Jefferies bullish on Adani as group eyes USD 100bn capex over next decade

Ahmedabad (Gujarat) [India], June 21 : Global investment firm Jefferies said on Friday that the Adani Group is eyeing USD 100 billion in capital expenditure with major outlays on energy transition projects and digital infrastructure for the next leg of its growth.
At an investors' meeting, the Adani Group management outlined a strong FY24 operating performance -- a 27 per cent compound annual growth rate (CAGR) for five years -- and a significantly improved leverage profile across businesses.
The Adani Group outlined an expansive vision to invest USD 100 billion over the next decade. This investment will predominantly target energy transition initiatives and the development of manufacturing capabilities for green energy components.
These strategic moves align with global shifts towards sustainable energy and digital modernization, promising to position Adani as a key player in these sectors.
The group's portfolio achieved EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of approximately USD 10 billion for FY24, reflecting a year-on-year growth of over 40 per cent.
Notably, more than 80 per cent of this EBITDA was generated from infrastructure-related businesses, underscoring the group's strength in this domain.
The management emphasized the group's healthy cash flow, with sufficient funds after tax to cover all debt maturities.
The Adani Group's leverage position has significantly improved, with contracted EBITDA constituting 80 per cent of the total group EBITDA and cash reserves standing at over 20 per cent of its borrowing.
This financial stability reduces refinancing risks and ensures steady cash flow despite potential fluctuations in interest rates and foreign exchange rates.
The Adani Group's extensive national footprint allows it to engage with a vast consumer base, currently numbering around 350 million users. The management anticipates leveraging this demographic advantage to expand its digital infrastructure platform and capitalize on the growing demand for digital services in India.
Adani Enterprises, the group's primary entity, is spearheading several ambitious projects. The rollout of the Green Hydrogen (GH2) ecosystem is set to be the most capital-intensive venture, aligning with India's push towards renewable energy.
Additionally, AEL plans to bid for new airports under the Indian government's privatization plan and has commenced work on significant projects like a copper manufacturing facility and a Coal-to-PVC plant. Management remains confident that net debt to EBITDA will remain below 5x during this extensive capital expenditure phase.
Adani Cement is on track to achieve a production capacity of 140 million tons per annum (MTPA) by FY28. The company is targeting an EBITDA per ton of Rs 1,500 and aims to reduce the cost of production to Rs 3,650 per ton by FY28, positioning it among the best in class globally. Recent acquisitions and ongoing expansion projects are expected to strengthen the company's presence in the cement sector.
Adani Energy Solutions (AESL) aims to commission Rs 170 billion worth of under-construction transmission assets by FY26. The company has a strong pipeline of transmission bids and is making strides in smart metering projects, worth Rs 270 billion, as part of India's smart meter deployment target.
AESL's focus on increasing the renewable energy mix and enhancing consumer tariffs underscores its commitment to sustainable energy solutions.
Adani Green reported an installed capacity of 10.9 GW as of March 2024, with plans to add 6-8 GW annually over the next few years.
The company is on course to achieve a 50 GW capacity target by FY30, including significant investments in renewable energy projects in Khavda. The group is also exploring battery storage solutions to complement its pumped hydro storage projects.
Adani Enterprises is incubating several new business ventures, including Green Hydrogen production, airport management, data centres, and specialized manufacturing. The company aims to establish a comprehensive GH2 ecosystem with a planned capacity of up to 3 million metric tons over the next decade.
Adani aims to enhance its airport business through significant AI-driven initiatives to improve customer experience and productivity. The company also plans to bid for new airport projects under the Indian government's privatization plan.
AESL is focused on expanding its renewable energy portfolio and improving operational efficiency in its transmission and distribution businesses. The company is also exploring new growth areas like district cooling, which has significant potential in India's urban centers.
Adani Green is making substantial progress in developing its renewable energy capacities, particularly in the Khavda region.