41% Revenue Growth Masks Sequential Profit Decline and Transmission Risk

Revenue jumped 41.6% year-on-year to ₹4,258 crore. On the surface, it's a blowout. Management opened the call celebrating this milestone. But dig one quarter back, and profit fell 24% sequentially — from an implied ₹986 crore in Q1 to ₹747 crore in Q2. Management did not volunteer this softness. The YoY narrative masked a real momentum deceleration, and the call reveals why: transmission infrastructure delays at Khavda are biting harder than modeled, and the battery storage deployment pace is aggressive against a 6-month clock.

Digging into the drivers: power supply revenue hit ₹4,019 crore (up 45% YoY) with a 92% EBITDA margin — industry-leading and a testament to long-term PPAs with AA+ counterparties locking in 13–14% returns. But the margin benefit didn't flow to the bottom line in the same measure as the top line. Why? Two structural reasons. First, solar capacity utilization factor (CUF) at Khavda dipped to 23% from 24.8% — a 180-basis-point curtailment hit that management attributed to transmission evacuation delays. Second, depreciation and interest costs — the company is carrying 20.8 GW of operational assets on its balance sheet, each depreciating over 25–30 years, plus a ₹5.6x leverage ratio (moving to 4.5–5x by FY30). These structural costs aren't elastic to revenue growth.

1. Transmission timing revised, not cancelled. Phase 3 evacuation pushed from end-FY27 expectation to Q4 FY27 (Jan–Mar 2027). A slip, but management framed it as external (Power Grid India, state distribution utilities) and acknowledged the impact on 4.5–5 GW capacity additions planned for FY27. Likely flow-through to FY28. 2. Battery storage commitment upgraded and reaffirmed. Management not only reaffirmed 10 GW battery target by FY27 end but volunteered to "surpass" it. Currently 3.5 GW tied to AESL (long-term PPA at ~₹2.7/kWh merchant equivalent, 25-year term); rest 3.1 GW in procurement. This is a core strategy shift — BESS is no longer a hedge against curtailment; it's becoming a primary revenue pillar with 13–14% ROA. 3. Capex guidance maintained at ₹42,000 crore through FY30. No challenges foreseen. Directed towards battery deployment (~1 GW/month to hit 10 GW target), renewable capacity, and transmission co-investment for 50 GW target by 2030. 4. Interest rate risk mitigated via AGE23L upgrade. A special purpose vehicle (AGE23L) holding ~15% of EBITDA was upgraded to AAA rating (from AA+), yielding 20–25 bps benefit on a ~₹100 crore annualized interest bill. Broader portfolio: 72% of loans are fixed-rate (3–5 year medium term); average rate 8.9% (down 220 bps since 2019).

The stock trades at ₹1,185.1 (as of 2026-10-23), down 61% from its all-time high of ₹3,050 but up 55% from its 52-week low of ₹765. This is a massive reset. The price sits below all three key moving averages (SMA20: ₹1,277, SMA50: ₹1,291, SMA200: ₹1,214) — a bearish signal on technical momentum. RSI at 35.4 signals oversold conditions, typical of a 2–3 month drawdown. Ownership is stable but not rallying. FII ownership stands at 11.84% (up 74 bps quarter-on-quarter), DII at 4.82% (up 26 bps), promoter at 62.43% (unchanged). The uptick in both FII and DII is modest — institutions are neither aggressively adding nor selling. Promoter holding is rock-solid. The August block deals are telling. In early August 2026, ADANI INFRA (INDIA) LIMITED bought 3.85 million shares (1.7M at ₹1,400 and 2.15M at ₹1,510) from ARDOUR INVESTMENT HOLDING LTD. This looks like intra-group consolidation (ADANI INFRA is likely an affiliate of the Adani conglomerate). No red flags here — no insider selling near the highs. Rather, the group was adding to its own stake when the stock was down 30–35% from ATH. This price action + ownership pattern suggests the market is pricing in real near-term transmission delays and curtailment headwinds (61% drawdown from ATH) but the promoter group sees long-term value (buying in Aug). The real question for the next 2–3 quarters is whether the -24% QoQ PAT decline is a structural reset or a temporary trough. If Q3 shows sequential recovery or BESS deployment accelerates, the 61% haircut could prove excessive.