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STRATEGIC MANGEMENT

Submitted to, Prof. S N PRASAD

ADANI POWER LTD


Submitted by,
KARTHIK SUNIL NAIR
PGDM: 15028

ADANI POWER LTD.


Introduction
Adani Group is a business behemoth based in India having a global footprint with interests in
Infrastructure, Power, Global Trading, Logistics, Energy, Port & SEZ, Mining, Oil & Gas,
Agri Business, FMCG products, Real Estate Development, Bunkering, et al. It is a name well
established among the distinguished corporate entities of India, with a young and highly
motivated taskforce of professionals who are a prized asset of the organisation.
Adani Power Ltd is engaged in power generation and setting up of power projects. The
company is a part of the Adani Group, a power project development company, which is
developing, and will operate and maintain, power projects in India. The company is carrying
on the business of generation, accumulation, distribution and supply of power and to generally
deal in electricity and to explore, develop, generate, accumulate, supply and distribute or to
deal in other forms of energy from any source whatsoever.
Adani Power Ltd was incorporated on August 22, 1996 and received a certificate of
commencement of business on September 4, 1996. The Company was originally incorporated
by Mr. Gautam S. Adani and Mr. Rajesh S. Adani, together with their relatives. The company
became a private limited company on June 3, 2002 and the name of the company was
subsequently changed to Adani Power Pvt Ltd.
Adani is implementing 18,500 MW of power generation projects at seven locations in India
with the objective of raising this to 20,000 MW by 2020. It is also investing in cross country
power transmission lines to evacuate power from our generation facilities. The energy
business basket of Adani also includes the supply of Compressed Natural Gas to automobiles
and piped natural gas to household users. Adani also entered into oil and gas exploration and
production with development and production sharing rights in assets in India, Thailand and
Egypt.

Key Financial Ratios and Metrics


12704.15
48.98
9115
5.62

Sales Turnover (Crores)


P/E Ratio
Market CAP (Crores)
Profit Margin
Net Profit Margin (%)
Current Ratio
Quick Ratio
Return on Capital Employed (%)
Return on Assets (%)
Total Debt/Equity

0.04

0.43
0.38
0.02
0.01
2.7

Porters Five Forces Model

Threat of the entry of new


competitors

Threat of substitute products or


services

Bargaining power of customers


(buyers)

Bargaining power of suppliers

Competitive rivalry

Highly capital-intensive industry and hence demands


huge investment
Obtaining regulatory approvals, fuel linkages, land
etc. still remain the major bottlenecks.
For Adani Power threat of new entrant is medium
because it has already set up functional power plants
Over All threat of new entrants is Medium to low

Power does not have substitute but it can be generated


from different sources of energy.
Currently thermal power is dominant in India, coal
being the major raw material.
But Non thermal power sources can be a future threat
to thermal Power companies
Bargaining power of retail customers is low, as power
is in short supply.
Retail customers -Government regulates the power
sector to ensure supply of power at reasonable prices
but this regulation is limited.
The bargaining power of buyers is Medium as the
number of power companies to buy from is limited in
number
Power companies are required to import coal if the
domestic supply is not sufficient, which proves to be
an expensive affair.
The supply of coal in India is limited and hence coal
players are in dominant position.
The bargaining power of suppliers is low for the fully
integrated power plants as in case of Adani power as
they have their own mines of key raw materials (coal,
oil).
No competitive rivalry as demand for power is way
above its supply and all the power generated is used
up.
The Electricity Act 2003 aims to encourage
investments, thereby increasing competition.
Adani power cant afford to digress from its future
plans of generating 20,000 MW by 2020 if it has to
remain in the race.

Competitive Advantage

Early entrant into the Private power sector.


Established infrastructure The Company is one of the worlds largest single-location
thermal power plants in Mundra, Gujarat.
Adani is implementing 18,500 MW of power generation projects at seven locations in India
Financial backing from parent group which allows it to have extensive capital investments
Has its own coals mines which gives it better at advantage over its competitors who have
to source it externally.
They have also adapted to supercritical technologies. The key to their success has been
their ability to seize the existing and emerging market opportunities.
Extensive power transmission network and investment in new technologies such As HVDC
transmission
Possible political connections as the Adani group gets clearances for their project faster.
Adani Power continues to pioneer usage of innovative and modern IT solutions to drive
operations in an efficient and effective manner. The company deploys best-in-class
applications and systems, which streamline business processes to improve performance and
reduce costs. These systems provide seamless integration across modules and functions
resulting in strong MIS platform and informed decision-making by the management

Value Chain
Raw Material
Adani is the largest importer and supplier of coal in India, enjoys coal purchase rights in
Indonesia and owns coal mine in Australia. Adani supplies nearly 30 million tonnes of coal in
India; it expects to manage 200 million tonnes of coal by 2020. Thus being a thermal power
company it enjoy the benefits of having its own supply for raw material.
Power Generations
Adani is implementing 18,500 MW of power generation projects at seven locations in India
with the objective of raising this to 20,000 MW by 2020. It is also investing in cross country
power transmission lines to evacuate power from our generation facilities. The energy
business basket of Adani also includes the supply of Compressed Natural Gas to automobiles
and piped natural gas to household users. Adani also entered into oil and gas exploration and
production with development and production sharing rights in assets in India, Thailand and
Egypt.

Mundra Thermal Power Station. A 4620 MW (4x330, 5x660 MW) coal-based thermal
power plant at Mundra, Kutch district, Gujarat. This plant is fully functional.
Kawai Thermal Power Station. A 1320 MW (2x660 MW) coal-based thermal power
plant at Kawai village, Baran district, Rajasthan. This plant is fully functional
Tiroda Thermal Power Station. A 3300 MW (5x660 MW) coal-based thermal power
plant at Tiroda, Gondia district, Maharashtra. All units are fully functional.

The company produces 40 MW of solar power in Bitta, Kutch Gujarat showing its
interest in renewable energy.
Udupi Power Plant. A 1200 MW (2x600 MW) coal-based thermal power plant at
Padubidri, Udupi district, Karnataka. Both units are fully functional since September
2012. Adani Power acquired this power plant from Lanco Infratech in August 2014
for Rupees 6000 crores
Kamuthi Solar Power Project - A 648 MW solar photo-voltaic power generating
station.
Transmission
The Adani Power has a great transmission and distribution Network which is built up by
another Adani Subsidiary, Adani Infra. A few of the key projects are

APL is presently executing 400 KV D/C transmission line of about 431 KM distance
from Mundra to Dehgam.
APL is also executing 500 KV Bi-Pole HVDC transmission line of about 800 KM
distance from Mundra to Haryana for transmitting 2500MW
They created the benchmark for the fastest completion of India's first private 500
kV HVDC Mundra - Mohindergarh transmission system line (989 kms).

Profitability

During FY16, the company recorded a total income of 13,227.01 Crores, up by 19.84%,
of which income from the sale of power was 12,704.15 Crores and other income was
522.86
Crores
For the year FY16, Earnings before Interest, Depreciation, Tax and Amortization
(EBIDTA) were showing a loss of 28.48 Crores due to rising expenses that were driven
up by fuel costs. But the loss was significantly less than the previous years indicating an
improvement in performance.
For the year FY16, Depreciation was 976.93 Crores, Net Interest and Finance charges
were 2,951.50 Crores.
Profit After tax (PAT) was 5.62 Crores, with a Net Profit margin of 0.04%
Basic Earnings per Share (EPS) of 0.02 and Cash Earnings per Share (CEPS) of 2.95.

Other Key Profitability Ratios


PBDIT Margin (%)
PBIT Margin (%)
PBT Margin (%)
Net Profit Margin (%)
Return on Net worth / Equity (%)
Return on Capital Employed (%)
Return on Assets (%)
Total Debt/Equity (X)

30.69
23
-0.22
0.04
0.06
0.02
0.01
2.7

Conclusion
Recognising that electricity is one of the key drivers for rapid economic growth and poverty
alleviation, the industry has set itself the target of providing access to all households over the
next few years. As per government reports, about 36% of the households did not have access
to electricity. Hence, meeting the target of providing universal access is a daunting task
requiring significant addition to generation capacity and expansion of the transmission and
distribution network.
Coal costs from both domestic linkages and imported sources are expected to be on the rise.
Shortfall of coal in India is expected to go up to 220 MMT (m metric tonnes) by FY17.
Availability of coal from domestic linkages would suffice only 55 to 60% of the PLF
equivalent. Hence purchase of coal byway of Coal India's e-auction would only become more
expensive.
On an overall basis, power distribution has been loss-making business in India. But with the
privatization coming in, the investment in transmission and distribution networking is
expected to improve.
Trading in electricity has brought a sea change in the structure of the industry because some
parts of country are power surplus and some are deficient. A power trading company like
Adani Power buys power from surplus area and sells it in a power deficit area through
transmission lines. While the potential for power trading is huge, the regulator has to play a
key role in removing all discrepancies that occur in terms of electricity pricing across trading
regions.
Of course with growing environmental concerns, the future of coal power energy may
become unsustainable. Since Adani Group is committed to sustainability it should have a
renewed focus on Renewable and more sustainable sources of energy. They have already
demonstrated their capabilities to this regards in terms of investment in solar energy.