Adani Green shares fall 5% on Bernstein warning over asset shift
Adani Green shares dropped 5% after Bernstein maintained its Underperform rating, warning that a new structure transferring merchant power and storage assets to a sister company shifts potential upside away from the renewable developer.
Adani Green Energy shares fell 5% after the renewable power developer posted first-quarter results that showed robust operational growth but drew immediate skepticism from analysts over a structural shift in its business model. Revenue from operations rose 16% year-on-year to Rs 4,663 crore, driven by a 29% increase in power supply revenue to Rs 4,280 crore.
The sharp market reaction centered on commentary from Bernstein, which retained its Underperform rating on the stock despite acknowledging the company's leading position in the sector. The brokerage raised specific concerns regarding Adani Green's new structure for its commercial and industrial segment.
Under this arrangement, Adani Green will allocate its entire 4 GW of operating and planned merchant generation capacity, alongside 10 GWhr of battery storage coming online this year, to Adani Energy Solutions. This power will be supplied on a long-term fixed tariff basis, with the sister company then selling the electricity forward to industrial customers like data centres.
While Bernstein noted the structure allows Adani Green to focus on execution while maintaining its return hurdles, the brokerage warned that a "reasonable portion of the potential upside has shifted to Adani Energy Solutions following the transaction." For investors, this fundamentally alters the risk-reward profile by diverting higher-margin merchant upside away from the core renewable entity.
Underlying operational metrics remained strong. Total operational capacity grew 27% year-on-year to 20,142 MW as of June, supported by 848 MW of capacity added during the quarter. Energy sales increased 30% to 13,657 million units, buoyed by fresh greenfield additions.
The growth was largely powered by the company's flagship Khavda project in Gujarat, where operational capacity surged to 10.3 GW from 5.6 GW a year earlier. On a year-on-year basis, Adani Green added 3,051 MW of solar capacity—including 2,662 MW at Khavda—alongside 684 MW of wind capacity and 592 MW of solar-wind hybrid capacity.
Profitability did face a near-term headwind, with curtailment reducing EBITDA by 5% to 7%, though management expects this to normalise in the second half. Looking ahead, CEO Ashish Khanna stressed the strategic necessity of the company's storage pivot. "As renewable penetration rises and power demand continues to grow, storage will play a critical role in ensuring round-the-clock reliability and grid stability," he said.
The 538 sq km Khavda site is almost five times the size of Paris. The company stated the project remains on track to achieve its 30 GW target by 2029.
