Jefferies: Adani Group's Ambitious USD 100bn Capex Plan and Strong FY24 Performance

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Jefferies: Adani Group's Ambitious USD 100bn Capex Plan and Strong FY24 Performance

Team FS

21/Jun/2024

Key Points:

Adani Group plans USD 100bn capex over the next decade focused on energy transition and digital infrastructure.
Adani Portfolio achieved USD 10bn EBITDA in FY24, growing 40%+ YoY, with 80% from infra-related businesses.
Adani Group’s leverage position is strong, with 20%+ cash reserves of borrowing, and no refinancing risks.

Jefferies recently hosted the Adani Group Companies for investor meetings in Ahmedabad, where the management outlined an impressive growth trajectory and ambitious plans for the future. The group's performance in FY24 was robust, and their strategic initiatives set the stage for significant advancements in the coming decade.

USD 100bn Capex Plan

The Adani Group is gearing up for a monumental USD 100bn capital expenditure (capex) over the next decade. This ambitious plan focuses primarily on energy transition projects and enhancing digital infrastructure. The group's commitment to scaling up capacities across its businesses underscores its vision for sustainable growth and innovation in the energy and digital sectors.

FY24 Financial Performance

EBITDA Growth: The group reported a remarkable 40%+ year-over-year (YoY) growth in EBITDA, reaching approximately USD 10bn in FY24. Notably, over 80% of this EBITDA was derived from infrastructure-related businesses, highlighting the group's strong foothold in this sector.
Cash Flow and Debt Management: Management emphasized a high Cash after Tax (FFO) to EBITDA ratio, which ensures sufficient funds to cover all debt maturities. This strong cash flow position bolsters the group's financial stability and supports its long-term growth initiatives.

Leverage and Financial Stability

The Adani Group’s leverage profile is reportedly in its best position in years. Contracted EBITDA accounts for 80% of the total group EBITDA, and cash reserves stand at 20%+ of borrowing. This robust financial footing helps mitigate cash flow and system risks, ensuring no refinancing risk at the group level. Effective capital management planning has maintained rate profile stability and increased duration despite rate and FX volatility.

Digital Infrastructure and Consumer Base

With a national footprint, the Adani Group has established multiple touchpoints with Indian consumers, currently clocking a 350 million user base on its core infrastructure platform. Management anticipates leveraging this demographic dividend in the medium term, with significant opportunities in the digital infrastructure space.

Individual Business Highlights

Adani Enterprises (AEL): Rated as a Buy, AEL management discussed the gradual rollout of the Green Hydrogen (GH2) ecosystem, poised to be the group's most capex-intensive venture. The airports business is expected to benefit from increased traffic and non-aero trends, with plans to bid for new airports under India's privatization scheme. Recently, a Copper project was commissioned, and work on the Coal to PVC project has commenced. Management is confident that net debt/EBITDA will remain below 5x during the capex phase.
Adani Cement (Ambuja; ACEM): Also rated as a Buy, ACEM management reiterated that the capex expansion timeline (140 MTPA by FY28) is on track. The company aims for Rs1,500 EBITDA/T and plans to reduce production costs to Rs3,650/T by FY28, positioning itself as a global cost leader. A medium-term plan involves consolidating all cement companies under a single head to optimize structure and efficiency.
Adani Energy Solutions (AESL): Rated as a Buy, AESL plans to commission Rs170bn under-construction transmission assets by FY26. With a Rs1.1 trillion TBCB bid pipeline over the next 12-15 months and a 16% market share, AESL is well-positioned for growth. The Mumbai distribution (AEML) saw a 64bps YoY improvement in distribution losses in FY24. The focus on increasing the renewable energy (RE) mix and executing smart metering projects worth Rs270bn further strengthens its market position.
Adani Green: With an installed capacity of 10.9GW as of March 2024 and another 11GW under execution, Adani Green is poised for substantial growth. Management guides for 6-8GW annual capacity addition in FY25E and FY26E, aiming to reach 50GW by FY30, including a 5GW pumped hydro project. The development of 30GW RE projects in Khavda (2GW commissioned) is targeted by 2029, with land acquisition and transmission connectivity largely in place.

Conclusion

The Adani Group is on a promising trajectory with its ambitious USD 100bn capex plan and strong FY24 performance. The focus on energy transition, digital infrastructure, and effective capital management positions the group for sustainable growth and innovation. Investors and stakeholders can look forward to significant advancements across various sectors as the group continues to capitalize on its robust financial health and expansive consumer base.

Stay tuned to Finance Saathi for comprehensive updates and expert analyses on the Adani Group and other market trends.

Also Read : BSE Sensex Drops 0.4% Amid Profit Booking and Budget Talks

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Services

Jefferies: Adani Group's Ambitious USD 100bn Capex Plan and Strong FY24 Performance

USD 100bn Capex Plan

FY24 Financial Performance

Leverage and Financial Stability

Digital Infrastructure and Consumer Base

Individual Business Highlights

Conclusion

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