 29,640 76,024 1,00,650 77,183

PETROL/LPG 32,817 24,564 23,978 19,123 16,537 11,374 6,166 1,559

Total 23,99,881 25,10,639 27,00,029 29,18,765 29,06,763 27,16,294 23,69,600 16,93,168

CNG Share (%) 6.0 6.3 7.5 6.2 7.1 7.1 7.3 7.7

Bus FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22*

CNG ONLY 1,430 1,408 2,386 2,149 2,020 4,679 779 597

DIESEL 37,919 46,042 52,757 40,108 39,223 50,069 6,743 5,537

EV 0 4 1 35 75 443 373 635

PETROL 32 42 58 36 24 7 17 14

Total 39,381 47,496 55,202 42,328 41,342 55,198 7,912 6,783

CNG Share (%) 3.6 3.0 4.3 5.1 4.9 8.5 9.8 8.8

174174

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As the number of CNG filling stations increase, the number of vehicles shifting from conventional fuels to gas is expected to accelerate. As a result, we are expecting CNG volumes to grow at a CAGR of 52.5% to 801 mmscm by FY24, leading to CNG revenues to record a CAGR growth of 56.3% to INR 2,823 cr.

A strong boost is expected in PNG industrial Regulatory intervention from the National Green Tribunal (NGT) in various industrial clusters is leading to a shift from traditional fuels such as coal and diesel to cleaner alternatives such as natural gas, wind and solar. Solar and wind alone are insufficient to cater to the energy needs of energy clusters, therefore, in the absence of any other alternative, natural gas is the only ‘green’ option available. The central pollution control board (PCB) and NGT have identified 100 polluted industrial areas across India. NGT has given strict orders to state PCBs and CPCB to implement their action plans to prohibit pollution-causing industrial activities in the 100 industrial areas. COVID has delayed this implementation, however, we are expecting strong action by state PCBs in the next 2-3 years.

ATGL has wisely selected its GAs, which are placed across key industrial corridors


Strict NGT orders inevitably mean industries switching from coal/diesel to natural gas with immediate effect. This could significantly boost ATGL’s industrial gas demand, as all the acquired GAs are placed along major industrial corridors. As a result, we are expecting PNG industrial volumes to grow at a CAGR of 28.9% to 474 mmscm by FY24, while PNG industrial revenues are expected to record a CAGR growth of 35.4% to INR 2,035 cr.

175175

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ATGL’s PNG industrial rollout in the next 7 years


PNG domestic to provide stability to gas volumes

PNG domestic is a household gas consumption segment which is used for cooking and heating.

Therefore, irrespective of economic conditions, PNG domestic gas volumes largely remain

stable. The government is targeting to expand PNG domestic connections to 100 lakhs

households by the end of 2022. This target is 22% higher than the current base of 82.2 lakh (as

on 30th Sept 2021).

Most of the cities in recent CGD auctions are of Tier II & III levels, where the families prefer to

eat home cooked food rather than dine out. This is expected to substantially improve gas

demand in the PNG domestic segment. As a result, we are expecting PNG domestic volumes

to grow at a CAGR of 37.5% to 148 mmscm by FY24, while PNG domestic revenues to record

a CAGR growth of 45.5% to INR 474 cr.

ATGL’s PNG domestic rollout in the next 7 years


Both CNG and PNG domestic networks have access to APM gas. However, the capex

requirement in PNG domestic is significantly higher (over 15X to CNG) for the similar

throughput gas volumes. Thus, we believe that irrespective of stable gas volumes, PNG

domestic will continue to remain RoE dilutive and therefore, ATGL is focusing on the faster

rollout of CNG stations and will gradually expand its PNG domestic connections.


PNG Industrial Connections (nos) 1,287 1,480 1,666 1,863 2,163 2,563 3,163 3,863 4,663 5,563

PNG Industrial Volume (mmscm) 204.4 222.2 221.5 265.1 367.4 474.4 627.0 833.5 1,089.2 1,399.7

YoY Growth (%) 8.7 (0.3) 19.7 38.6 29.1 32.2 32.9 30.7 28.5

Avg PNG industrial volume per connection (scmd) 532.7 439.9 385.8 411.7 500.0 550.0 600.0 650.0 700.0 750.0

PNG Industrial Revenue 767.7 799.8 819.9 1,137.2 1,575.7 2,034.6 2,689.2 3,574.8 4,671.7 6,003.4

YoY Growth (%) 4.2 2.5 38.7 38.6 29.1 32.2 32.9 30.7 28.5

PNG Industrial Revenue per scm (INR) 37.6 36.0 37.0 42.9 42.9 42.9 42.9 42.9 42.9 42.9


PNG Domestic Connections (nos) 3.8 4.4 4.8 5.8 7.8 10.3 13.3 16.5 20.0 24.0

PNG Domestic Volume (mmscm) 44.1 51.8 56.9 60.6 98.7 148.0 214.6 271.7 333.2 401.7

YoY Growth (%) 17.5 9.9 6.5 62.8 49.9 45.0 26.6 22.7 20.5

Avg PNG domesitc volume per connection (scmd) 0.35 0.35 0.34 0.32 0.40 0.45 0.50 0.50 0.50 0.50

PNG Domestic Revenue 108.5 136.7 153.9 194.3 316.3 474.2 687.8 870.5 1,067.9 1,287.2

YoY Growth (%) 26.0 12.6 26.3 62.8 49.9 45.0 26.6 22.7 20.5

PNG Domestic Revenue per scm (INR) 24.6 26.4 27.0 32.0 32.0 32.0 32.0 32.0 32.0 32.0

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PNG commercial – No near-term trigger in Tier II & III cities

PNG commercial gas is used in restaurants, office spaces and hotels. Most of the cities in recent

CGD auctions are of Tier II & III levels, where the families prefer to eat home-cooked food

rather than dine out (compared to metro cities). Therefore, we are expecting comparatively

slower growth in the PNG commercial segment than CNG, PNG Industrial and PNG domestic.

ATGL’s PNG commercial rollout in the next 7 years


As a result, we are expecting PNG commercial volumes to grow at a CAGR of 41.4% to 27

mmscm by FY24, while PNG commercial revenues are expected to record a CAGR growth of

48.3% to INR 163 cr.

Network rollout in 15 GAs is a challenge that ATGL can easily surmount

PNGRB has awarded 132 GAs in the 9th & 10th rounds of auction, compared to 50 GAs awarded

in the first 8 rounds. Out of the 132 GAs on auction, 15 GAs (~11-12% of 132 GAs) have been

acquired by ATGL (excluding IOAGL JV), making it the highest bidder in the auction.

Adani Group (promoter of ATGL) operates on a model of scale, growth and sustainability. It has

significant experience in the execution of complex infrastructure projects such as power plants,

transmission lines, ports, multimodal logistics, etc., which requires multiple statutory

approvals from several civic and governmental agencies.

Adani Group strength and expertise



PNG Commercial Connections (nos) 2,561 2,986 3,300 3,731 4,231 4,731 5,231 5,731 6,231 6,731

PNG Commercial Volume (mmscm) 15.6 16.7 9.6 16.3 24.0 27.2 30.4 33.6 36.9 40.2

YoY Growth (%) 6.4 (42.3) 69.3 47.4 13.2 11.8 10.7 9.8 9.0

Avg PNG commercial volume per connection (scmd) 17.6 16.5 8.4 12.7 16.5 16.6 16.7 16.8 16.9 17.0

PNG Commercial Revenue 74.2 80.5 50.0 97.7 144.0 163.0 182.3 201.8 221.5 241.5

YoY Growth (%) 8.6 (37.9) 95.4 47.4 13.2 11.8 10.7 9.8 9.0

PNG Commercial Revenue per scm (INR) 47.4 48.4 52.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0

The Scale

Most of the Adani Group’s businesses are among the largest in India, generating attractive economies of scale.

The Positioning

Adani group has focused on sizable infrastructure development in India with O&M benchmarked to global standards

The Credibility

Adani group is the only infrastructure investment grade bond issuer from India

177177

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Therefore, we believe that the CGD infrastructure rollout in a period of 8 years is an achievable

task for the Adani Group.

Healthy balance sheet and strong cash flows to ease capex pressure

ATGL's net debt to equity is 0.2X and net debt to EBITDA is 0.7X, providing sufficient room to

raise debt to fund the estimated capex of INR 9,000 cr in the next 10 years.

In addition, ATGL generates INR 600-700 cr of cash flow from operations (CFO) annually, which

accounts for 60-70% of the annual capex requirement. This cash flow will only further increase

with the network rollout and rise in gas consumption in the new GAs. We do not foresee any

significant impact on balance sheet health due to the upcoming capex of INR 9,000 cr in the

next 10 years.

Strong balance sheet and healthy cash flows to sustain ATGL’s financial health


Efficiency and Cost Optimization – Advantage ATGL

ATGL has a well-diversified natural gas mix and supply chain compared to its peers. This helps

it in generating one of the best EBITDA per scm in the industry.

• GGL has the highest volumes in the industrial segment, however its CNG and PNG

domestic volumes are low

• IGL and MGL are strong in the CNG space, however, their PNG domestic and industrial

volumes are low.

• ATGL is the only listed company with strong volumes in CNG and PNG industrial

segments, while its PNG domestic (high-cost segment) has a comparatively lower share

in total volume.

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

2,500

Expansion in new GAs would be partly funded by external debt

Total Debt Net Debt


INR Cr X

(40)

(20)

0

20

40

60

80

100

120

(500)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

CFO to remain strong; FCF to take capex hit

CFO FCF


INR Cr %

178178

( 9 t h D e c 2 0 2 1 )


ATGL has a fair mix of CNG & PNG


On comparing the unit cost of peers with ATGL, we find that ATGL has the lowest OPEX cost

per scm amongst peers. This is a function of higher CNG and PNG industrial volume throughput

and better asset utilization ratio.

ATGL has the best EBITDA per scm in the industry

Source: Company Reports, Industry Reports and Ventura Research

In addition, the JV with TOTAL would be a game-changer in the coming years. TOTAL has

expertise in

• LNG business – TOTAL is the second-largest LNG player in the world. This would stand

in good stead for ATGL to source LNG at competitive rates.

• Fuel retailing – TOTAL is helping ATGL in CNG station rollout, which requires extensive

market research and demand-supply analysis, to optimize volume throughput.

Particulars ATGL GGL IGL MGL

FY21 Gas Volume (mmscm) 584 3,454 2,357 1,080

CNG Volume Share (%) 50.0 15.7 73.7 72.6

PNG Domestic Volume Share (%) 8.9 6.0 6.0 13.7

PNG Industrial/Commercial Volume Share (%) 41.1 78.3 20.3 13.7

2

4

6

8

10

12

14

16

FY18 FY19 FY20 FY21

ATGL IGL GGL MGL

INR per scm

179179

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IOAGPL JV – Massive volume scale up in the coming years

Indian Oil Adani Gas Pvt Ltd (IOAGPL), incorporated in Oct 2013, is an equal JV of Indian Oil

Corporation and ATGL. IOAGPL acquired the following geographies of

• Allahabad and Chandigarh GAs in the 2nd round of bidding

• Ernakulam, Panipat and Daman in the 4th round of bidding

• Dharwad and Udham Singh Nagar in the 5th round of bidding

• South Goa and Bulandshahr in the 8th round of bidding

• 9 GAs in the 9th round of bidding, and

• Jaunpur/Ghazipur (1 GA) in the 10th round of bidding

9 GAs acquired by IOAGPL in the 9th round of bidding

Source: PNGRB

As on 31st Mar 2021, the JV was operating 114 CNG stations and supplying PNG gas to 2.4 lakh

households, 158 commercial setups and 120 industrial units. ATGL consolidates 50% of

IOAGPL’s net profit with its PAT.

As per the MWP committed by IOAGPL in the recent bidding, the company has to open 876 CNG stations and 23.2 lakhs PNG connections by FY27.

IOAGPL commitment in 9th & 10th round of CGD bidding

Source: PNGRB

The JV will benefit from gaining access to IOCL's retail outlets on commercial terms. In addition,

IOCL's equity stake in Petronet LNG’s Dahej and Kochi terminals, will enable assured sourcing

of gas at competitive rates. ATGL has also offered technical expertise backed by experience in

operating CGD projects and execution skills in network rollout.

Palakkad & Thrissur Districts

(Kerala)

Kannur, Kasargod & Mahe

Districts (Kerala & Pudduchery)

Gaya & Nalanda Districts

(Bihar)

Kozhikode & Wayanad

Districts (Kerala)

Burdwan District (West

Bengal)

Panchkula, Sirmaur, Shimla &

Solan Districts (Haryana & HP)

Malappuram Districts (Kerala)Bulandshahr, Aligarh & Hathras

(UP)

Allahabad, Bhadohi &

Kausambi Districts (UP)

YearCNG Station

Progress (%)

Cummulative

CNG Stations

(nos)

PNG

Connection

Progress (%)

Cummulative

PNG Network

(nos)

Steel Pipeline

(km)

Cummulative

Steel Pipeline

(km)

FY20 0 0 0 0 5 629

FY21 15 131 10 2,32,387 20 2,516

FY22 30 263 20 4,64,774 40 5,031

FY23 45 394 30 6,97,161 60 7,547

FY24 60 526 40 9,29,548 70 8,805

FY25 75 657 60 13,94,321 80 10,062

FY26 90 788 80 18,59,095 90 11,320

FY27 100 876 100 23,23,869 100 12,578

180180

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PNGRB’s 11th bidding round – Target to cover India entirely under CGD

coverage

The 9th & 10th bidding rounds have increased the coverage of the network from ~20% of

population before such rounds to ~70% post completion. Recently the PNGRB announced the

11th round of CGD auction, which will add 65 GAs (covering 208 districts) to India’s current CGD

network of 226 GAs (covering 404 districts). After the completion of the 11th round, 96% of

India’s population and 86% of the country’s area would have access to the CGD network.

While ATGL was not aggressive in bidding for the 9th and 10th round, we expect them to bid to

win more aggressively in the 11th round. The incremental wins will only be growth and

profitability accretive.

CGD coverage to span across 86% of India

Source: PNGRB

CGD areas to be auctioned in the 11th round of bidding

Source: PNGRB

FY22

FY19 11th round

FY18 10th round 65 GAs

FY09-17 9th round 50 GAs

Pre-FY16 1st-8th rounds 84 GAs

Pre PNGRB 56 GAs

36 GAs

Total number

of GAs - 291

Geographical Area State Geographical Area State

Kurnool, Guntur, & Prakasam Andhra Pradesh Alirajpur, N&urbar & Barwani Maharashtra & MP

Nagaon, Morigaon, Hojai, Karbi Anglong & West Karbi Anglong Assam Koraput, Malkangiri, & Nabarangpur Odisha

Lakhimpur, Dhemaji , Darrang, Udalgiri, Sonitpur & Biswanath Chariali Assam Gajapati, K&hamal, Boudh & Sonepur Odisha

Kokrajhar & Dhubri Assam Rayagada, Kalah&i, Bolangir & Nuapada Odisha

Baksa, Barpeta, Bongaigaon, Chirang & Nalbari Assam Pathankot district Punjab

Darbhanga, Madhubani, Supaul, Sitamarhi & Sheohar Bihar Tarn Taran district Punjab

Gopalganj, Siwan, West Champaran, East Champaran & Deoria Bihar & UP Fazilka (except area already authorized), Ganganagar & Hanumangarh Punjab & Rajasthan

Baloda Bazar, Gariyab& & Raipur Chhattisgarh Bikaner & Churu Rajasthan

Kabirdham, Raj N&gaon & Kanker Chhattisgarh Jhunjhunu, Sikar & Nagaur Rajasthan

Mungeli, Bemetara, Durg, Balod & Dhamtari Chhattisgarh Dausa, Karauli, Sawai Madhopur & Tonk Rajasthan

Jashpur, Raigarh, Janjgir-Champa & Mahasamund Chhattisgarh Dharmapuri & Krishnagiri Tamil Nadu

Koriya & Surajpur Chhattisgarh Tiruvannamalai & Villupuram Tamil Nadu

Balrampur & Surguja Chhattisgarh Ariyalur & Perambalur Tamil Nadu

Kondagaon, Bastar & Sukma Chhattisgarh Namakkal & Tiruchirapalli Tamil Nadu

Narayanpur, Bijapur & Dantewada Chhattisgarh Pudukottai, Sivaganga & Thanjavur Tamil Nadu

M&i, Kullu, Kinnaur & Lahaul & Spiti Himachal Pradesh Madurai, Theni & Virudhnagar Tamil Nadu

Kangra & Chamba Himachal Pradesh Kanyakumari, Thoothukudi & Tiruneveli Kattabo Tamil Nadu

Gumla, Latehar, Lohardaga, Simdega, Garhwa & Khunti Jharkhand Dindigul & Karur Tamil Nadu

Chikkaballapur district Karnataka The Nilgiris & Erode Tamil Nadu

Idukki, Kottayam & Pathanamthitta Kerala Nizamabad, Adilabad, Nirmal, Mancherial & Kumuram Bheem Asifabad Telangana

Burhanpur, Kh&wa, Khargone & Harda MP Jogulamba Gadwal, Nagarkurnool, Mahabubnagar, Narayanpet, Telangana & Karnataka

Tikamgarh, Niwari, Chattarpur & Panna MP South Tripura & Sepahijala district Tripura

Betul, Chhindwara, Seoni & Balaghat MP Dhalai, North Tripura, Unakoti & Khowai Tripura

Damoh, Jabalpur, Katni, M&la, Umaria & Dindori MP Jammu, Udhampur, Reasi, Samba & Kathua UT of J&K

Hoshangabad, Narsinghpur, Sagar & Vidisha MP Amroha & Sambhal (except area already authorized) UP

Agar Malwa, Neemuch, M&saur & Jhalawar MP & Rajasthan Kasganj district UP

Buldana, N&ed & Parbhani Maharashtra B&a, Chitrakoot & Mahoba UP

Beed, Jalgaon & Jalna Maharashtra Pauri Garhwal, Uttarkashi, Rudraprayag & Tehri Garhwal Uttarakhand

Akola, Hingoli & Washim Maharashtra Pithoragarh, Champawat, Almora, Chamoli & Bageshwar Uttarakhand

Amravati & Yavatmal Maharashtra Purulia & Bankura West Bengal

Ch&rapur & Wardha Maharashtra East Mednipore, West Mednipore & Jhargram West Bengal

Nagpur district Maharashtra Alipurduar & Koch Bihar West Bengal

Bh&ara, Gondiya & Garchiroli Maharashtra

181181

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During FY19-21, ATGL’s gas volumes and revenues declined at a CAGR of 2.5% to 514 mmscm

and 0.7% to INR 1,696 cr, respectively, contributed by

• CNG volumes and revenue CAGR decline of 9.5% to 226 mmscm and 6.8% to INR 739

cr, respectively

• PNG industrial volumes and revenue CAGR of 4.1% to 222 mmscm and 3.3% to INR 820

cr, respectively

• PNG domestic volumes and revenue CAGR of 13.6% to 57 mmscm and 19.1% to INR

154 cr, respectively

• PNG commercial volumes and revenue CAGR decline of 21.6% to 10 mmscm and 17.9%

to INR 50 cr, respectively

Over the same period, the company’s EBITDA and PAT grew at a CAGR of 24.5% to INR 704 cr

and 42.3% to INR 463 cr respectively, while per scm EBITDA and PAT improved from INR 8.4

and INR 4.2 in FY19 to INR 13.7 and INR 9.0 respectively in FY21. As a result, RoE improved by

318bps (to 23.9%), however, capex in new GAs impacted RoIC, which contracted by 237bps (to

26.6%) respectively.

ATGL’s Financial Performance

(20)

(10)

0

10

20

30

40

50

60

0

200

400

600

800

1,000

1,200

1,400

1,600


Network rollout in new GAs to improve gas volumes

Total Gas Volume YoY Growth (%)

Vol in mmscm %

51 50 44 53 55 55

38 38 43 37 34 33

8 9 11 8 9 10 3 3 2 2 2 2


CNG proportion in volumes to remain high in the coming years


(20)

(10)

0

10

20

30

40

50

60

70

0

1,000

2,000

3,000

4,000

5,000

6,000


Higher volumes to drive the revenue performance

Revenue YoY Growth (%)

INR Cr %

47 48 42 48 51 51

43 41 47 41 38 37

6 7 9 7 8 9 4 4 3 4 3 3


Volume mix to replicate in revenue bifurcation


182182

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Source: ACE Equity

During H1FY22, ATGL’s gas volumes and revenues grew at a YoY rate of 61.5% to 315 mmscm

and 85.8% to INR 1,143 cr, respectively, driven by

• CNG volumes and revenue YoY growth of 91.6% to 159 mmscm and 106.3% to INR 557

cr, respectively

• PNG industrial volumes and revenue YoY growth of 51.8% to 124 mmscm and 85.5%


• PNG domestic volumes declined at a YoY rate of 2.6% to 26 mmscm, while the

segment’s revenue grew at a YoY rate of 17.0% to INR 84 cr, respectively

• PNG commercial volumes and revenue YoY growth of 78.8% to 6 mmscm and 109.4%


Over the same period, the company’s EBITDA and PAT grew at a YoY rate of 52.9% to INR 439

cr and 63.3% to INR 297 cr respectively, while per scm EBITDA and PAT improved to INR 13.9

and INR 9.4 respectively.

Over the forecasted period of FY21-24E, we are expecting the gas volumes and revenues to

grow at a CAGR of 41.3% to 1,451 mmscm and 45.6% to INR 5,238 cr, respectively, driven by

• CNG volumes and revenue growing at a CAGR of 52.5% to 801 mmscm and 56.3% to

INR 2,823 cr, respectively

• PNG industrial volumes and revenue growing at a CAGR of 28.9% to 474 mmscm and

35.4% to INR 2,035 cr, respectively

• PNG domestic volumes and revenue growing at a CAGR of 37.5% to 148 mmscm and

45.5% to INR 474 cr, respectively

• PNG commercial volumes and revenue growing at a CAGR of 41.4% to 27 mmscm and

48.3% to INR 163 cr, respectively

Over the same period, we are expecting EBITDA and PAT to grow at a CAGR of 33.8% to INR

1,688 cr and 38.4% to INR 1,228 cr, respectively, however, per scm EBITDA and PAT declining

to INR 11.6 and INR 8.5, respectively, by FY24. Subsequently, return ratios – RoE and RoIC will

improve by 411bps (to 28.0%) and 217bps (to 28.8%) respectively by FY24E.

0

5

10

15

0

500

1,000

1,500

2,000


Infrastructure rollout in new GAs to increase opex for the next 4 years and impact margins

EBITDA PAT

EBITDA per scm (INR) Net per scm (INR)

INR Cr %

15

20

25

30

35

0

1,000

2,000

3,000

4,000

5,000

6,000


Return ratios to remain subdued due to lower margins


RoE (%) RoIC (%)

INR Cr %

183183

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ATGL is committed to improving ESG Score

Since FY18, ATGL has worked on ESG parameters and disclosures, which has improved its

overall ESG score. The company aligned its ESG reporting standards with the Global Reporting

Initiative (GRI), increased its public disclosures, management systems and business excellence

initiatives, and remains committed to improving its ESG performance by further refining its

policies and practices, as well as strengthening information disclosure procedures.

ATGL’s Environmental Philosophy


ATGL’s Social Philosophy


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ATGL’s Governance Philosophy


185185

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Ventura Business Quality Score



Management Quality 8 Low The management is of high quality. It has been able to deliver on guidance; investor-friendly with timely updates on developments

Promoters Holding Pledge 7 Low The promoter holding is 74.8% and there is no pledge by promoters as on 30th Sept 2021

Board of Directors Profile 7 Low The average experience of directors is >20 years with significant experience in the their respective sectors and expert areas


Industry Growth 10 Low

The PNGRB has opened 132 GAs in 9th & 10th rounds of CGD auctions, which took the total GA count under CGD to 184. The regulator has recently announced the 11th round to open 65 more GAs, which will significantly boost the opportunities for CGD sector in the coming years

Regulatory Environment or Risk 5 Medium CGD is a semi regulated market due to the restriction on gas sourcing. However, there are no regulations on pricing

Entry Barriers / Competition 8 Low CGD players get 8 years of marketing exclusivity and 25 years of infrastructure exclusivity for acquired GAs which creates strong entry barriers for other players.

Business Prospects

New Business / Client Potential 8 Low ATGL has been very aggressive in the 9th & 10th rounds of CGD auctions and acquired the highest number of GAs.

Business Diversification 8 Low ATGL has four products to market in newly acquired GAs – CNG, PNG domestic, PNG industrial and PNG commercial, which is providing sufficient room for business diversification

Market Share Potential 10 Low Post the rollout of CGD network in newly acquired GAs, ATGL will become the only pan-India CGD company and will have significant market share

Margin Expansion Potential 8 Low Focus on CNG and LNG sourcing from TOTAL at a competitive rate is the key trigger for margin expansion

Earnings Growth 8 Low Efficient rollout of CGD network in new GAs will significantly boost gas volumes and trigger the overall earnings growth momentum

Valuation and Risk

Balance Sheet Strength 8 Low ATGL’s RoIC is more than 30% and its working capital cycle is negative, which showcase strong balance sheet health

Debt Profile 5 Medium ATGL's net debt to equity is 0.2X and net debt to EBITDA is 0.7X, providing sufficient room to raise debt to fund the estimated capex of INR 9,000 cr

FCF Generation 5 Medium ATGL is in a growth phase, hence the capex is expected to remain high for the next 5 years, which could impact FCF

Dividend Policy 3 High The company has never paid a dividend in the past and its fund requirements are expected to remain high in the coming years

Total Score

Ventura Score (%)

108

72 Low

The overall risk profile of the company is good and we consider it as a LOW risk company for investments


186186

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We analyzed the FY21 annual report of ATGL and our key observations are as follows:

Key Takeaways

• CNG network expansion – Added 102 stations (90 in new geographies), taking the total

number to 217.

• Reported a sales volume of 515.13 mmscm and achieved 2.0 mmscmd of gas volume

and crossed 2,250-inch km of steel pipe laying.

• PNG domestic connections increased by 40,939 to 0.48 million. PNG industrial and

commercial customer base expanded to 1,666 and 3300 respectively.

• Launched MyAdaniGas mobile app, which provides customers with a range of services

that can be executed at their fingertips – such as registration for a new connection,

paying bills and analysing gas consumption. Further, the billing solution is integrated

with WhatsApp. Digital payment accounted for 92% of the total number of payments

and 82% of total gas volume.

Auditor’s qualifications and significant notes to accounts

Shah Dhandaria & Co LLP is the auditor and there was no qualifications/emphasis of matters

highlighted by them in the FY21 Annual Report.

Board of Directors

ATGL has a stable team in place and no one left the board in the past 4 years, which reflects

the leadership stability in the company.

Details of Board of Directors

Source: Company Reports (Alexis Thelemaque resigned in Oct 2021)

Board Members FY18 FY19 FY20 FY21

Gautam S Adani C C C C

Jose Ignacio Sanz Saiz NEID

Maheswar Sahu NEID NEID NEID NEID

Naresh Kumar Nayyar NEID NEID NEID NEID

Chandra Iyengar NEID NEID NEID NEID

Gauri Trivedi NEID

Pranav V Adani P & ED P & ED P & ED P & NED

Alexis Thelemaque NEID NEID ED

Suresh Prakash Manglani ED ED

C - Chairman, P - Promoter

NED - Non Executive Director, ED - Executive Director

NEID - Non Exec Independent Director

187187

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Royalty Payments

ATGL is not paying royalty to any organization or company.

Related Party Transactions and Balances

Related party transactions remained stable in the past 3 years and have not increased with the

business.

ATGL’s Related Party Balances with Adani Group and JV Companies

Source: Annual Reports


Contingent Liabilities of the company are very low compared to the net worth of the company.

Most of the elements are related to minor disputes or cases with government and regulatory

authorities.

ATGL’s Contingent Liabilities

Source: Annual Reports

Related Party Balances FY18 FY19 FY20 FY21

Trade Payables 72.6 4.8 3.3 31.0

Other Current Financial Assets 3.7 3.9 15.0 9.9

Current Loans 358.9 359.0 311.2 0.0

Other Non Current Assets 10.0 0.0 4.6 1.5

Corporate Guarantee (IOAGPL) 2,471.4 3,471.9 3,533.5 3,533.5

Total 2,916.6 3,839.7 3,867.5 3,575.8

Contingent Liabilities FY18 FY19 FY20 FY21

Pending labour matters contested in various courts 0.7 1.0 1.0 1.0

Cases pending in Consumer Forums 0.0 0.0 0.0 0.8

Cases pending in MACT 0.1 0.1 0.1 0.1

In respect of Service tax, Excise Duty and VAT 53.0 59.6 27.3 29.3

In respect of Income Tax 3.5 2.2 2.2 2.7

Special Civil Suits 0.3 0.3 0.3 0.3

Case Pending in CCI 25.7 25.7 0.0 0.0

Property Tax 0.0 0.0 0.0 11.7

Stamp Duty under Gujarat Stamp Act 0.0 0.0 0.0 0.4

Total 83.2 88.8 30.9 46.2

Continget Liabilities to Net Worth (%) 9.6 8.1 2.1 2.4

188188

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Management Team



• A key driver for healthy margins in the CNG business is the cheaper sourcing of

domestic gas. Policy change and a decline in domestic gas allocation could impact

operating margins and cash flow.

• A delay in execution in network development and CGD infrastructure rollout could

extend the payback period for capex incurred and impact the operating cash flow and

balance sheet health

• Infrastructure bottlenecks for CNG stations due to legal issues related to land

acquisition could restrict CNG rollout and volumes. This could significantly affect the

operating performance as CNG has the highest profitability.

• Delay in infrastructure development, especially industrial corridors and highways

could restrict the volume growth in both PNG industrial gas and CNG.

• Faster EV rollout in India on the lines of China could significantly impact the long term

CNG story, on which most of the assumptions are based.


Mr Suresh P

ManglaniCEO

He has 29 years of varied experience in Oil & Gas projects & major specialization in conceptualizing,

negotiating, forming & successfully operating City Gas Distribution businesses and JVs. He started his

career with Kelvinator (now Whirlpool India) and subsequently worked with GAIL, Mahanagar Gas

and India Gas Solutions (JV of RIL and BP). Prior to joining ATGL, Suresh was working with Reliance

Industries ltd. as Sr. Vice President & Head of Commercial of petroleum retail business.

Mr Parag Parikh CFO

He has Masters degree in Commerce from Mumbai University and MBA degree from MET. He has an

experience of 22 years in the areas in infrastructure and energy. Prior to joining ATGL, he has worked

with Gammon Infrastructure Projects and GMR Group

189189

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Fig in INR Cr (unless specified) FY19 FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 FY21 Q1FY22 Q2FY22 Q3FY22E Q4FY22E FY22E FY23E FY24E

CNG Stations (nos) 82 115 115 134 151 217 217 224 244 281 317 317 417 517

CNG Volume (mmscm) 276.0 292.0 24.0 59.0 68.0 75.0 226.0 68.0 91.0 103.8 118.4 381.2 602.8 801.1

YoY Growth (%) 5.8 (66.2) (21.3) (9.3) 5.6 (22.6) 183.3 54.2 52.7 57.9 68.7 58.1 32.9

Avg CNG volume per staion (scmd) 9,757.0 8,121.8 2,293.4 5,151.0 5,186.9 4,529.0 3,730.0 3,388.9 4,227.1 4,300.0 4,400.0 3,912.1 4,500.0 4,700.0

CNG Revenue 850.4 948.0 77.0 193.0 218.0 251.0 739.0 235.0 322.0 367.5 419.0 1,343.4 2,124.1 2,823.0

YoY Growth (%) 11.5 (66.7) (21.5) (9.5) 9.6 (22.0) 205.2 66.8 68.6 66.9 81.8 58.1 32.9

CNG Revenue per kg (INR) 40.5 42.7 42.2 43.0 42.2 44.0 43.0 45.5 46.6 46.6 46.6 46.4 46.4 46.4

PNG Domestic Connections (nos) 3.8 4.4 4.4 4.5 4.6 4.8 4.8 4.9 5.1 5.4 5.8 5.8 7.8 10.3

PNG Domestic Volume (mmscm) 44.1 51.8 13.8 13.2 14.1 15.8 56.9 13.6 12.8 16.8 17.5 60.6 98.7 148.0

YoY Growth (%) 17.5 17.6 10.7 3.8 8.7 9.9 (2.0) (3.2) 19.3 10.7 6.5 62.8 49.9

Avg PNG domesitc volume per connection (scmd) 0.35 0.35 0.35 0.32 0.34 0.38 0.34 0.31 0.28 0.35 0.35 0.32 0.40 0.45

PNG Domestic Revenue 108.5 136.7 37.1 34.4 37.4 44.9 153.9 42.5 41.2 54.1 56.5 194.3 316.3 474.2

YoY Growth (%) 26.0 20.2 8.3 5.4 16.6 12.6 14.5 19.6 44.6 25.8 26.3 62.8 49.9

PNG Domestic Revenue per scm (INR) 24.6 26.4 26.8 26.1 26.6 28.4 27.0 31.3 32.3 32.3 32.3 32.0 32.0 32.0

PNG Commercial Connections (nos) 2,561 2,986 3,300 3,383 3,531 3,631 3,731 3,731 4,231 4,731

PNG Commercial Volume (mmscm) 15.6 16.7 1.2 2.2 2.9 3.3 9.6 2.4 3.6 4.9 5.3 16.3 24.0 27.2

YoY Growth (%) 6.4 (69.0) (47.8) (34.9) (20.1) (42.3) 99.7 67.3 69.6 59.5 69.3 47.4 13.2

Avg PNG commercial volume per connection (scmd) 17.6 16.5 0.0 0.0 0.0 0.0 8.4 7.8 11.5 15.0 16.0 12.7 16.5 16.6

PNG Commercial Revenue 74.2 80.5 6.0 11.1 14.7 18.2 50.0 13.6 22.1 29.9 32.1 97.7 144.0 163.0

YoY Growth (%) 8.6 (68.4) (45.6) (30.6) (8.9) (37.9) 127.3 99.6 103.0 76.3 95.4 47.4 13.2

PNG Commercial Revenue per scm (INR) 47.4 48.4 50.3 50.7 50.6 54.8 52.0 57.3 60.5 60.5 60.5 60.0 60.0 60.0

PNG Industrial Connections (nos) 1,287 1,480 1,666 1,682 1,733 1,793 1,863 1,863 2,163 2,563

PNG Industrial Volume (mmscm) 204.4 222.2 25.1 56.7 68.2 71.5 221.5 56.4 67.7 69.0 72.0 265.1 367.4 474.4

YoY Growth (%) 8.7 (50.8) 4.2 12.3 27.7 (0.3) 125.0 19.4 1.2 0.6 19.7 38.6 29.1

Avg PNG industrial volume per connection (scmd) 532.7 439.9 0.0 0.0 0.0 0.0 385.8 370.5 431.0 450.0 500.0 411.7 500.0 550.0

PNG Industrial Revenue 767.7 799.8 83.0 197.7 244.7 294.5 819.9 224.9 295.9 301.6 314.7 1,137.2 1,575.7 2,034.6

YoY Growth (%) 4.2 (56.5) (0.5) 14.4 50.1 2.5 170.8 49.7 23.3 6.9 38.7 38.6 29.1

PNG Industrial Revenue per scm (INR) 37.6 36.0 33.1 34.9 35.9 41.2 37.0 39.9 43.7 43.7 43.7 42.9 42.9 42.9

Total Gas Volume (mmscm) 540.2 582.6 64.1 131.1 153.1 165.7 514.0 140.4 175.1 194.6 213.2 723.3 1,092.8 1,450.7

YoY Growth (%) 7.9 (53.6) (10.3) (0.6) 13.7 (11.8) 119.0 33.6 27.1 28.7 40.7 51.1 32.7

Blended Avg Realization (INR per scm) 33.3 33.7 31.7 33.3 33.6 36.7 34.3 36.8 38.9 38.7 38.6 38.3 38.1 37.9

Revenue from operations 1,719.0 1,874.6 197.2 417.9 496.1 584.5 1,695.6 494.3 648.2 717.3 782.7 2,642.6 3,965.2 5,237.8

YoY Growth (%) 25.1 9.1 (56.2) (11.6) 1.4 26.4 (9.5) 150.7 55.1 44.6 33.9 55.8 50.1 32.1

Raw Material Cost 1,092.7 1,060.0 75.5 157.2 234.0 302.9 769.6 216.8 325.1 369.7 405.1 1,316.7 2,076.4 2,770.7

RM Cost to Sales (%) 63.6 56.5 38.3 37.6 47.2 51.8 45.4 43.9 50.2 51.5 51.8 49.8 52.4 52.9

Employee Cost 42.0 47.5 13.4 12.4 11.2 14.5 51.5 11.7 11.9 27.8 27.8 79.3 198.3 288.1


Other Expenses 129.7 172.4 31.0 38.7 38.1 62.4 170.1 58.7 79.7 61.1 61.1 260.7 378.4 490.8


EBITDA 454.6 594.8 77.4 209.5 212.8 204.7 704.3 207.1 231.4 258.7 288.6 985.9 1,312.1 1,688.1

EBITDA per scm (INR) 8.4 10.2 12.1 16.0 13.9 12.4 13.7 14.8 13.2 13.3 13.5 13.6 12.0 11.6

EBITDA Margin (%) 26.4 31.7 39.2 50.1 42.9 35.0 41.5 41.9 35.7 36.1 36.9 37.3 33.1 32.2

Net Profit 228.7 436.3 38.9 134.3 145.9 143.7 462.8 142.6 158.1 203.9 226.3 731.0 971.1 1,272.3

Net Profit per scm (INR) 4.2 7.5 6.1 10.2 9.5 8.7 9.0 10.2 9.0 10.5 10.6 10.1 8.9 8.8

Net Margin (%) 13.3 23.3 19.7 32.1 29.4 24.6 27.3 28.8 24.4 28.4 28.9 27.7 24.5 24.3

Adjusted EPS 2.1 4.0 0.4 1.2 1.3 1.3 4.2 1.3 1.4 1.9 2.1 6.6 8.8 11.6

P/E (X) 810.3 424.7 400.4 253.5 190.8 145.7

Adjusted BVPS 10.0 13.4 17.6 23.6 31.1 40.3

P/BV (X) 168.2 126.0 95.8 71.5 54.2 41.8

Enterprise Value 1,85,551 1,85,630 1,85,794 1,85,492 1,85,902 1,86,123

EV/EBITDA (X) 408.1 312.1 263.8 188.2 141.7 110.3

Net Worth 1,102.0 1,470.9 1,933.8 2,591.7 3,417.1 4,434.9

Return on Equity (%) 20.8 29.7 23.9 28.2 28.4 28.7

Capital Employed 1,495.9 1,873.9 2,422.1 2,953.2 4,084.4 5,305.9

Return on Capital Employed (%) 16.6 23.1 19.8 22.9 21.5 21.3

Invested Capital 1,336.2 1,784.4 2,411.2 2,767.0 4,002.5 5,241.5

Return on Invested Capital (%) 29.0 30.5 26.6 32.7 29.3 28.8

Cash Flow from Operations 356.1 492.4 653.5 892.4 1,207.4 1,565.7

Cash Flow from Investing 791.0 (461.0) (770.5) (537.0) (1,426.0) (1,463.7)

Cash Flow from Financing (1,077.1) (102.0) 38.6 (180.5) 113.8 (120.0)

Net Cash Flow 70.0 (70.6) (78.4) 175.0 (104.8) (18.0)

Free Cash Flow 80.6 45.9 (104.2) (185.0) (6.4) 295.8

FCF to Net Profit (%) 35.3 10.5 (22.5) (25.3) (0.7) 23.2

FCF to Net Worth (%) 7.3 3.1 (5.4) (7.1) (0.2) 6.7

Total Debt 394.0 403.0 488.3 361.5 667.3 871.0

Net Debt 234.2 313.6 477.4 175.3 585.4 806.6

Net Debt to Equity (X) 0.2 0.2 0.2 0.1 0.2 0.2

Net Debt to EBITDA (X) 0.5 0.5 0.7 0.2 0.4 0.5

Interest Coverage Ratio (X) 4.3 13.3 15.9 23.6 25.4 21.8

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Key Criteria View Comments Q3FY21


CNG volumes and reveneue declined at a YoY rate of 9.3% to 68 mmscm and 9.5% to INR 218 cr respectively. CNG station count stood at 151 (openned 7 stations during the quarter)

PNG industrial volumes and reveneue grew at a YoY rate of 12.3% to 68 mmscm and 14.4% to INR 245 cr respectively

PNG domestic volumes and reveneue grew at a YoY rate of 3.8% to 14 mmscm and 5.4% to INR 37 cr respectively. Total connections stood 4.6 lakhs (connected 0.1 lakh households during the quarter)

PNG commercial volumes and reveneus declined at a YoY rate of 34.9% to 2.9 mmscm and 30.6% to INR 15 cr respectively.

Total volumes declined at a YoY rate of 0.6% to 153 mmscm, while revenue grew at a YoY rate of 1.4% to INR 496 cr respectively. EBITDA and PAT grew at a YoY rate of 36.3% to INR 213 cr and 26.8% to INR 146 cr, while per scm EBITDA and PAT sood at INR 13.9 and INR 9.5 resepctively

Outlook & Strategy POSITIVE Annual capex for ATGL would be in the range of INR 1,000 cr for the expansion in new GAs. A similar capex is expected in IOAGPL. The CGD rollout in new geographies has started and the focus is on the faster rollout of CNG

Q4FY21


CNG volumes and reveneus grew at a YoY rate of 5.6% to 75 mmscm and 9.6% to INR 251 cr respectively. CNG station count stood at 217 (openned 66 stations during the quarter)


PNG domestic volumes and reveneue grew at a YoY rate of 8,7% to 16 mmscm and 16.6% to INR 45 cr respectively. Total connections stood 4.8 lakhs (connected 0.2 lakh households during the quarter)

PNG commercial volumes and reveneue declined at a YoY rate of 20.1% to 3 mmscm and 8.9% to INR 18 cr respectively.

Total volumes and reveneue grew at a YoY rate of 13.7% to 166 mmscm and 26.4% to INR 585 cr respectively. EBITDA and PAT grew at a YoY rate of 21.9% to INR 205 cr and 18.6% to INR 144 cr, while per scm EBITDA and PAT sood at INR 12.4 and INR 8.7 resepctively

Outlook & Strategy POSITIVE Annual capex for ATGL would be in the range of INR 1,000-1,200 cr for the expansion in new GAs. A similar capex is expected in IOAGPL. Company added 102 stations (90 in new geographies), taking the total number to 217. Targeting to open 100 stations annually.

Q1FY22


CNG volumes and reveneue grew at a YoY rate of 183.3% to 68 mmscm and 205.2% to INR 235 cr respectively. CNG station count stood at 224 (openned 7 stations during the quarter)


PNG domestic volumes declined at a YoY rate of 2.0% to 14 mmscm, segment’s revenue grew at a YoY rate of 14.5% to INR 43 cr respectively. Total connections stood 4.9 lakhs (connected 0.1 lakh households during the quarter)

PNG commercial volumes and reveneue grew at a YoY rate of 99.7% to 2 mmscm and 127.3% to INR 14 cr respectively.

Total volumes and reveneue grew at a YoY rate of 119.0% to 140 mmscm and 150.7% to INR 494 cr respectively. EBITDA and PAT grew at a YoY rate of 167.7% to INR 207 cr and

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198.7% to INR 143 cr, while per scm EBITDA and PAT sood at INR 14.8 and INR 10.2 resepctively

Outlook & Strategy POSITIVE Annual capex for ATGL would be in the range of INR 1,000-1,200 cr for the expansion in new GAs. A similar capex is expected in IOAGPL

Q2FY22


CNG volumes and reveneue grew at a YoY rate of 54.2% to 91 mmscm and 66.8% to INR 322 cr respectively. CNG station count stood at 244 (openned 20 stations during the quarter)


PNG domestic volumes declined at a YoY rate of 3.2% to 13 mmscm, while the segment’s revenue grew at a YoY rate of 19.6% to INR 41 cr. Total connections stood 5.1 lakhs (connected o,1 lakh households during the quarter)

PNG commercial volumes and reveneue grew at a YoY rate of 19.4% to 68 mmscm and 49.7% to INR 296 cr respectively.

Total volumes and reveneue grew at a YoY rate of 33.6% to 175 mmscm and 55.1% to INR 648 cr respectively. EBITDA and PAT grew at a YoY rate of 10.5% to INR 231 cr and 17.1% to INR 158 cr, while per scm EBITDA and PAT sood at INR 13.2 and INR 9.9 resepctively

Outlook & Strategy POSITIVE Annual capex for ATGL would be in the range of INR 1,000-1,200 cr for the expansion in new GAs. A similar capex is expected in IOAGPL


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YoY Growth (%) 9.1 (9.5) 55.8 50.1 32.1 Adjusted Cash EPS (INR) 4.4 4.8 7.4 10.1 13.2

Raw Material Cost 1,060.0 769.6 1,316.7 2,076.4 2,770.7 Adjusted BVPS (INR) 13.4 17.6 23.6 31.1 40.3


Employee Cost 47.5 51.5 79.3 198.3 288.1 CFO Yield (%) 0.3 0.4 0.5 0.7 0.8

Employee Cost to Sales (%) 2.5 3.0 3.0 5.0 5.5 Adjusted FCF per share (INR) 0.4 (0.9) (1.7) (0.1) 2.7

Other Expenses 172.4 170.1 260.7 378.4 490.8 FCF Yield (%) 0.0 (0.1) (0.1) (0.0) 0.2


EBITDA 594.8 704.3 985.9 1,312.1 1,688.1 Solvency Ratio (X)



Depreciation & Amortization 50.7 62.5 81.8 137.8 179.2 Net Debt to EBITDA 0.5 0.7 0.2 0.4 0.5

EBIT 544.1 641.8 904.0 1,174.3 1,508.9




Finance Cost 41.1 40.5 38.2 46.3 69.2 Return on Invested Capital 30.5 26.6 32.7 29.3 28.8


Exceptional Item 0.0 (14.5) 0.0 0.0 0.0 Working Capital Ratios

PBT 547.4 631.2 905.1 1,169.8 1,492.6 Payable Days (Nos) 16 25 25 25 25


YoY Growth (%) 53.5 15.3 43.4 29.2 27.6 Receivable Days (Nos) 12 22 20 20 20

Tax Expense 111.2 159.3 228.8 294.4 375.7 Net Working Capital Days (Nos) 4 9 5 5 5

Tax Rate (%) 20.3 25.2 25.3 25.2 25.2 Net Working Capital to Sales (%) 1.1 2.4 1.4 1.4 1.4

PAT 436.2 472.0 676.3 875.4 1,116.9


YoY Growth (%) 90.7 8.2 43.3 29.4 27.6 P/E 424.7 400.4 253.5 190.8 145.7

Min Int/Sh of Assoc 0.1 (9.1) 54.6 95.7 155.4 P/BV 126.0 95.8 71.5 54.2 41.8

Net Profit 436.3 462.8 731.0 971.1 1,272.3 EV/EBITDA 312.1 263.8 188.2 141.7 110.3

Margin (%) 23.3 27.3 27.7 24.5 24.3 EV/Sales 99.0 109.6 70.2 46.9 35.5

YoY Growth (%) 90.8 6.1 57.9 32.8 31.0

Cash Flow Statement

Balance Sheet PBT 547.4 631.2 905.1 1,169.8 1,492.6

Share Capital 110.0 110.0 110.0 110.0 110.0 Adjustments 53.1 201.9 213.1 350.6 466.6

Total Reserves 1,360.9 1,823.8 2,481.7 3,307.1 4,324.9 Change in Working Capital 3.0 (20.3) 3.0 (18.6) (17.9)

Shareholders Fund 1,470.9 1,933.8 2,591.7 3,417.1 4,434.9 Less: Tax Paid (111.2) (159.3) (228.8) (294.4) (375.7)

Long Term Borrowings 297.6 307.9 250.0 500.0 650.0 Cash Flow from Operations 492.4 653.5 892.4 1,207.4 1,565.7

Deferred Tax Assets / Liabilities 90.3 110.5 110.5 110.5 110.5 Net Capital Expenditure (441.5) (606.3) (1,000.0) (1,100.0) (1,150.0)

Other Long Term Liabilities 22.4 38.6 60.1 90.2 119.2 Change in Investments (19.5) (164.2) 463.0 (326.0) (313.7)

Long Term Trade Payables 0.0 0.0 0.0 0.0 0.0 Cash Flow from Investing (461.0) (770.5) (537.0) (1,426.0) (1,463.7)

Long Term Provisions 4.2 4.6 7.0 17.6 25.6 Change in Borrowings 5.3 79.1 (69.2) 305.8 203.7

Total Liabilities 1,885.2 2,395.4 3,019.4 4,135.4 5,340.2 Less: Finance Cost (41.1) (40.5) (38.2) (46.3) (69.2)

Net Block 1,198.0 1,379.3 2,297.5 3,259.7 4,230.5 Proceeds from Equity 0.0 0.0 0.0 0.0 0.0

Capital Work in Progress 342.1 696.5 0.0 0.0 0.0 Buyback of Shares 0.0 0.0 0.0 0.0 0.0

Intangible assets under development 0.0 0.0 0.0 0.0 0.0 Dividend Paid (66.3) 0.0 (73.1) (145.7) (254.5)

Non Current Investments 281.6 417.3 650.4 975.9 1,289.1 Cash flow from Financing (102.0) 38.6 (180.5) 113.8 (120.0)

Long Term Loans & Advances 96.6 132.1 205.9 309.0 408.1 Net Cash Flow (70.6) (78.4) 175.0 (104.8) (18.0)

Other Non Current Assets 0.0 355.1 553.4 830.4 1,096.9 Forex Effect 0.0 0.0 0.0 0.0 0.0

Net Current Assets (33.0) (584.9) (687.8) (1,239.5) (1,684.4) Opening Balance of Cash 159.3 88.6 10.2 185.2 80.4

Total Assets 1,885.2 2,395.4 3,019.4 4,135.4 5,340.2 Closing Balance of Cash 88.6 10.2 185.2 80.4 62.4

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194194

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Adani Enterprises Limited

A goose that lays golden eggs

195195

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AEL stands among the few listed company to have generated >30% CAGR in wealth for

its investors Over the years, AEL has incubated various businesses of the group like

transmission, renewable energy, city gas distribution etc which have themselves gone

on to become big business themselves. In its 2nd phase, AEL is currently incubating

several new businesses like airports, data centres, solar manufacturing, roads, defence

& green businesses. Adani Wilmar a JV company is on the verge of unlocking value

through its proposed IPO.

With most of the business verticals in the investment phase, profit metrics are in the

nascent stage and do not reflect steady state run-rates. Hence the valuations do not

capture the true long term potential of these incubated businesses. We initiate

coverage on AEL with a BUY rating for long term given high valuations. We remain

confident of the company’s ability to turn its new set of businesses into giants and

unlock value from them either through a stake sale to a strategic investor or through

direct listing once they cross the threshold of steady state run rates.

Over FY21-24, we expect AEL’s total revenues to grow at a CAGR of 20.6% to INR

69,413.2 cr over FY21-24E owing to:

• 62.8% CAGR growth in revenues of mining business

• 10.9% CAGR growth in revenues of IRM business

• 44.5% CAGR growth in revenues of solar business

• 5.5% CAGR growth in revenues of others segment (consisting of defence, roads,

agro products etc).

• Airports revenues to touch INR 8,100 cr by FY24.

AEL’s data centre and edible oil business are housed in separate JV’s with EdgeConneX

and Wilmar group respectively with 50% stake in each. EBITDA is expected to grow by

54.5% CAGR in FY21-24 to INR 9,235.1 cr with margins at 13.3% in FY24 (+697bps over

FY21). However, most of the new businesses are still in investment phase & hence net

earnings are expected to grow by 10.0% CAGR to INR 1,227.1 cr over the same period.


Revenue EBITDA

Net Profit

EBITDA (%)

Net Profit

(%) EPS (₹)

BVPS (₹)

RoE (%)

RoIC (%)

P/E (X) P/BV

(X)

EV/ EBITDA

(X)

FY20 43,403 2,284 1,138 5.3 2.6 10.3 154.1 6.7 7.2 166.5 11.2 86.6

FY21 39,537 2,505 923 6.3 2.3 8.4 156.0 5.4 6.4 205.4 11.0 81.0

FY22E 54,207 3,564 835 6.6 1.5 7.6 172.3 4.4 4.7 227.0 10.0 62.9

FY23E 64,877 7,173 1,020 11.1 1.6 9.3 181.6 5.1 7.5 185.8 9.5 34.0

FY24E 69,413 9,235 1,227 13.3 1.8 11.2 192.8 5.8 8.6 154.4 8.9 27.4

CMP INR 1,723 Target: INR 1,889 in 24 months Upside potential: 10%

A goose that lays golden eggs

Industry Diversified

Scrip Details


Market Cap (INR Cr) 189,159

Price (INR) 1,723


3M Avg Vol (000) 3,355.00

52W High/Low (INR) 1,788/409



Promoter 74.9

Institution 21.9

Public 3.2

TOTAL 100.0

Price Chart

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SENSEX- LHS AEL

Adani Enterprises Ltd

196196

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AEL valuation and price performance

Source: Company, Ventura research, Bloomberg

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AEL is trading near +2std EV/EBITDA

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43

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5459

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AEL L&T Coal India* Vedanta*

AEL has been lagging in ESG score over peers

Environmental Social Governence ESG Score20

21

22

23

24

25

26

27

28

FY15 FY16 FY17 FY18 FY19 FY20 FY21

ESG score has been improving

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Valuation

AEL is a combination of various businesses with its own set of scalability, maturity phase

and challenges. Hence, we have used a SOTP method to value the various businesses of the

group. Also, unlike traditional holding companies which have never looked at value

unlocking actively, AEL has a history of demergers and subsequent listing of those

businesses (once they reach a given scale and threshold) and hence we have not applied

any holding company discount in our valuation methodology.

Fair value of AEL based on existing businesses

Stake FY24 EBIT

INR cr EV/EBIT

(x) FY24 PAT

INR cr PE (x)

Implied value INR

cr Attributable value INR cr

Mining 100% 1,303 25 32,581 32,581

IRM 100% 890 15 13,344 13,344

Airports without MIAL* *75% 1,074 50 53,696 40,272

MIAL* *51% 1,356 55 74,584 38,038

Solar 74% 2,214 45 99,648 73,740 Roads, Water, Agro, Defence 100% 441 35 15,441 15,441

Less Net debt FY24* (31,831)

Attributable Market value of standalone and subsidiaries 181,586

Data Centre 50% 221 35 7,735 3,868

AWL 50% 1,438 31 44,524 22,262

Fair value of all businesses in INR cr 207,715

No of shares in cr 110

Value per share in INR 1,889


*We believe that there are multiple opportunities for maximizing non aero revenues

available to the airport business which include hospital and wellness chains, hoteling and

exhibition and convention centres and gaming/leisure. With a view to providing world class

services, we believe that the airport vertical would enter into JVs with specialty firms

and offer promising value unlocking potential over the medium to long term.

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Valuation and Comparable Metric of Domestic and Global companies

Source: Company, Ventura research

PEG

Company Name Mkt Cap Price FY24 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2022 2023 2024 2020 2021 2022 2023 2024 2022 2023 2024 2022 2023 2024

Domestic Peers in cr INR

AEL 183,447 1,668 15.0 4.0 3.7 3.6 61.2 33.2 26.8 87.2 42.5 34.0 219.8 179.8 149.5 4.4 5.1 5.8 4.7 7.5 8.6 43,403 39,537 54,208 64,877 69,413 6.6 11.1 13.3 1.5 1.6 1.8

Larsen & Toubro 250,904 1,778 2.2 2.3 2.1 1.8 19.5 16.4 14.3 22.5 19.1 16.3 24.8 19.8 17.2 12.3 13.9 14.4 8.4 9.4 10.4 144,308 135,979 156,330 174,937 202,684 11.8 12.6 12.6 6.5 7.2 7.2

KNR Infra 7,685 274 2.3 2.2 1.8 1.6 11.5 9.2 8.6 15.2 12.3 10.3 24.6 11.0 15.5 12.9 24.9 15.4 23.3 24.1 25.4 2,380 2,904 3,338 4,053 4,435 19.2 19.7 18.9 9.4 17.2 11.2

PNC Infratech 7,674 301 0.8 1.2 1.0 1.0 9.0 7.4 7.4 9.5 7.9 8.4 18.0 15.3 10.8 12.6 12.6 17.0 25.2 25.7 21.1 5,391 5,788 6,060 7,175 7,701 13.5 13.7 13.9 7.0 7.0 9.3

Ashoka Buildcon 2,699 96 5.5 0.5 0.4 0.4 1.8 1.5 1.5 2.1 1.8 4.9 11.7 8.5 9.3 15.3 17.1 6.8 80.3 80.2 13.3 4,774 4,992 5,739 6,363 6,917 28.0 28.0 27.8 4.0 5.0 4.2

Dilip Buildcon 7,753 530 0.2 0.9 0.7 0.6 6.5 5.1 3.7 9.3 6.8 5.1 15.7 10.7 8.5 9.5 12.3 14.8 14.3 18.1 24.1 9,274 10,168 11,050 13,040 15,000 14.1 14.7 15.0 4.5 5.6 6.1

HUL 551,014 2,349 3.1 10.6 9.4 8.5 42.6 36.6 32.1 46.2 39.3 34.1 61.0 51.8 45.6 18.6 21.2 23.5 28.9 35.0 41.0 39,238 47,028 51,306 57,210 63,436 24.8 25.8 26.4 17.6 18.6 19.0

Marico 67,853 527 2.7 7.1 6.4 5.8 37.2 31.7 27.8 40.2 34.1 29.8 51.4 43.9 38.7 36.2 38.3 39.1 59.9 67.0 67.7 7,254 8,048 9,446 10,413 11,584 19.0 20.2 20.7 14.0 14.9 15.1

ITC 273,495 221 1.3 4.9 4.4 4.2 13.4 11.7 11.2 14.3 12.3 11.7 17.8 15.9 14.9 24.7 20.5 27.8 32.4 29.5 38.1 48,979 53,155 55,076 59,905 64,177 36.4 37.4 37.2 27.9 28.8 28.5

HAL 43,619 1,311 1.1 1.4 1.2 1.0 6.0 5.0 4.3 7.8 6.5 5.6 12.4 11.1 10.2 19.9 19.4 18.2 53.7 61.5 59.1 21,438 22,755 24,294 25,935 28,792 23.2 23.8 23.6 14.5 15.2 14.8

Cochin Shipyard Ltd. 4,488 341 1.6 0.6 0.7 0.7 2.9 3.5 3.7 2.7 3.6 4.0 6.9 6.6 6.5 14.6 14.0 12.3 37.7 24.4 18.1 3,422 2,819 3,612 4,075 3,929 21.8 20.8 19.5 17.9 16.6 17.4

Bharat Dynamics 7,556 412 0.2 1.9 1.5 1.3 9.1 6.5 5.5 12.3 8.1 6.6 15.7 11.6 10.1 15.5 17.7 16.6 37.2 40.3 35.3 2,985 1,914 2,984 3,772 4,153 20.9 22.7 23.5 16.1 17.2 18.0

BEL 50,206 205 1.0 2.9 2.6 2.1 13.3 11.6 9.1 14.8 12.5 10.2 20.7 18.3 15.6 19.4 19.4 20.1 34.6 36.4 44.9 12,637 14,109 16,093 18,129 21,004 21.9 22.0 23.0 15.1 15.1 15.3

Vedanta 129,098 344 0.7 1.3 1.3 1.3 3.5 3.4 3.6 4.5 4.2 4.8 7.1 7.4 7.9 25.6 22.0 18.4 37.3 36.6 29.6 83,545 88,021 110,107 110,796 108,000 37.5 37.0 36.4 16.5 15.8 15.1

NMDC 40,369 137 (5.0) 1.4 1.6 1.6 3.0 4.0 4.0 3.1 4.2 5.0 4.5 6.3 6.7 25.7 16.6 14.9 37.6 25.1 20.1 11,699 15,370 25,520 21,695 18,327 47.9 40.6 39.3 35.5 29.6 32.9

Tata power 71,959 221 0.7 2.6 2.4 2.1 13.7 12.0 9.8 20.3 16.8 15.1 38.2 30.8 24.9 8.5 9.7 11.4 9.0 10.5 11.5 29,136 32,468 42,208 45,983 52,298 19.1 20.0 21.2 4.5 5.1 5.5

Thermax 20,551 1,717 1.0 3.2 2.8 2.4 38.9 30.4 25.6 50.7 37.9 30.9 56.6 44.6 37.6 10.0 11.6 12.3 20.5 25.5 27.2 5,731 4,791 5,798 6,706 7,467 8.3 9.1 9.6 6.3 6.9 7.3

KEC International 10,998 427 0.5 0.9 0.8 0.7 9.9 7.7 6.5 11.4 8.7 7.2 17.5 13.2 11.1 16.3 18.3 18.3 20.6 24.4 26.5 11,765 13,114 14,573 16,231 17,730 8.6 9.7 10.1 4.3 5.1 5.6

Global Peers in mn US $

Ferrovial SA 21,482 29 0.6 3.3 3.2 3.0 32.2 27.3 23.2 46.9 38.3 29.9 86.3 51.6 33.0 7.2 12.2 21.4 7.9 9.6 13.9 7,240 7,352 7,602 7,792 8,046 10.1 11.7 13.0 3.3 5.3 8.1

Skanska AB 9,924 24 11.5 0.6 0.5 0.5 8.6 7.7 7.5 10.4 9.7 8.7 13.0 12.6 11.2 14.1 13.6 14.2 17.8 17.9 17.6 17,480 16,811 17,813 18,496 19,425 6.4 6.8 7.3 4.3 4.2 4.4

Sumitomo Corp 17,197 14 0.5 0.8 0.8 0.7 13.0 14.6 14.5 20.4 24.7 23.1 6.1 6.5 6.6 11.7 10.3 9.4 4.1 3.3 3.3 48,752 43,817 46,683 47,241 48,476 6.1 5.2 5.0 6.1 5.6 5.4

WSP Global Inc 16,274 138 2.2 2.5 2.4 2.3 14.8 13.8 13.2 21.6 21.7 20.9 32.3 29.0 27.3 12.1 12.1 12.4 16.0 14.4 13.3 6,571 6,205 6,873 7,174 7,507 16.7 17.3 16.9 7.3 7.8 8.2

Mastec Inc 6,701 90 1.6 0.9 0.8 0.7 8.1 6.9 6.3 14.3 11.3 9.4 15.9 13.9 13.0 15.4 15.7 17.4 14.9 18.1 23.9 6,321 8,030 8,640 9,389 9,841 10.8 11.0 10.9 4.9 5.1 5.2

Construction Partners 1,818 35 0.5 1.8 1.6 1.5 15.5 12.9 12.1 34.3 25.8 19.5 44.5 33.8 25.8 8.8 10.4 11.9 9.1 11.7 13.8 786 911 1,125 1,249 1,339 11.4 12.0 12.5 3.6 4.3 5.3

China Telecom Corp 57,192 0 1.0 0.8 0.8 1.5 2.9 2.8 3.1 10.8 10.0 8.5 13.2 12.1 10.5 3.4 3.6 4.0 4.2 4.5 5.0 56,573 68,324 73,126 77,568 81,814 28.6 27.9 27.6 5.9 6.1 6.7

Equinix Inc 71,908 799 2.7 11.9 11.2 1.5 25.3 23.4 22.0 68.2 61.1 48.6 98.9 81.6 69.7 6.9 8.4 9.4 5.2 5.7 12.7 5,999 6,628 7,168 7,737 8,337 47.2 47.7 47.6 10.1 11.4 12.4

KDDI America 66,337 29 13.6 1.5 1.5 1.5 4.4 4.4 4.2 7.5 7.5 6.9 11.2 10.9 10.5 13.0 12.7 12.2 19.2 18.0 18.7 48,176 50,114 47,818 48,126 48,692 33.4 33.2 33.2 12.4 12.7 12.9

Sydney airport 15,969 6 (0.2) 27.5 19.7 1.5 36.0 24.0 20.1 70.1 37.8 23.1 298.7 59.1 44.4 11.1 123.7 110.0 5.0 9.5 98.2 555 429 787 1,105 1,296 76.5 82.1 84.9 6.8 24.5 27.8

Auckland International Airport 7,802 5 (2.5) 37.8 21.4 1.5 71.9 30.6 22.7 217.9 47.0 27.5 4,557.3 66.5 40.9 0.0 2.1 3.5 0.6 2.9 5.1 360 192 233 415 535 52.5 69.9 74.6 0.7 28.3 35.7

Hainan Meilan International airport1,530 3 0.6 5.3 4.1 1.5 9.5 7.1 7.2 15.3 9.5 6.3 14.2 10.4 9.4 13.4 15.7 15.2 10.2 15.5 22.1 197 294 384 452 533 56.2 57.5 63.3 28.0 32.7 30.6

EV/Sales (X) Sales EBITDA Margin (%) Net Margin (%)RoIC (%)EV/EBIT (X) RoE (%)P/E (X)EV/EBITDA (X)

199199

( 9 t h D e c 2 1 )


AEL valuations need to be seen in the context with the growth potential that it offers

Source: Ventura Research, ACE Equity & Bloomberg, Size of bubble indicates revenue size

AEL L&T

KNR

Ashoka

DBLKEC

HUL

Marico

ITC

HAL

Cochin

Bharat Dynamics

BEL

0

10

20

30

40

50

60

70

80

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

FY24

Ro

IC %

FY24 EV/EBITDA/ (EBITDA CAGR)

AEL

L&T

KNR

PNCAshoka

DBL

KECHUL

Marico

ITCHAL

Cochin

Bharat Dynamics

BEL

0

5

10

15

20

25

30

35

0 5 10 15 20 25 30 35 40 45

FY24

rev

en

ue

CA

GR

%

EBIT margin %

200200

( 9 t h D e c 2 0 2 1 )


Source- Company, Ventura research, Airports is merged in other segments till FY21 post which it has been given as a separate segment

(20)

(10)

0

10

20

30

40

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000


Reveneus are expected to grow at 20.6% over FY21-24E

Integrated resource mgmt Mining except Carmichael)

Solar manufacturing Others*

Airports* YoY Growth (%)

68%57% 55% 47% 44%

4%5% 9%

12% 12%

5%7% 7% 11% 12%

22% 31% 25% 22% 21%

0% 0% 4% 9% 11%

0%

20%

40%

60%

80%

100%


Share of new age business like airports, solar, defence is expected to increase going forward

Integrated resource mgmt Mining except Carmichael)

Solar manufacturing Others*

Airports*

0

2

4

6

8

10

12

14

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000


EBITDA/Net profit is expected to grow at 54.5%/10.0% CAGR over FY21-24

EBITDA- LHS Net Profit- LHS


0

1

2

3

4

5

6

7

8

9

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000


Return ratios are expected to remain subdued due to high capex over next 3 years

Net Worth- LHS Invested Capital- LHS

RoE (%) RoIC (%)

0

2

4

6

8

10

12

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000


Net debt to EBITDA is expected to inch higher to 6.8x in FY24 due to high capex which is expected to be funded

from borrowings

Total Debt- LHS Net Debt- LHS


(2,000)

(1,500)

(1,000)

(500)

0

500

(20,000)

(15,000)

(10,000)

(5,000)

0

5,000

10,000


High capex will result in negative FCF

CFO-LHS FCF-LHS


Story in Charts

INR cr

INR cr INR cr

INR cr INR cr

201201

( 9 t h D e c 2 0 2 1 )


Source: Company, Ventura research

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

0

2,000

4,000

6,000

8,000

10,000


Mining revenues are expected to grow at 62.8% CAGR over FY21-24

Mining Revenues-LHS Growth

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1,000

1,200

1,400

1,600


Mining EBIT is expected to grow at 51.7% CAGR over FY21-24

Mining EBIT-LHS Margins

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000


IRM revenues are expected to grow at 10.9% CAGR over FY21-24

IRM Revenues-LHS Growth

0%

1%

2%

3%

4%

5%

0

200

400

600

800

1,000

1,200

1,400

1,600


IRM EBIT is expected to grow at 1.7% CAGR over FY21-24

IRM EBIT-LHS Margins

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000


Solar revenues are expected to grow at 44.5% CAGR over FY21-24

Solar Revenues-LHS Growth

0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500


Solar EBIT is expected to grow at 48.3% CAGR over FY21-24

Solar EBIT-LHS Margins

INR cr INR cr

INR cr INR cr

INR cr INR cr

202202

( 9 t h D e c 2 0 2 1 )


Source: Company, Ventura research, Data centre & airport business is carried in a JV and hence only profit figures get merged

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1HFY22 FY22E FY23E FY24E

Airports segment is expected to touch INR 8,100 cr in revenues by FY24

Airports Revenues- LHS Growth

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

(500)

0

500

1,000

1,500

2,000

2,500

3,000


Airports segment EBIT is expected to touch INR 2,430 cr in FY24

Airport EBIT- LHS Margins

0%

5%

10%

15%

20%

25%

30%

0

10,000

20,000

30,000

40,000

50,000

60,000


AWL revenues are expected to grow at 9.8% CAGR over FY21-24

AWL revenues- LHS Growth

2.5%

2.7%

2.9%

3.1%

3.3%

3.5%

3.7%

800

1,000

1,200

1,400

1,600

1,800

2,000


AWL EBIT is expected to grow at 18.7% CAGR over FY21-24 as share of non oil business rise

AWL EBIT- LHS Margins

0

50

100

150

200

250

300

350

400

FY23E FY24E

Data Centre is expected to start earning revenues from FY23

0%

10%

20%

30%

40%

50%

60%

70%

0

50

100

150

200

250

FY23E FY24E

Data centre is high margin business of ~65%

Data Centre EBIT- LHS Margins

INR cr INR cr

INR cr INR cr

INR cr INR cr

203203

( 9 t h D e c 2 0 2 1 )


3

Source: Company, Ventura research, Other segment consists of airports also in FY21

0%

5%

10%

15%

20%

25%

30%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000


Other segment revenues are expected to grow at 5.5% CAGR over FY21-24

Others Revenues- LHS Growth

-5%

0%

5%

10%

15%

20%

(500)

0

500

1,000

1,500

2,000

2,500

3,000

3,500


Other segment EBIT is expected to become postitive from hereon

Others EBIT- LHS Margins

INR cr INR cr

204204

( 9 t h D e c 2 0 2 1 )



Going forward, we expect AEL’s total revenues to grow at a CAGR of 20.6% to INR 69,413.2

cr over FY21-24E. In terms of segmental breakup, mining/IRM/solar manufacturing/others

are expected to grow at 62.8/10.9/44.5/5.5% CAGR over the same period while airport

revenues are expected to clock INR 8,100 cr by FY24. EBITDA is expected to grow by 54.5%

CAGR to INR 9,235.1 cr with margins at 13.3% in FY24 (+697bps over FY21). Net income is

expected to grow by 10.0% CAGR to INR 1,227.1 cr over FY21-24 while PAT margins are

expected to fall by 57 bps to 1.8% in FY24. The return ratios, RoE and RoIC are expected to

remain in single digits as most of the AEL’s business verticals are still in the investment

phase. Net debt to EBITDA is expected to increase to 6.9x in FY24 from 5.4x in FY21.

However, as a group philosophy, AEL keeps on looking for strategic investors for its various

incubating businesses to unlock value and bring down debt levels and it does not expect

debt to EBITDA to breach 6x in the long run.

Financial Summary


Fig in INR Cr (unless specified) FY20 FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E

Revenue from operations 43,402.6 39,537.1 54,207.5 64,877.4 69,413.2 70,776.5 72,147.9 73,582.2 74,921.4 76,310.4 77,751.3

YoY Growth (%) 5.7 (8.9) 37.1 19.7 7.0 2.0 1.9 2.0 1.8 1.9 1.9

Raw Material Cost 34,660.3 30,247.8 40,791.1 48,495.9 51,539.3 52,197.7 52,848.4 53,531.0 54,130.7 54,752.7 55,397.8

RM Cost to Sales (%) 79.9 76.5 75.3 74.8 74.3 73.8 73.3 72.8 72.3 71.8 71.3

Employee Cost 682.5 829.3 1,192.6 1,362.4 1,388.3 1,344.8 1,298.7 1,250.9 1,198.7 1,144.7 1,088.5

Employee Cost to Sales (%) 1.6 2.1 2.2 2.1 2.0 1.9 1.8 1.7 1.6 1.5 1.4

Other Expenses 5,775.4 5,954.9 8,659.9 7,846.7 7,250.5 7,759.8 7,880.7 7,559.5 8,000.1 7,905.2 8,156.7

Other Expenses to Sales (%) 13.3 15.1 16.0 12.1 10.4 11.0 10.9 10.3 10.7 10.4 10.5

EBITDA 2,284.3 2,505.1 3,563.8 7,172.5 9,235.1 9,474.3 10,120.2 11,240.8 11,591.8 12,507.8 13,108.3

EBITDA Margin (%) 5.3 6.3 6.6 11.1 13.3 13.4 14.0 15.3 15.5 16.4 16.9

Net Profit 1,138.2 922.6 834.7 1,020.1 1,227.1 1,298.0 1,748.5 3,109.6 4,168.2 5,208.3 6,214.4

Net Margin (%) 2.6 2.3 1.5 1.6 1.8 1.8 2.4 4.2 5.6 6.8 8.0

Adjusted EPS 10.3 8.4 7.6 9.3 11.2 11.8 15.9 28.3 37.9 47.4 56.5

P/E (X) 166.5 205.4 227.0 185.8 154.4 146.0 108.4 60.9 45.5 36.4 30.5

Adjusted BVPS 154.1 156.0 172.3 181.6 192.8 204.6 220.5 248.7 286.6 334.0 390.5

P/BV (X) 11.2 11.0 10.0 9.5 8.9 8.4 7.8 6.9 6.0 5.2 4.4

Enterprise Value 197,716.6 202,948.5 224,244.0 244,041.7 253,304.8 253,842.7 253,877.8 252,403.1 250,234.8 247,118.9 243,357.6

EV/EBITDA (X) 86.6 81.0 62.9 34.0 27.4 26.8 25.1 22.5 21.6 19.8 18.6

Net Worth 16,946.6 17,158.6 18,953.1 19,973.2 21,200.4 22,498.3 24,246.8 27,356.4 31,524.6 36,732.9 42,947.3

Return on Equity (%) 6.7 5.4 4.4 5.1 5.8 5.8 7.2 11.4 13.2 14.2 14.5

Capital Employed 28,599.2 32,451.9 56,857.6 77,558.4 88,120.6 89,609.4 91,549.9 93,860.3 95,515.9 97,918.7 100,334.8

Return on Capital Employed (%) 4.5 4.2 3.3 5.4 6.2 6.3 6.3 6.6 6.7 7.0 7.2

Invested Capital 25,167.6 30,611.6 53,701.6 74,519.5 85,009.7 86,845.5 88,629.0 90,264.0 92,263.8 94,356.3 96,809.3

Return on Invested Capital (%) 7.2 6.4 4.7 7.5 8.6 8.6 8.7 9.2 9.3 9.7 10.0

Cash Flow from Operations 2,453.6 4,093.5 1,514.2 5,470.3 8,295.4 8,992.2 9,552.4 10,276.9 10,368.4 11,004.4 11,333.5

Cash Flow from Investing (2,323.0) (7,902.4) (11,726.6) (20,256.5) (11,148.1) (2,763.1) (2,935.8) (3,117.4) (3,308.4) (3,509.4) (3,720.7)

Cash Flow from Financing (220.9) 3,058.6 11,342.9 14,667.5 2,923.0 (6,577.7) (6,461.5) (6,486.0) (7,406.1) (7,186.7) (7,651.9)

Net Cash Flow (90.3) (750.3) 1,130.5 (118.6) 70.3 (348.7) 155.1 673.5 (346.1) 308.2 (39.1)

Free Cash Flow 612.5 440.9 (6,996.8) (16,398.9) (5,022.7) 4,033.0 4,631.2 5,609.2 5,939.6 6,713.7 7,166.4

FCF to Revenue (%) 1.4 1.1 (12.9) (25.3) (7.2) 5.7 6.4 7.6 7.9 8.8 9.2

FCF to EBITDA (%) 26.8 17.6 (196.3) (228.6) (54.4) 42.6 45.8 49.9 51.2 53.7 54.7

FCF to Net Profit (%) 53.8 47.8 (838.2) (1,607.5) (409.3) 310.7 264.9 180.4 142.5 128.9 115.3

FCF to Net Worth (%) 3.6 2.6 (36.9) (82.1) (23.7) 17.9 19.1 20.5 18.8 18.3 16.7

Total Debt 11,652.7 15,293.3 37,904.5 57,585.2 66,920.2 67,111.0 67,303.0 66,503.8 63,991.3 61,185.8 57,387.5

Net Debt 8,221.0 13,453.0 34,748.4 54,546.2 63,809.3 64,347.1 64,382.2 62,907.6 60,739.2 57,623.4 53,862.0

Net Debt to Equity (X) 0.5 0.8 1.8 2.7 3.0 2.9 2.7 2.3 1.9 1.6 1.3

Net Debt to EBITDA (X) 3.6 5.4 9.8 7.6 6.9 6.8 6.4 5.6 5.2 4.6 4.1

Interest Coverage Ratio (X) 1.2 1.4 0.9 1.1 1.1 1.1 1.2 1.5 1.8 2.1 2.5

205205

( 9 t h D e c 2 0 2 1 )


In the Adani group philosophy, sectoral prospects are not evaluated only on the basis of

existing market demand but market growth is envisioned. This is keeping in mind Adani’s

superior value proposition that they bring to the table and which is demonstrated

successfully across business domains. The Adani group has been among the fastest wealth

creators in the country. Since listing in 1994, the group has enormous value for its

shareholders.

Journey of AEL over the years


1988- Started commodity trading

1994- Listed on BSE and NSE @ INR 150 per share

1995- Mundra Port commences operations

1996- bonus issue 1:1

1999- Commencement of IRm business. Signed JV with Wilmar

2001-Started City gas distribution business

2005- Awarded india's first MDO contract

2006- Stock split of AEL (10:1)

2007- APSEZ IPO

2008- Acquirede Bunya Mine, Indonesia

2009- Adani Power IPO

2010- Acquired Carmichael Mine at Australia

2015- Completed demerger of APSEZ, APL and ATL

2017- Started manufacturing solar PV panels

2018- Demerger of Adani Green and Adani gas

2019-Emerged 2nd largest IRM player in the world

2020- Forayed into airports business

206206

( 9 t h D e c 2 0 2 1 )


AEL’s business model

AEL acts mainly as an incubator for various businesses in the group. The quality of AEL’s

incubation has been reflected in the speed of maturing without comprising the robustness

of the demerged entity to emerge as a sectoral benchmark and maximise stakeholder value.

Some of the companies also attracted global strategic stake holders (Total etc) and

institutional investors (Indian and global) post demerger. Besides, these companies also

attracted the highest credit ratings accorded to Indian infrastructure companies by some of

the most demanding international appraising agencies.

Adani group structure

Source: Company Reports & Ventura Research, Value as on 14th Oct

AEL believes that the ability to convert a small business segment into a large and profitable

business is derived from a broad-based competitive advantage that is not dependent on

any one factor but is a combination of varied factors like:

• Timely project implementation

• Ability to commission projects faster than the sectorial curve

• Competence to do so at a cost lower than the industry average

• Foresight to not merely service the market but to grow it

• Establish a decisive sustainable leadership and

• Evolve the Company’s position into a generic name within the sector of its

presence.

207207

( 9 t h D e c 2 0 2 1 )


How AEL has been consistently able to transform smaller segments into giant businesses


Incubation lifecycle of AEL


AEL holds a portfolio of large businesses within itself


Betting on India

Focus on big picture

Making outsized

investments at

competitive cost of capital

Focus on fater

commissioning/execution

Creating long term revenue

visibility

Reinforcing margins

DemergeHoldDevelopFundConceive

208208

( 9 t h D e c 2 0 2 1 )


A snapshot of activities carried under each business


Mining

Adani Enterprises entered the Mine Developer and Operator (MDO) business in 2008. It

dispatched its first rake from the PEKB mine to Rajasthan Rajya Vidyut Utpadan Nigam

Limited (RRVUNL) Power Stations in March 2013.

Within a decade, AEL has emerged as one of the largest developers and operators of coal

mines in India in addition to footprints in Indonesia and Australia.

209209

( 9 t h D e c 2 0 2 1 )


Fully explored mines capacity

Status Block name Project Capacity MMTPA

Operational Parsa East Kante Coal mining service 15.0 Talabira II & III Coal mining service 20.0

Gare Palma III Coal mining service 5.0 Kurmitar Iron ore mining service 6.0

Under development Parsa Coal mining service 5.0

Kente Extension Coal mining service 7.0 Gidhmuri Paturia Coal mining service 6.0

Suliyari Coal mining service 5.0

Gare palma II Coal mining service 23.0

Bailadila Iron ore mining service 10.0

Gondulpara Commercial mining 4.0

Dhirauli Commercial mining 5.0

Jhigador Commercial mining NA

Khargaon Commercial mining NA

LOI received Gare Palma I Coal mining service 15.0

Total 126.0

Source: Company websites & Ventura Research

AEL has ~50% market share in mining business


210210

( 9 t h D e c 2 0 2 1 )


AEL has also got a wholly-owned step-down subsidiary in Australia which owns a 100%

interest in the Carmichael mine in the Galilee Basin in Queensland, Australia.

Brief history of Carmichael mine project

• Carmichael is a thermal coal mine under construction in the Galilee Basin in Central

Queensland, which has been approved by the Queensland and federal

governments.

• AEL had initially planned the project in 2010 with an investment of A$16.5 billion

but later scaled it down to A$2 billion. This was one of the biggest investments by

an Indian company in Australia.

• The project had faced protests from a section of the population claiming that if

Carmichael goes ahead, it will destroy the ancestral lands, waters and cultures of

Indigenous people without their consent, increase shipping traffic through the

Great Barrier Reef heritage area and add around 4.7bn tonnes of carbon pollution

to the atmosphere over its 60-year lifespan.

• The opposition grew so strong that over the years several banks refused to fund it.

• The group, however, went ahead with the project which included construction of a

brand new railway line connecting an Australian port to the mine -- situated 300

kilometers away in Queensland.

• The project was given the final approvals in June 2019, and construction began later

that year and the first cargo dispatch is expected in Dec, 2021.

• As per AEL, Carmichael will produce 11 million tonnes of thermal coal per annum at

peak capacity.

Carmichael mine project


211211

( 9 t h D e c 2 0 2 1 )


How AEL has derisked its mining business economically:

Economically

• Diversified portfolio- The mining business has a presence in 70% of India’s mineral

belt with a wide exposure across MDO coal, MDO iron ore, washery and commercial

coal functions.

• 100% contracted capacity: Contractual mechanism for life-long tariff escalation

across mining agreements of 30 years.

• Robust counter-party profile: Addressing customers of AAA and AA categories

(57%) and A and Unrated category (43%).

• Engagement stability: Engaged across multi-decade contracts with sovereign/ sub-

sovereign entities and State- and Central Government-backed counterparties.

• Volumes: No volume risk due to a confirmed annual offtake of the entire contacted

quantity leading to predictable long-term cash flows, on the basis of fixed and cost

pass-through agreements.

Over FY21-24, revenues from the mining vertical are expected to grow at 62.8% CAGR

mainly due to commencement of operations of Carmichael mines & increase in demand for

coal. The operating profits are expected to grow at a 51.7% CAGR over the same period with

margins expected to hover around 14-17%. Keeping the consequences of climate change

in mind, the management has discontinued any further fresh investments in this vertical

and projects will be allowed to run off with their contract period expiring (the furthermost

being in FY2041.

Mining revenues and EBIT profile


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000


Mining revenues are expected to grow at 62.8% CAGR over FY21-24

Mining Revenues-LHS Growth

INR cr

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1,000

1,200

1,400

1,600


Mining EBIT is expected to grow at 51.7% CAGR over FY21-24

Mining EBIT-LHS Margins

INR cr

212212

( 9 t h D e c 2 0 2 1 )


Peer comparison

Revenue growth

EBIT growth EV/EBIT(x)

FY21-24E FY21-24E FY23E FY24E

AEL 63% 52%

Vedanta 7% 14% 4.2 4.8

NMDC 6% -12% 4.2 5.0

Source: Company websites & Ventura Research, Bloomberg

Integrated resource management (IRM)

AEL ventured into coal management in 1999 to address the gap in the requirement of coal

at thermal power plants. The company is the largest coal supplier in India and a major

supplier of important minerals worldwide. AEL is also the largest coal importer in Indonesia

& India’s largest non-coking coal off-taker in Indonesia, South Africa and USA. The company

is also present in the growing coal markets of Sri Lanka, Thailand, Vietnam, China and Dubai.

Under this division, AEL provides a door-to-door resource delivery model which includes:

• Sourcing resources from suppliers

• Managing sea-borne logistics

• Providing an intermediate holding facility at discharge ports

• Delivering resources to customers.

While the primary customers for the IRM business consists of States or Central owned

Electricity Boards, AEL has over the years diversified to other businesses like steel, cement

and other metals to derisk its dependence. Currently, the IRM business has more than 600

customers across various downstream industries and is a market leader.

We expect IRM revenues to grow at 10.9% CAGR over FY21-24 to touch INR 32,662.2cr given

the business is more or less in a mature phase. In terms of operating profits, we expect the

same to grow at 1.7% CAGR with FY22 margins at >4% and then fall to a normalized 2-3 %

range in FY23 and FY24.

213213

( 9 t h D e c 2 0 2 1 )


IRM revenues and EBIT profile


Solar manufacturing

The emergence of solar energy as a preferred renewable energy option has created a

backend demand for solar photo-voltaic cells and modules. India has emerged as one of the

most aggressive investors in solar energy, creating an unprecedented appetite for solar

energy products. To capitalize on this opportunity, Mundra Solar Photo Voltaics Limited

(MSPVL) (constituent of AEL) was commissioned in 2017 and has sold > 3 GW (till March

2021) of modules, addressing Indian and global demand.

MSPVL is the first and the largest GW scale integrated cell and module manufacturer in India

with backward integration through ancillaries in ethylene vinyl acetate (EVA), back sheet

and aluminium frames. Besides manufacturing, the solar business also comprises an EPC

business in Mundra Special Economic Zone (SEZ). MSPVL enjoys a pan-India presence

through 11 channel partners and their associated distributors to address residential and

commercial & institutional rooftop demand. Under the KUSUM scheme, MSPVL modules

have been supplied for solar pump installations in the state of Punjab, Haryana, Uttar

Pradesh, Rajasthan, Gujarat, Madhya Pradesh and Maharashtra and accounts for ~52% of

the total modules installed in the scheme as of Feb, 2021.

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000


IRM revenues are expected to grow at 10.9% CAGR over FY21-24

IRM Revenues-LHS Growth

INR cr

0%

1%

2%

3%

4%

5%

0

200

400

600

800

1,000

1,200

1,400

1,600


IRM EBIT margins are expected to be at normalised levels in FY23 & FY24

IRM EBIT-LHS Margins

INR cr

214214

( 9 t h D e c 2 0 2 1 )


MSPVL is expected to benefit from the domestic thrust on solar energy


MSPVL also undertakes EPC projects besides manufacturing modules and cells

Hyundia, Chennai Indore Airport Andaman and Nicobar


Mundra Solar Photo Voltaics Ltd

(MSPVL)

Largest Solar energy

products company in

India

10.3% share of solar power in

total power capacity in

2020

13x increase in solar capacity in last 6 years

41% share of solar energy in renewable mix

215215

( 9 t h D e c 2 0 2 1 )


AEL is the largest solar panel manufacturer

________________________________________________________________________


The solar business is also expected to benefit from various policies of the government like:

PM-KUSUM scheme

The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme

was launched in July 2019. The scheme initially targeted to set up decentralised solar power

capacity of 26 GW by 2022. However, the MNRE has increased the aggregate target to 31

GW from 26 GW by FY23.

The scheme has the following three components

• setting up of 10,000MW of decentralised ground/stilt-mounted grid-connected

solar or other renewable energy-based power plants

• installation of 1.75 million standalone solar agriculture pumps.

• solarisation of 1 million grid connected solar agriculture pumps.

Production Linked Incentive (PLI) Scheme

The Cabinet on Nov, 2020 approved a INR ~1.5 lakh crore (US$20bn) production-linked

incentive (PLI) scheme for 10 sectors to attract investments and boost domestic

manufacturing. As part of this, INR 45bn (US$616m) is allocated for the solar PV sector.

Expenses incurred on plant, machinery, equipment, R&D and technology transfer would be

eligible for the incentive scheme. The scheme shall also extend an incentive of 4-6% on

incremental sales (over the base year) of products manufactured in domestic facilities and

covered under target segments, to eligible companies, for a period of 5 years subsequent

to the base year.

0

200

400

600

800

1000

1200

1400

1600

Adani Solar Indosolar Jupiter solar Tata powersolar

Websolenergy

Moser Baer RenewSys BHEL

MW

216216

( 9 t h D e c 2 0 2 1 )


Basic Custom Duties (BCD) To Be Introduced

In order to make imported cells and modules more expensive, the government had

proposed the implementation of a new tariff scheme, the Basic Custom Duties, on solar

cells, modules and inverters, starting from 2021. But, recently, in supersession to the

previous announcements, now, the finance ministry will be issuing an order for imposing

40% and 25% BCD on the import of solar modules and solar cells respectively. The new

tariffs shall be imposed from 1st April 2022. It would replace the current SGD regime on the

concerned solar equipment.

How AEL has built and derisked its solar manufacturing business:

Scale: The Company possesses India’s largest integrated cell & module manufacturing

capacity (1,400 MW). With its multi-level infrastructure, the manufacturing facility is being

scaled to 3.5 GW of modules and cells under a single roof.

Operations: MSPVL has widened its technology offering through cutting-edge research

and development. It offers a range of multi (315Wp to 345Wp), mono (340 Wp to 375Wp)

and bifacial (350Wp to 425Wp) solar modules.

Knowledge capital: The Company possesses a strong and experienced team of 3500+

employees to ensure process sustenance with two PhDs working on product development

and research.

Technology: Investment in best-in-class systems and processes (automation, ecosystem

development and quality assurance).

De-risking: MSPVL collateralizes more than 80% of its diversified order book, enhancing the

certainty of cash flows.

De-leveraged: MSPVL strengthened its capital management, moderating long term debt

from INR 1,385 cr in FY18 to INR 924 cr in FY21. However, with expansion kicking in we

expect leverage to go up.

We expect solar manufacturing revenues to grow at 44.5% CAGR over FY21-24 to touch INR

8,857.6 cr as the new capacity of 3.5GW is expected to commence operations (cell line from

Dec, 21 and module line from next year). We expect the operating profit to grow at 48.3%

CAGR with margins expected to see a sharp fall in FY22 (module prices have increased

recently which will affect the existing contracts) and then bounce back to ~25% in FY23 and

FY24.

217217

( 9 t h D e c 2 0 2 1 )


Solar revenues and EBIT profile


Peer comparison

Revenue growth



AEL 45% 48%

Tata Power 17% 19% 16.8 15.1

Thermax 16% 42% 37.9 30.9

KEC 11% 18% 8.7 7.2


Airports business

Adani Airports Holdings Limited won the mandate to modernize and operate six airports in

2019 – Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram –

through the Airports Authority of India’s globally competitive tendering process. Adani

Airports will operate, manage and develop all the six airports for 50 years. The company

commenced operations in Ahmedabad, Lucknow and Mangaluru airports while the

commencement of operations in Jaipur, Guwahati and Thiruvanthapuram took place by

Oct, 21.

Besides above airports, the company has acquired a 74% stake in Mumbai International

Airport Limited (MIAL), a joint venture with the Airports Authority of India by acquiring

50.5% stake from GVK group, 10% stake from Airport company of South Africa and 13.5%

stake from Bidvest. Further, by acquiring majority stake in MIAL, the company has gained

direct control of upcoming Navi Mumbai airport as MIAL holds a 74% stake in the same.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000


Solar revenues are expected to grow at 44.5% CAGR over FY21-24

Solar Revenues-LHS Growth

INR cr

0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500


Solar EBIT is expected to grow at 48.3% CAGR over FY21-24

Solar EBIT-LHS Margins

INR cr

218218

( 9 t h D e c 2 0 2 1 )


AEL intends to design revolutionary airports that offer seamless processes and facilitate

touch-less operations – especially in the post COVID-19 era, when social distancing will be

the new norm. Over longer term, the management envisages to convert the airport

business from B2B currently to B2C in lines of Changi airport which houses several fancy

shopping malls, restaurants & world’s largest indoor waterfall. It is to be noted that the 7

airports (Navi Mumbai excluded) touch ~25% of total India’s air traffic consumer base of

>300 mn people.

Regional connectivity scheme (UDAN) can provide a big boost to airports business

Under Regional connectivity scheme, government plans to connect the underserved

airports to key airports through flights that will cost Rs 2,500 for per hour flight. The goal is

to make air travel affordable and widespread and to boost air transport infrastructure

development. The scheme will be jointly funded by the central government and state

governments with several states having come on board by signing the "Memorandum of

Understanding" with the union government.

The 7 airports handle ~25% of India’s air traffic consumer base of >30 cr


AAHL plans to increase passenger footfalls and provide network effect in the following

ways:

• Establishing first rate infrastructure on the air and land sides of the airport to

enhance quality travel time for passengers.

• Creating locally relevant architecture in and around airports to attract foreign

tourists and domestic passengers.

• Developing entertainment destinations (aerotropolis, airport village, hotels and

malls, among others).

• Enhancing domestic airline connectivity with new and under- prioritised locations.

• Raise the number of international flights; reducing the delay between two flights.

45.9

11.4

5.5 5.43.9

1.95.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Mumbai Ahmedabad Guwahati Lucknow Trivandram Mangaluru Jaipur

Passenger footfalls in mn in FY20

219219

https://www.forbes.com/sites/gabrielleigh/2019/05/01/singapores-jewel-the-best-airport-shopping-mall-in-the-world/?sh=72dbba1e3b7c

( 9 t h D e c 2 0 2 1 )


Further, the outlook for the airport infrastructure business is positive on account of the

government’s decision to progressively divest ownership stakes in Indian airports in favour

of private operators. The divestment is expected to accelerate the modernization of

infrastructure and turn them at par with global airports.

We expect the airport business to clock INR 2,463 cr in revenues in FY22 and thereafter

grow at 81.4% CAGR in FY23 and FY24 once COVID is behind us. We expect only breakeven

profits in FY22 and have built 20% and 30% in margins in FY23 and FY24 respectively leading

to total operating profit touching INR 2,430 cr in FY24.

Solar revenues and EBIT profile


Peer comparison

Revenue growth



AEL 81% 474%

Sydney airport 18% 50% 37.8 23.1

Auckland Intl 32% 167% 47.0 27.5

Hainan Meilan 12% 41% 9.5 6.3


Roads and Highway construction business

Adani Enterprises entered this business in 2018 and has since emerged as one of its fastest

growing business unit. In this business. the company will focus on pan- India projects

launched by the National Highways Authority of India (NHAI) and Ministry of Road Transport

and Highways (MORTH), Ministry of Railways and metro corporations under numerous

states and all related projects under the purview of Central or State authorities or agencies.

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


Airport revenues are expected to touch INR 8,100 cr by FY24

Airports Revenues- LHS Growth

INR cr

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

(500)

0

500

1,000

1,500

2,000

2,500

3,000


Airport EBIT is expected to be >INR 2,000 cr by FY24

Airport EBIT- LHS Margins

INR cr

220220

( 9 t h D e c 2 0 2 1 )


The business enjoys a pan-India presence (Chhattisgarh, Telangana, Andhra Pradesh,

Kerala, Orissa, Gujarat and West Bengal) with an awarded project length of around 2,300

lane km. As a developer, AEL will primarily target PPP projects structured in Build-Operate-

Transfer (BOT), Toll-Operate- Transfer (TOT) & Hybrid-Annuity Mode (HAM) models while

on the EPC side AEL will only take those projects that can offer scale and complexity, marked

by relatively low competition.

Bharatmala Project can provide a big boost to road construction

The program of Bharatmala focusses on

1. Enhancing effectiveness of already built infrastructure

2. Bridging infrastructure gaps for seamless movement and

3. Integrating National and Economic Corridors.

The program was conceptualized to attain optimal resource allocation for a holistic highway

development & improvement. The Bharatmala Pariyojana, once implemented, is expected

to result in connecting 550 Districts in the country through NH linkages.

The six features of the Bharatmala project are:

• Economic Corridors: Integrating the economic corridors facilitates larger

connectedness between economically important production and consumption

centers.

• Inter-corridor and Feeder routes: Inter corridor connectivity would ensure first mile

and last mile connectivity.

• National Corridor Efficiency Improvement: Through this, the greater actionable goal

is to undertake lane expansion and decongestion of existing National Corridors.

• Border and International connectivity Roads: Better border road infrastructure

would ensure greater maneuverability, while also boosting trade with neighboring

countries.

• Coastal and Port connectivity roads: Portled economic development is further

boosted through connectivity to coastal areas, encouraging both, tourism and

industrial development.

• Green-field Expressways: Expressways with higher traffic congestion and choke

points would benefit from green field expressways.

221221

( 9 t h D e c 2 0 2 1 )


Bharatmala Yojna Phase I

Before Bharatmala After Bharatmala

Six corridors Fifty corridors

40% freight on national highways 70-80% freight on national highways

300 districts connected by 4+ lane highways

550 districts connected by 4+ lane highways


The roads and highway business of AEL is expected to benefit from Bharatmala Pariyojana

Phase I as per which 24,800 kms of national highways and 10,000 kms of residual road works

under National Highways Development Project (NHDP).

Bharatmala Yojna Phase I

Scheme Length kms Cost in INR cr

Economic corridors 9,000 120,000

Inter corridors and feeder roads 6,000 80,000

National corridor effeciency improvement 5,000 100,000

Border/International connectivity 2,000 25,000

Coastal and port connectivity 2,000 20,000

Expressways 800 40,000

Ongoing projects including NHDP 10,000 150,000

Total 34,800 535,000


AEL expects portfolio of 12,000 lane Kms by 2026 from 450+kms currently


222222

( 9 t h D e c 2 0 2 1 )


AEL is also open to grow its business through the inorganic route & as per various media

reports, it is already in talks to acquire 49% stake in Maharashtra Border Checkpost Network

Ltd (MBCPNL) from Sadbhav Infrastructure Project Ltd. at an enterprise value of INR.1,680

cr (7x EBITDA). While initially the acquisition will be of 49% stake in MBCPNL, there will be

an option to acquire additional stake, subject to approvals. With this acquisition, AEL will

get exclusive fee-collection rights from commercial vehicles at 24 entry points to

Maharashtra.

18 check posts are operational, 4 near operational, 1 near completion & 1 under construction


National asset monetization can accelerate the growth prospects for Road/Highways and

airports business

The government announced National asset monetization program (NMP) under which the

strategic objective is to unlock the value of investments in brownfield public sector assets

by tapping institutional and long-term patient capital, which can thereafter be leveraged

for further public investments. It is to be noted that under NMP only rights over asset will

be transferred while ownership will rest with the government only and thus the asset will

be handed back to the government at the end of the transaction life.

Concessions are long term

till at least 2033 & have

inflation protection (5% per

annum & compounded

every 3 years)

223223

( 9 t h D e c 2 0 2 1 )


NMP framework

Source: PIB & Ventura Research

The aggregate asset pipeline under NMP over FY22-25 is valued at INR 6.0 lakh cr of which

roads will constitute ~27% at INR 1.6 lakh cr while airports constitute ~3.5% at INR 0.2 lakh

crore. The monetization includes more than 20 asset classes totally besides roads & airports

like ports, railways, warehousing, gas & product pipeline, power generation and

transmission, mining, telecom, stadium, hospitality and housing.

NMP envisages monetization of assets worth INR 6 lakh crore


The assets under the NMP are expected to be rolled out through public private partnership

concessions as well as capital market instruments such as InvITs. The choice of instrument

will be determined by the sector, nature of asset, timing of transactions (including market

224224

( 9 t h D e c 2 0 2 1 )


considerations), target investor profile and the level of operational/investment control

envisaged to be retained by the asset owner etc.

NMP envisages monetization of assets worth INR 6 lakh crore


Water management

AEL entered this business in 2019. It bagged the prestigious waste water treatment project

in Prayagraj under the National Mission for Clean Ganga Framework, which comprised the

construction of three sewage treatment plants of 72 MLD capacity and rehabilitation of six

sewage treatment plants of cumulative 254 MLD capacity. For the execution of these

projects, a Special Purpose Vehicle (SPV) called Prayagraj Water Pvt. Ltd. was formed. The

project was 60% complete FY21.

The water management business is expected to benefit from following programs of the

government:

• National Mission for Clean Ganga and National River Conservation for pollution

abatement of Ganga & Other Rivers.

• Pradhan Mantri Krishi Sinchayee Yojana for extending coverage of irrigation with

improved efficiency of micro-irrigation.

• Jal Jeevan Mission for providing piped water connections to 14.6 cr rural

households by 2024.

• Jal Shakti Abhiyaan to stimulate rainwater harvesting and water conservation.

• National River Linking projects to connect 37 rivers across the nation to ensure

adequate water through the year in all regions.

88,190

1,62,422

1,79,544 1,67,345

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

1,80,000

2,00,000

FY22 FY23 FY24 FY25

Monetisation pipelineINR cr

225225

( 9 t h D e c 2 0 2 1 )


Rising population is accentuating water problems in India

Source: World Bank, Ventura research

Further, increasing urbanization & industrial activities has resulted in a significant increase

in sewage generation in India. During FY11-20, the total sewage generated by Tier I & II

cities increased from 41 bn litres per day (BLD) to 75 BLD, while the sewage treatment

capacity increased from 11 BLD to 26 BLD, indicating that only 30-35% of the total volume

of sewage generated gets treated. The conditions in Tier III cities is far worse off.

The water division is also expected to benefit from various policies of the government like:

AMRUT Mission (launched in June 2015):

The key objectives of the mission are

• To ensure that every household has access to a tap with the assured supply of water

and a sewerage connection.

• To increase the amenity value of cities by developing greenery and well maintained

open spaces (e.g. parks).

• To reduce pollution by switching to public transport or constructing facilities for

non-motorized transport (e.g. walking and cycling).

2nd phase of AMRUT Scheme

It is the continuation of the AMRUT mission launched in June 2015

The key objectives of the phase 2 are:

• It will build upon the progress of AMRUT to address water needs, rejuvenate water

bodies, better manage aquifers, reuse treated wastewater, thereby promoting a

circular economy of water.

4

67

15

18

5

20

3

India USA China Brazil

Share of Water Share of Population

In %

226226

( 9 t h D e c 2 0 2 1 )


• It will provide 100% coverage of sewerage and septage in 500 AMRUT cities.

• Recycling and reuse of treated wastewater is expected to cater to 20% of total

water needs of the cities and 40% of industrial demand. Under the Mission, fresh

water bodies will be protected from getting polluted to make natural resources

sustainable.

• Pey Jal Survekshan will be conducted in cities to ascertain equitable distribution of

water, reuse of wastewater and mapping of water bodies.

Jal Jeevan Mission

Jal Jeevan Mission (JJM) envisages supply of 55 litres of water per person per day to every

rural household through Functional Household Tap Connections (FHTC) by 2024. Salient

features of the mission:

• JJM focuses on integrated demand and supply-side management of water at the

local level.

• Creation of local infrastructure for source sustainability measures as mandatory

elements, like rainwater harvesting, groundwater recharge and management of

household wastewater for reuse, would be undertaken in convergence with other

government programmes/schemes.

• The Mission is based on a community approach to water and includes extensive

Information, Education and Communication as a key component of the mission.

• JJM looks to create a jan andolan for water, thereby making it everyone’s priority.

Funding Pattern: The fund sharing pattern between the Centre and states is 90:10 for

Himalayan and North-Eastern States, 50:50 for other states, and 100% for Union Territories.

The total allocation to the scheme is over INR 3 lakh crore.

Jal Shakti Ministry

The government has created a new ministry called ‘Jal Shakti’ after merging Ministries of

Water Resources, River Development & Ganga Rejuvenation along with Drinking Water and

Sanitation.

Both AMRUT and JJL are expected to offer significant opportunity for water treatment for

EPC and O&M players in the space. There are very few focused Indian companies in this

space and AEL is one of the largest.

227227

( 9 t h D e c 2 0 2 1 )


Agro products business

The Adani Group through Adani Agri Fresh Limited (AAFL) emerged as the first company to

engage in organised apple purchase, storage and marketing in 2006. Subsequently, AAFL

created state-of-the-art controlled atmosphere facilities of 22,400 MT capacity in Shimla

district.

AAFL possesses the largest integrated apple supply chain with ultra-modern storage

infrastructure (> 40% of the total storage capacity of Himachal Pradesh apples) and is the

largest player in India in the area of fresh apples and other fruit. AAFL markets Indian fruits

under the Farm-Pik brand, while it also imports apples, pears, kiwis, oranges and grapes

from various countries for onward sale.

AAFL has tied up with major fruit exporters around the world

Source: Company DRHP & Ventura Research

228228

( 9 t h D e c 2 0 2 1 )


AAFL is expected to benefit from high industry growth rates

Source: Company reports & Ventura Research

Defence sector business

Adani Defence and Aerospace is developing Tier-1 capabilities in avionics and systems,

opto-electronics, aero-structure and precision components, aerospace composites as well

as radar and electronic warfare systems. The company addresses the widening needs of

customer segment comprising DRDO, ISRO, HAL, BEL and the Israel-based Elbit Systems.

AEL enjoys a first mover advantage in the following areas in defence:

• India’s first private sector UAV (Unmanned aerial vehicle) manufacturer-exporter.

• India’s first and only private small arms manufacturing facility.

• India’s first company to implement counter-drone systems for airports.

• India’s first comprehensive aircraft services being built.

41

94

188

0

20

40

60

80

100

120

140

160

180

200

2015 2020 2025E

Organised retailUS $ bn

8

24

63

0

10

20

30

40

50

60

70

2015 2020 2025E

Food & groceryUS $ bn

229229

( 9 t h D e c 2 0 2 1 )


Capital outlay on defence has increased by 18.8% for FY22


Some of the contracts won by AEL in FY21 in defence:

• Operations and maintenance of training simulators for Mi17 helicopters and MiG29

aircraft for the Indian Air Force on a BOM (Build Operate Maintain) basis for 20

years worth ~INR 2,200 cr.

• Upgrade of 16 Pechora Air Defence Missile Systems for the Indian Air Force for INR

591 cr.

AEL is present in manufacture of small arms and ammunition, aircraft and tank simulators


2.7% 2.8% 2.8% 2.9% 3.0%

3.5% 3.6%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

FY16 FY17 FY18 FY19 FY20 FY21E FY25E

Defence expenditure as a % of GDP

0

2

4

6

8

10

12

14

16

18

20

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

FY20 FY21 FY22

Capital outlay on defence in cr LHS Growth %

230230

( 9 t h D e c 2 0 2 1 )


The defence business is expected to get boost from the various policies and initiatives like:

Focus on “Atmanirbhar Bharat”

Government of India has announced total embargo on 101 defence items progressively

beyond the year 2025. 101 Defence Products are declared in negative list for imports, thus

encouraging domestic manufacture and eliminating import of these products.

Subsequently, another of 108 items was also announced by MoD for embargo on imports

progressively upto 2025. The defence ministry estimates potential contract worth ~ INR 4

lakh crore (US$ 57.2 billion) for the domestic industry in the next 5-7 years (2025-2027).

Defence Procurement Procedure has been modified to further give priority to IDDM

(Indigenously Designed, Developed and Manufactured) to encourage indigenous design and

manufacture of defence equipment.

It is to be noted that AEL currently classifies revenues from roads, water, agro products,

defence & other ancillary businesses (like power trading, renewable plant in Australia etc)

in “other segment”. We have modelled the revenues from others segment to grow at 5.5%

CAGR over FY21-24. We expect the operating profits from others segments to touch INR

441.2 cr in FY24, assuming a combined operating margin of 2.9%.

Other segment revenues and EBIT profile


0%

5%

10%

15%

20%

25%

30%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000


Other segment revenues are expected to grow at 5.5% CAGR over FY21-24

Others Revenues- LHS Growth

INR cr

-5%

0%

5%

10%

15%

20%

(500)

0

500

1,000

1,500

2,000

2,500

3,000

3,500


Other segment EBIT are expected to reboun as roads, water, defence scale up

Others EBIT- LHS Margins

INR cr

231231

( 9 t h D e c 2 0 2 1 )


Peer comparison

Revenue growth



AEL 5% -233%

Larsen & Toubro 14% 3% 19.1 16.3

KNR Infra 15% 12% 12.3 10.3

PNC Infratech 10% 8% 7.9 8.4

Dilip Buildcon 14% 14% 6.8 5.1

HAL 8% 5% 6.5 5.6

Cochin Shipyard Ltd. 12% 2% 3.6 4.0

Bharat Dynamics 29% 48% 8.1 6.6

BEL 14% 15% 12.5 10.2


Data Centres

To extend beyond pure B2B businesses to B2C, aggregation of data and a deeper

understanding of consumers is critical for long term success. In view of this, AEL entered

into the data centre business in a JV with EdgeConneX, a company with a decade’s

experience of serving global cloud service providers in mature markets to leverage the vast

quantum of data being generated by the company’s various consumer facing businesses –

airports, edible oils etc. – that interface every single day with millions of consumers and are

expected to cover an estimated 500 Mn consumers by 2025.

AEL entered the space for the following reasons:

• Adjacent to multiple Adani sectors like power, real estate and ports with the

potential to create a strong value proposition.

• Represents critical infrastructure for India in the modern world.

• Sunrise sector with rapid projected growth but insufficient capacity.

• Fragmented market, multiple players, sub-scale assets and small sectorial footprint.

• Government policy rapidly evolving, based on technology changes and recognition

of national security challenges.

• Capacity expected to treble in five years as Data Protection Bill indicates that all

internet companies will need to mandatorily store critical data of individuals within

the country.

Initially, the plan is to build data centers in the National Capital Region, Mumbai, Chennai,

Vizag & Hyderabad.

232232

( 9 t h D e c 2 0 2 1 )


The JV with EdgeConneX is expected to build data centers all around India


The data centre industry’s capacity in India is expected to double and exceed 1 GW by 2023

due to the increased use of data consumption and internet bandwidth in India is driven by:

• Increased reach of social media through Facebook, Twitter, LinkedIn, Instagram,

Youtube, etc.

• Extensive use of messaging services like WhatsApp, Telegram, etc.

• Increased use of smart devices like smartphones, tablets, smart home solutions,

etc.

• Increased adoption of IoT and cloud services by corporates. Make in India and

China+1 will attract more corporates to set up facilities in India, which is expected

to improve demand for IoT and cloud services

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Significant jump in data consumption raised the demand for data localization

Source: TRAI Reports

COVID19-led travel restrictions and work from home has accelerated the data usage

resulting in increased demand for bandwidth as well as storage capacities. Although India

has emerged as one of the largest data consumers in the world, the number of data centres

and their capacities are significantly lower than in the US and China.

India’s data center market size compared with US and APAC

Source: Gartner, IDC & Cyber Media Research

Data localization will reduce latency and increase the response speed of apps and other

online programs. This will benefit the end consumers and improve internet usage.

Data centres consume significant power and other resources and therefore, many countries

have paused the new construction of data centres to divert power supply for other basic

141 152

178

200

30 37 44 55

2 3 5 7

CY14 CY16 CY18 CY20

India's data center market size (USD Bn)

Global APAC India

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needs, and to focus on environmental sustainability. India is a natural fit for global data

centre operators looking at their expansion due to

• The large domestic consumer base

• Significant scaling up of renewable power capacities, which will reduce the reliance

on thermal power for data centres.

Key technical criteria for setting up data centres

• Minimal risk of natural disasters

• Proximity to power sub-stations

• Connectivity with national optical fibre network

• Distance from oil terminals and mass rapid transport systems

• Distance from residential societies or areas

Major investments announced in 2020 & 2021

• Carlyle bought a 25% stake in Extra Data (a wholly-owned subsidiary of Airtel) for

the USD 235 mn in July 2020.

• Equinix announced the acquisition of the India business of GPX Global Systems for

USD 161 mn in August 2020.

• Iron Mountain agreed to form a joint venture with Indian colocation Data Centre

provider WebWerks. Iron Mountain expects to invest USD 150 million over the next

two years.

Data centre operators are adopting large land acquisition strategies to fulfil the long term

requirements of large cloud players and occupiers with massive computing requirements.

AEL has expertise in the execution of large and complex infrastructure projects which

includes land acquisition and requires multiple statutory approvals from several civic and

governmental agencies. Hence arranging the land parcel and creating conducive

infrastructure for data centres would not be an issue for AEL.

Going forward, the JV is attractively placed to capture the high growth data centre market

due to following reasons:

• Complete ownership of large land parcels pan-India.

• Validated project management capabilities.

• End-to-end power value chain (generation, transmission and distribution) in a

business warranting the intensive use of electricity.

• Fiber connectivity and strong network connectivity.

• Captive renewable power generation to ensure sustainability.

We expect the data centre business to start earning revenues only from FY23 and have built

revenues of INR 55 cr and INR 340 cr in FY23 and FY24 with operating margins at 65%.

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Data Centre segment revenues and EBIT profile


Peer comparison

Revenue growth


FY24E FY24E FY23E FY24E

AEL 518% 518%

China Telecom Corp 5% 13% 10.0 8.5

Equinix Inc 8% 5% 61.1 48.6

KDDI America 1% 1% 7.5 6.9


Edible oil and Packaged food business

AEL entered into a JV in 1999 with Wilmar Group (Singapore), Asia’s leading agri-business

group to form Adani Wilmar Limited (AWL). The company is currently India’s leading

consumer edible oil company and one of the fastest growing FMCG companies in India. The

Company provides the largest range of edible oils (drawn from soya, sunflower, mustard,

rice bran, groundnut, cotton seed and others). Recently, AWL has ventured into the wider

foods categories comprising packed basmati rice, pulses, soya chunks, besan, atta and

khichdi. AWL products portfolio comprises prominent brands like Fortune, King’s, Bullet,

Raag, Avsar, Pilaf, Jubilee, Fryola, Alpha, Alife and Aadhar. AWL owns and manages more

than 25 units at various strategic locations across India and has emerged as one of the

leading exporters of castor oil, oleo-value added products and de-oiled cakes.

We expect revenues of AWL to grow at 9.8% CAGR over FY21-24 to INR 49,088 cr with the

edible oil business growing at 7.0% CAGR over the same period while the FMCG business

and industry essentials are expected to grow at a faster rate. We have modelled a gradual

0

50

100

150

200

250

300

350

400

FY23E FY24E

Data Centre revenues are expected from FY23 onwards

INR cr

0%

10%

20%

30%

40%

50%

60%

70%

0

50

100

150

200

250

FY23E FY24E

We expect EBIT margins of 65% given rental business

Data Centre EBIT- LHS Margins

INR cr

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increase in operating margins from 2.9% in FY21 to 3.6% in FY24 leading to operating profits

growing at a 18.7% CAGR to INR 1,771 cr in FY24.

India’s edible oil consumption is expected to grow at 3.5% CAGR over the next 5 years

Source: Company DRHP & Ventura Research, OY is oil year from November to October

19

2221

25

0

5

10

15

20

25

30

OY14 OY19 OY20 OY25

India's edible oil consumptionMn MT

3,76,000

6,02,000

10,13,000

-

2,00,000

4,00,000

6,00,000

8,00,000

10,00,000

12,00,000

FY15 FY20 FY25E

Packaged Food retail market in IndiaINR Cr

87%

13%

Share in Indian edible oil in FY20. Total market size is INR 1,79,500 cr

Branded Unbranded

90%

10%

Share in Indian edible oil in FY25. Total market size is INR 2,38,000 cr

Branded Unbranded

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AWL is present across all essential kitchen commodities


AWL is present in all types of oil

Company Palm Soyabean Mustard Sunflower Cotton Groundnut Rice Bran Blended Vanaspati

AWL ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Ruchi Soya ✓ ✓ ✓ ✓ ✓ ✓ ✓

Emami ✓ ✓ ✓ ✓ ✓ ✓ ✓

Cargill ✓ ✓ ✓ ✓ ✓

Bunge ✓ ✓ ✓ ✓ ✓ ✓ ✓

Marico ✓

Gemini ✓ ✓ ✓ ✓ ✓

Agro tech ✓ ✓


FMCG companies Edible oils Wheat flour Rice Pulses Sugar Dairy

Adani Wilmar ✓ ✓ ✓ ✓ ✓

HUL ✓

Dabur

ITC ✓ ✓

Nestle

Britannia

Godrej

Marico ✓

Parle

Pepsi Co

Ruchi Soya ✓ ✓

Patanjali ✓ ✓ ✓ ✓ ✓

Emami Agrotech ✓

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AWL has the largest market share as of FY20 in edible oil


Company wise edible oil brands


17%

8%

6%

4%

3%

1%

60%

Adani Wilmar Ruchi Soya Emami Cargill Bunge Marico Others

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Adani Wilmar revenues and EBIT profile


Peer comparison

Revenue growth

EBIT growth EV/EBIT(x) EV/sales

FY21-24E FY21-24E FY23E FY24E FY23E FY24E

AEL 10% 19%

HUL 10% 14% 39.3 34.1 9.4 8.5

Marico 13% 15% 34.1 29.8 6.4 5.8

ITC 6% 14% 12.3 11.7 4.4 4.2


0%

5%

10%

15%

20%

25%

30%

0

10,000

20,000

30,000

40,000

50,000

60,000


AWL revenues are expected to grow at 9.8% CAGR over FY21-24

AWL revenues- LHS Growth

INR cr

2.5%

2.7%

2.9%

3.1%

3.3%

3.5%

3.7%

800

1,000

1,200

1,400

1,600

1,800

2,000


AWL EBIT is expected to slowly inch upwards as non edible oil segment revenue scales up

AWL EBIT- LHS Margins

INR cr

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Management Quality 7 Low All the businesses have their own CEOs who are responsible for driving the business operations and achieving the desired targets.

Promoters Holding Pledge 6 Low The promoter holding is 74.9% and promoter pledging as of 30th Sept, 2021 is 4.5%.

Board of Directors Profile 8 Low The board consists of 8 directors with 4 of them being independent.


Industry Growth 8 Low Except mining and IRM, which are more or less matured industries, all the other businesses have high growth potential

Regulatory Environment or Risk 4 High The airport, mining and solar businesses are dependent on government regulations while other businesses are comparatively less dependent on government policies.

Entry Barriers / Competition 6 Low Entry barriers are access to capital, technical know-how.

Business Prospects

New Business / Client Potential 8 Low

AEL is an incubator of various businesses and has a successful track record of demerging businesses and creating shareholder value once they are big enough to stand on their own.

Market Share Potential 8 Low Market share for new businesses are expected to increase in future. Mature businesses are already more or less industry leaders in their respective segment.

Margin Expansion Potential 6 Low Once businesses reach a threshold, margin expansion is expected. Till then, the focus will be on growth and expansion.

Earnings Growth 8 Low Earnings are expected to remain strong given the huge investments in new age infra businesses.

Valuation and Risk

Balance Sheet Strength 4 High AEL is expected to embark on huge capex over the next 3-4 years and hence net debt to EBITDA is expected to deteriorate.

Debt Profile 4 High As already discussed above, net debt is expected to remain high.

FCF Generation 4 High We do not expect free cash flow generation due to high capex.

Dividend Policy 3 High Dividend yield is negligible.

Total Score 98 Medium

The overall risk profile of the company is good and we consider it as a medium risk company for investments Ventura score (%) 60

Source: Company Reports & Ventura Research, Total score >=75 = low risk, between 50-74 = medium risk, less than 50= high risk

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Annual Report Analysis

We analyzed the FY21 annual report of USL and our key observations are as follows:

Key takeaways & outlook on various businesses:

• Mining- Intends to emerge as one of the largest and most diversified mining groups

in the world. It is expected that the Carmichael mine in Australia could commence

operations in FY22. AEL will operationalise at least three mines in India in FY22.

• Solar- AEL is in line to expand its installed capacity to 3.5 GW per annum with a

probable backward integration into the manufacture of ingots, wafers and polysilicon.

The Company will focus on the development of ancillaries in the EMC cluster for

ensuring the timely localisation of key raw materials & will align with the government

focus on the solarisation of agricultural pumps and increasing rooftop solar

installations across the country.

• Airports- The outlook for the airport infrastructure business is positive on account of

the government’s decision to progressively divest ownership stakes in Indian airports

in favour of private operators. The Company intends to re-define India’s airports

infrastructure sector through gateway development, regional footprint growth, focus

on consumers and non-passengers and deeper investment in digital technology

interventions.

• Roads/Highways- Will seek mergers and acquisitions that enhance access to

superior assets that maximise cash flows.

• Water- Scope of big players like AEL is widened given India’s water infrastructure

sector is marked by a larger number of projects coupled with a higher value of most

projects.

• Data centres- India’s digital economy is expected to touch USD 1 Trn by 2025. India

possesses one of the world’s largest data subscriber populations. There is a growing

appetite for reliable infrastructure to support Cloud, Content, Network, IoT, 5G, AI and

enterprise requirements. India’s Data Centre Policy encourages companies to build

data centre parks (providing infrastructure status) through incentives.

• Packaged food and edible oil- Adani Wilmar intends to widen its foods platform

across different segments addressing the needs of a growing India. The growing

optimism with regard to the consumption of hygienic, branded and packages food

products, a trend that has deepened following the pandemic, is now being viewed as

irreversible and holds out attractive multi-year prospects.

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• Agro products- The share of the organized retail (market size INR 7,050 Bn) at 11.9%

provides a large headroom for multi-decade growth. Interestingly, the organised share

of the food & grocery space is only 4.50% and projected to grow at 22% annually to

around 9% retail penetration by 2025.

• Defence- AEL plans to create a tiered vendor base to catalyse indigenisation and

localization. Further, it seeks to commission a final assembly and integration line

including MRO facilities by incorporating technology transfer to support products

during their lifecycle.

Board meetings

During the financial year 2020-21 the Board of Directors met 4 times on 6th May, 2020, 6th

August, 2020, 4th November, 2020 and 3rd February, 2021 and the gap between any two

Board Meetings did not exceed 120 days as required by the Companies Act. The attendance of

all the members was satisfactory.

Board member attendance has been excellent

Name of director Board

meetings Meetings attended % attendance

Gautam Adani 4 7 100% Rajesh Adani 4 4 100% Pranav Adani 4 4 100% Vinay Prakash 4 4 100% Hemant Nerurkar 4 4 100% V Subramanian 4 4 100% Vijaylakshmi Joshi 4 4 100% Narendra Mairpady 4 4 100% Total attendance 32 32 100%


Remuneration to KMP

The remuneration is commensurate with the size of the company and operating performance.

However, remuneration of independent directors is miniscule given the size of the company.

Remuneration of top management has more or less followed performance

FY19 FY20 FY21

Chairman 2.1 2.2 2.2

As a % of PBT 0.4% 0.2% 0.2%

MD 4.2 4.3 4.5

As a % of PBT 0.8% 0.4% 0.4%

Executive Directors 18.8 18.7 25.3

As a % of PBT 3.7% 1.7% 2.3%

Independent Directors 0.7 0.8 1.0

As a % of PBT 0.1% 0.1% 0.1%

Total 25.8 25.9 33.1

As a % of PBT 5.1% 2.3% 3.0%


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Auditor qualifications

Shah Dhandharia & Co LLP is the auditor. However, given the size of the company, appointment

of a bigger audit firm would have provided more comfort. No audit qualifications have been

given on financial statements.

Related Party Transactions

Related party transactions are high given the complex business structure and multiple

businesses.

Due to the very nature of business, related party transactions are too high

Source: Company & Ventura Research


Contingent liabilities as a % of networth are 38.8% of total networth as on FY21 However, 74%

of the same is on account of guarantees and LCs.

Contingent liabilities are high but consists mostly of guarantees

Source: Company Reports & Ventura research

INR cr

FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21

Sale of goods 29.7 1,218.6 267.9 - 4,004.2 2,399.1 - - 4,301.8 3,617.7

As a % of revenue 0.1% 3.1% 0.6% 0.0% 9.2% 6.1% 0.0% 0.0% 9.9% 9.2%

Purchase of goods 0.0 0.0 - - 2,275.9 3,243.9 - - 2,276.0 3,243.9

As a % of RM cost 0.0% 0.0% 0.0% 0.0% 6.6% 10.7% 0.0% 0.0% 6.6% 10.7%

Loans given 1,096.4 5,379.1 255.5 76.4 4,308.9 7,155.8 - - 5,660.8 12,611.4

As a % of total assets 4.7% 17.9% 1.1% 0.3% 18.5% 23.8% 0.0% 0.0% 24.3% 41.9%

Loans taken 1,611.0 2,621.9 50.3 151.4 6,292.8 10,213.1 - - 7,954.1 12,986.4

As a % of total assets 6.9% 8.7% 0.2% 0.5% 27.0% 33.9% 0.0% 0.0% 34.1% 43.2%

Others 1,110.9 96.6 2.7 2.6 1,599.8 2,102.1 40.3 59.6 2,753.7 2,261.0

As a % of revenue 2.6% 0.2% 0.0% 0.0% 3.7% 5.3% 0.1% 0.2% 6.3% 5.7%

Jointly controlled

entities Associates Other related parties KMP Total

INR cr FY20 FY21

Claims 4.0 4.3

Tax 1,776.3 1,739.7

Guarantee 3,925.8 3,843.0

LC 696.2 1,062.2

Total 6,402.2 6,649.1

As a % of networth 37.8% 38.8%

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Board of Directors details

Board consists of 50% independent directors


Gautam Adani Chairman He has > 33 years of business experience. Under his leadership, Adani Group has emerged as a global integrated infrastructure player with interest across Resources, Logistics and Energy verticals.

Rajesh Adani MD He has been associated with Adani Group since its inception. He is in charge of the operations of the Group and has been responsible for developing its business relationships.

Pranav Adani Director He has been active in the group since 1999. He has spearheaded the JV with the Wilmar Group of Singapore and transformed it from a single refinery edible oil business into a pan India Food Company.

Vinay Prakash Director

He has nurtured the Natural Resources business of the Adani Group since its inception and oversees its diversification and expansion in India and abroad. Natural Resources division comprises of Integrated Coal Management, Iron Ore, Minerals, Bunkering, Mining, Cement & Aggregate Businesses.

Hemant Nerurkar Independent and Non-

Executive Director

He has over 35 years of experience in steel industry in various functions. Mr. Nerurkar is an executive with multifaceted experience ranging from Project Execution, Manufacturing, Quality Control, Supply Chain and Marketing.

V. Subramanian Independent and Non-

Executive Director

He was the Secretary to the Government of India with the Ministry of New and Renewable Energy (MNRE) where he pioneered important initiatives for reforms and development of the renewable energy sector, including the introduction of the "Feed-in Tariff" concept.

Vijaylaxmi Joshi Independent and Non-

Executive Director

She is a 1980 batch IAS officer of the Gujarat cadre. She had served in various posts in the State and in the Centre. She had been Joint and Additional secretary in the Commerce Ministry between 2011 to 2014.

Narendra Mairpady

Independent and Non-Executive Director

He is an eminent banking professional having more than 40 years of wide experience and exposure. He was appointed as Chairman and Managing Director of Indian Overseas Bank in 2010 and retired as CMD in 2014.

Source: Company, Ventura Research

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• Issue of Carmichael mine: While Carmichael mine project is finally expected to see the

light of the day, the controversy surrounding its effect on nearby flora and fauna still

remains. Any major protest ahead for the same can negatively affect the company’s

financials going forward.

• Low ESG score: While AEL has put in place definite ESG targets, the company’s ESG

score remains low due to the very nature of the mining business. This can affect the

investments into other businesses of the company by global funds/ strategic partners

who are now required to invest only in strict ESG compliant companies.

• Foreign Exchange Risk: AEL is exposed to risks resulting from exchange rate fluctuation

and interest rate movements. It manages its exposure to these risks through derivative

financial instruments.

• Commodity price risk: Being in infrastructure business, the rise in price of commodities

always affect margins as not all costs are pass through.

• Debt: AEL is expected to embark on a huge capex over the next 3-4 years and hence

net debt is expected to increase considerably.

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Fig in INR Cr (unless specified) Q1FY20 Q2FY20 Q3FY20 Q4FY20 FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 FY21 Q1FY22 Q2FY22 FY22E FY23E FY24E

Revenue from operations 10,561.4 8,464.2 10,948.2 13,428.8 43,402.6 5,265.2 9,126.4 11,620.5 13,525.1 39,537.1 12,578.8 13,218.0 54,207.5 64,877.4 69,413.2

YoY Growth (%) 5.7 (50.1) 7.8 6.1 0.7 (8.9) 138.9 44.8 37.1 19.7 7.0

Raw Material Cost 8,413.9 6,834.8 8,717.4 10,694.2 34,660.3 4,199.9 6,888.3 8,835.1 10,324.6 30,247.8 9,245.2 9,897.7 40,791.1 48,495.9 51,539.3

RM Cost to Sales (%) 79.7 80.7 79.6 79.6 79.9 79.8 75.5 76.0 76.3 76.5 73.5 74.9 75.3 74.8 74.3

Employee Cost 165.3 171.7 184.2 161.3 682.5 205.6 203.1 220.5 200.1 829.3 228.9 289.7 1,192.6 1,362.4 1,388.3


Other Expenses 1,210.6 1,080.0 1,289.3 2,195.5 5,775.4 795.8 1,283.9 1,796.3 2,096.7 5,954.9 2,308.2 2,148.1 8,659.9 7,846.7 7,250.5


EBITDA 771.5 377.7 757.3 377.7 2,284.3 64.0 751.2 768.5 903.7 2,505.1 796.4 882.6 3,563.8 7,172.5 9,235.1

EBITDA Margin (%) 7.3 4.5 6.9 2.8 5.3 1.2 8.2 6.6 6.7 6.3 6.3 6.7 6.6 11.1 13.3

Net Profit 601.2 49.5 426.3 61.2 1,138.2 29.8 362.4 296.8 234.0 922.6 271.5 212.4 834.7 1,020.1 1,227.1

Net Margin (%) 5.7 0.6 3.9 0.5 2.6 0.6 4.0 2.6 1.7 2.3 2.2 1.6 1.5 1.6 1.8

Adjusted EPS 5.5 0.5 3.9 0.6 10.3 0.3 3.3 2.7 2.1 8.4 2.5 1.9 7.6 9.3 11.2

P/E (X) 166.5 205.4 227.0 185.8 154.4

Adjusted BVPS 154.1 156.0 172.3 181.6 192.8

P/BV (X) 11.2 11.0 10.0 9.5 8.9

Enterprise Value 197,716.6 202,948.5 224,244.0 244,041.7 253,304.8

EV/EBITDA (X) 86.6 81.0 62.9 34.0 27.4

Net Worth 16,946.6 17,158.6 18,953.1 19,973.2 21,200.4

Return on Equity (%) 6.7 5.4 4.4 5.1 5.8

Capital Employed 28,599.2 32,451.9 56,857.6 77,558.4 88,120.6

Return on Capital Employed (%) 4.5 4.2 3.3 5.4 6.2

Invested Capital 25,167.6 30,611.6 53,701.6 74,519.5 85,009.7

Return on Invested Capital (%) 7.2 6.4 4.7 7.5 8.6

Cash Flow from Operations 2,453.6 4,093.5 1,514.2 5,470.3 8,295.4

Cash Flow from Investing (2,323.0) (7,902.4) (11,726.6) (20,256.5) (11,148.1)

Cash Flow from Financing (220.9) 3,058.6 11,342.9 14,667.5 2,923.0

Net Cash Flow (90.3) (750.3) 1,130.5 (118.6) 70.3

Free Cash Flow 612.5 440.9 (6,996.8) (16,398.9) (5,022.7)

FCF to Revenue (%) 1.4 1.1 (12.9) (25.3) (7.2)

FCF to EBITDA (%) 26.8 17.6 (196.3) (228.6) (54.4)

FCF to Net Profit (%) 53.8 47.8 (838.2) (1,607.5) (409.3)

FCF to Net Worth (%) 3.6 2.6 (36.9) (82.1) (23.7)

Total Debt 11,652.7 15,293.3 37,904.5 57,585.2 66,920.2

Net Debt 8,221.0 13,453.0 34,748.4 54,546.2 63,809.3

Net Debt to Equity (X) 0.5 0.8 1.8 2.7 3.0

Net Debt to EBITDA (X) 3.6 5.4 9.8 7.6 6.9

Interest Coverage Ratio (X) 1.2 1.4 0.9 1.1 1.1

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Summary of qualitative management commentary over the last few quarters


Q3FY21

Business Performance NEUTRAL

• Revenues up 6.1% YoY, EBITDA up 1.5% YoY, PAT down 30.4% YoY.

• Taken over operations, management and development of Mangaluru, Lucknow and

Ahmedabad airports during Q3FY21.

Outlook and strategy

POSITIVE

• Commercial mining capex expected at INR 7,000- 8,000 cr over next 3 years.

Q4FY21


• Revenues up 0.7% YoY, EBITDA up 139.2% YoY, PAT up 282.2% YoY.

• The rise in EBITDA was predominantly driven by solar manufacturing on account of

increase in sales to DCR segment in the sales mix.

Outlook and strategy POSITIVE

• Airport capex pegged at INR 12,000 cr in next 1-2 years.

Q1FY22


• On a lower base, revenues up 138.9% YoY, EBITDA up 1,145.4% YoY,PAT up 811.2% YoY.

• AEL operationalized Kurmitar Iron Ore mine in Orissa in Q1FY22.

Outlook and strategy POSITIVE

• Airports business is looked at more of a B2C business and idea is to increase non aero revenues rather than aero revenues.

Q2FY22 Business Performance

POSITIVE

• Revenues up 44.8% YoY, EBITDA up 17.5% YoY, PAT down 41.4% YoY.

• In H1 FY22 the mining production volume increased by 91% at 10.9 million metric ton on

YoY basis.

• Mining dispatch increased by 77% at 9.9 million metric ton on YoY basis.

Outlook and strategy

POSITIVE

• Board of Directors have approved formation of corporate responsibility committee with

100% independent directors.

• The committee’s primary objective is to provide assurance towards ESG commitments.

Source: Company Reports & Ventura

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YoY Growth (%) 5.7 (8.9) 37.1 19.7 7.0 Adjusted Cash EPS (INR) 14.6 13.3 17.3 23.6 28.9

Raw Material Cost 34,660.3 30,247.8 40,791.1 48,495.9 51,539.3 Adjusted BVPS (INR) 154.1 156.0 172.3 181.6 192.8


Employee Cost 682.5 829.3 1,192.6 1,362.4 1,388.3 CFO Yield (%) 1.3 2.2 0.8 2.9 4.4

Employee Cost to Sales (%) 1.6 2.1 2.2 2.1 2.0 Adjusted FCF per share (INR) 5.6 4.0 (63.6) (149.1) (45.7)

Other Expenses 5,775.4 5,954.9 8,659.9 7,846.7 7,250.5 FCF Yield (%) 0.3 0.2 (3.7) (8.7) (2.7)


EBITDA 2,284.3 2,505.1 3,563.8 7,172.5 9,235.1 Solvency Ratio (X)



Depreciation & Amortization 472.1 537.1 1,063.0 1,572.2 1,956.7 Net Debt to EBITDA 3.6 5.4 9.8 7.6 6.9

EBIT 1,812.3 1,967.9 2,500.9 5,600.3 7,278.4




Finance Cost 1,572.3 1,376.9 2,659.9 5,013.2 6,412.0 Return on Invested Capital 7.2 6.4 4.7 7.5 8.6


Exceptional Item 198.8 (258.9) 0.0 0.0 0.0 Working Capital Ratios

PBT 1,122.3 1,086.0 677.7 1,432.1 1,720.0 Payable Days (Nos) 99 109 95 93 91


YoY Growth (%) 119.7 (3.2) (37.6) 111.3 20.1 Receivable Days (Nos) 111 111 85 83 81

Tax Expense 324.3 339.7 170.6 360.5 432.9 Net Working Capital Days (Nos) 33 18 14 14 13

Tax Rate (%) 28.9 31.3 25.2 25.2 25.2 Net Working Capital to Sales (%) 9.0 5.0 3.8 3.7 3.6

PAT 798.0 746.3 507.1 1,071.7 1,287.0


YoY Growth (%) 152.1 (6.5) (32.1) 111.3 20.1 P/E 166.5 205.4 227.0 185.8 154.4

Min Int/Sh of Assoc 340.2 176.3 327.6 (51.5) (59.9) P/BV 11.2 11.0 10.0 9.5 8.9

Net Profit 1,138.2 922.6 834.7 1,020.1 1,227.1 EV/EBITDA 86.6 81.0 62.9 34.0 27.4

Margin (%) 2.6 2.3 1.5 1.6 1.8 EV/Sales 4.6 5.1 4.1 3.8 3.6

YoY Growth (%) 58.7 (18.9) (9.5) 22.2 20.3 M.cap/Sales 4.4 4.8 3.5 2.9 2.7

Balance Sheet Cash Flow Statement

Share Capital 110.0 110.0 110.0 110.0 110.0 PBT 1,122.3 1,086.0 677.7 1,432.1 1,720.0

Total Reserves 16,836.6 17,048.6 18,843.1 19,863.3 21,090.4 Adjustments 563.7 1,435.3 2,539.0 5,409.0 7,374.3

Shareholders Fund 16,946.6 17,158.6 18,953.1 19,973.2 21,200.4 Change in Working Capital 1,091.9 1,911.9 (1,721.2) (1,010.3) (365.9)

Minority Interest 1,263.4 1,751.4 4,581.4 5,229.5 6,078.5 Less: Tax Paid (324.3) (339.7) 18.6 (360.5) (432.9)

Deferred Tax Assets / Liabilities (249.5) (50.4) 2,624.8 2,624.8 2,624.8 Cash Flow from Operations 2,453.6 4,093.5 1,514.2 5,470.3 8,295.4

Other Long Term Liabilities 1,797.4 1,623.5 7,860.1 9,407.2 10,064.9 Net Capital Expenditure (2,721.5) (3,359.0) (8,537.6) (21,100.0) (12,000.0)

Long Term Borrowings 3,515.8 9,523.3 29,502.3 48,502.3 57,202.3 Change in Investments 398.5 (4,543.4) (3,189.0) 843.5 851.9

Long Term Provisions 63.0 76.8 105.3 126.1 134.9 Cash Flow from Investing (2,323.0) (7,902.4) (11,726.6) (20,256.5) (11,148.1)

Total Liabilities 23,336.7 30,083.2 63,627.0 85,863.2 97,305.8 Change in Borrowings 3,274.1 7,520.1 13,667.3 19,680.7 9,335.0

Net Block 10,592.5 10,976.8 31,035.0 50,562.8 60,606.1 Other financial activities 317.0 (152.5) (42.9) 0.0 0.0

Capital Work in Progress 7,231.1 8,686.3 19,880.0 19,880.0 19,880.0 Interest Paid (1,532.2) (1,211.7) (2,281.5) (5,013.2) (6,412.0)

Non Current Investments 1,897.5 5,473.4 2,725.2 3,321.9 4,111.0 Cash flow from Financing (220.9) 3,058.6 11,342.9 14,667.5 2,923.0

Long Term Loans & Advances 2,383.7 5,201.5 5,095.5 6,098.5 6,524.8 Net Cash Flow (90.3) (750.3) 1,130.5 (118.6) 70.3

Other Non Current Assets 338.2 1,265.1 4,553.4 5,449.7 5,830.7 Forex Effect/Merger 1,241.1 (708.3) 183.8 0.0 0.0

Net Current Assets 894.1 (1,519.7) 338.0 550.5 353.4 Opening Balance of Cash 973.9 2,124.7 666.2 1,980.4 1,861.7

Total Assets 23,336.7 30,083.2 63,627.0 85,863.2 97,305.8 Closing Balance of Cash 2,124.7 666.2 1,980.4 1,861.7 1,932.0

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( 9 t h D e c 2 0 2 1 )


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