MUMBAI: The Central Electricity Regulatory Commission’s (CERC) “compensatory tariff” to Adani PowerBSE -0.94 % to be decided through an analytical process should be a new lease of life for the power firm, says CLSA. The decision is positive for investments in the power sector in general & similar regulatory acquittal for Tata Power is expected as well, it says.
The brokerage has maintained ‘sell’ rating on Adani Power with price target set at Rs 54. It will wait till April 30 for clarity on compensation before changing its view.
“CERC’s order has given new lease of life to Adani Power in our view which has been struggling with 800 percent net gearing and five continuous quarters of reported loss. Quantification of the benefit for Adani Power is difficult at this point as there is uncertainty regarding how the profit earned by Adani Enterprises from coal mining would be dealt with. Extent of domestic coal shortage is also not known,” the report said.
The brokerage is of the view that the difference between calculations of the company and states regarding the impact of increase in coal price is quite stark so the committee would have a tough task to reach an agreement.
“We will take a final call on the earnings and valuations of Adani Power after April 30 once we have clarity on ‘compensatory tariff’. Every 10p per kilo watt hike leads to 14-28 percent earnings upgrade for FY14-15 earnings & adds Rs 3 per share to the NPV. Our current estimates do not factor in the dilution due to the announced preferential allotment of promoters,” the report said.
At 10:30 a.m.; the stock was at Rs 47.35, down 0.63 per cent, on the BSE. It touched a high of Rs 48.30 and a low of Rs 46.65 in trade today.
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