Adani Group Propels Airports into the Future: Rs60,000 Crore Investment
The Adani Group has outlined an ambitious investment of ₹60,000 crore in its airport business over the next decade, with a specific focus on improving runways, terminals, and city-side amenities. This financial commitment, distinct from the ₹18,000 crore allocated for the initial phase of the Navi Mumbai airport, aims to transform the group’s airports into significant international hubs. Karan Adani, the Managing Director of Adani Ports & SEZ Ltd, has confirmed that these funds will be sourced through internal accruals.
The group anticipates a noteworthy surge in international travel, with plans to cater to 250-300 million passengers by 2040 across its existing eight airports. Karan Adani has openly discussed these ambitious plans, expressing the intention to publicly list the profitable airport business once it attains profitability. The Adani Group, presently overseeing eight airports, finalized the acquisition of Mumbai and the upcoming Navi Mumbai Airport in 2021.
Arun Bansal, the CEO of Adani Airport Holdings, has underscored the escalating demand for air travel in India, foreseeing a transition from 300 million to over a billion air travelers. The group is strategically preparing for the period of 2033-35 to ensure that infrastructure development aligns with long-term demand rather than short-term fluctuations. In the initial nine months of FY24, airport revenue saw a substantial 35% YoY increase, totaling ₹5,748.7 crore, underscoring the strategic significance of the airport business within the broader Adani Group portfolio.
The Adani Group has expanded its airport infrastructure with the inauguration of a new terminal in Lucknow, an investment amounting to ₹2,400 crore. Upcoming projects include the Navi Mumbai airport and a new terminal at Guwahati airport, emphasizing a continuous strategy of capacity addition. Karan Adani has expressed the intention to list the airport business separately on exchanges, highlighting the commitment to achieving international standards in infrastructure and technology.
In a significant move, the Adani Group aims to inject ₹60,000 crore into its seven airports over the next five to ten years, with approximately half earmarked for enhancing terminal and runway capacity within the next five years. This substantial capital expenditure, excluding the ₹18,000 crore allocated for the Navi Mumbai airport’s Phase-I development, will be funded through internal accruals. Arun Bansal has emphasized the support of Adani Enterprises Ltd for Adani Airports Holdings, considering it akin to a startup operating under AEL. The overarching goal is to build the capacity to accommodate 250 to 300 million passengers by 2040 across the group’s eight airports.
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Navigating Power Stocks: Lessons from Mahabharat’s Abhimanyu
In the realm of power stocks, Bernstein draws parallels to the Mahabharat’s Abhimanyu, questioning whether investors are caught in a complex cycle without an exit strategy.
According to Bernstein’s latest strategy note, the Indian power sector, while currently firing on all cylinders, is seen as a cyclical industry that could face challenges ahead. Comparing it to the Mahabharat, where Abhimanyu knew how to enter the ‘Chakravyuh’ but not how to exit, Bernstein emphasizes the importance of understanding industry indicators to avoid a similar fate.
Bernstein acknowledges its positive stance on the power sector at this early stage of the cycle, particularly liking shares of NTPC and Power Grid. However, the brokerage remains vigilant, stating that a prudent investor should be watchful of potential pitfalls, especially concerning demand, battery economics, and merchant power prices.
Reflecting on the previous cycle’s downfall, Bernstein identifies the first phase of industry privatization as a major contributor. The sector faced challenges with government influence, political objectives, and funding from banks/NBFCs, ultimately leading to its decline.
In the current scenario, Bernstein sees less risk, citing factors such as improved DISCOM health, reduced over-supply during non-solar hours, better coal availability, and fewer grid constraints. However, the brokerage highlights potential risks like demand slowdown and advancements in battery technology.
Despite the cautious approach, Bernstein maintains a positive outlook, particularly for NTPC and Power Grid, with target prices of Rs 340 and Rs 315, respectively. For IEX, it adopts an ‘Underweight’ position and sets a target of Rs 110, while Adani Green Energy Ltd receives a target of Rs 500. The brokerage aims to carefully monitor the industry indicators, ensuring a strategic exit if needed.
Looking back at the previous downfall, Bernstein identifies issues like power shortage, demand-side challenges, DISCOM troubles, coal scarcity, and oversupply. However, it emphasizes that the current scenario appears less risky, signaling a cautious optimism within the power sector.
