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Adani Power Financial Performance Analysis

Adani Power's financial performance improved in 2021 compared to 2020. The company's net profit increased to Rs. 1,269 crores in 2021 from a net loss in 2020. Its return on equity and economic value added also became positive in 2021 indicating the company was generating profits and value for shareholders. However, its market value added decreased in 2021 showing that management's activities were generating less value than the capital provided by shareholders. The company's total stock return also became positive in 2021 providing overall gains to investors through share price appreciation and dividends paid.

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Ananthasankar SNair
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180 views3 pages

Adani Power Financial Performance Analysis

Adani Power's financial performance improved in 2021 compared to 2020. The company's net profit increased to Rs. 1,269 crores in 2021 from a net loss in 2020. Its return on equity and economic value added also became positive in 2021 indicating the company was generating profits and value for shareholders. However, its market value added decreased in 2021 showing that management's activities were generating less value than the capital provided by shareholders. The company's total stock return also became positive in 2021 providing overall gains to investors through share price appreciation and dividends paid.

Uploaded by

Ananthasankar SNair
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

DUPONT ANALYSIS OF ADANI POWER

PARTICULARS 2021 2020


Net Profit 1,269 -2,274

Sales 26,221 26,467

Total Assets 78,535 75,025

Share Capital 3,945 3,933

Reserves & Surplus -3,359 -5,991

Shareholder's Fund 586.00 -2,058.00


Net Profit Margin 4.8% 0.0%
Total Asset turnover 33.4% 35.3%
Leverage Ratio 134.02 -36.46
ROE 216.6% 0.0%

Profit Margin = Net Profit / Sales

Total Asset Turnover = Sales / Total Assets

Leverage Factor = Total Assets / Avg. Shareholders’ Equity

ROE = Net Profit Margin * Total Assets Turnover * Leverage Factor

INTERPRETATION

Adani Power's return on investment (ROI) is higher in 2021 than it was in 2020. In
comparison to FY 2020, the company's net profit has grown in FY 2021. The contribution of
net profit margin and leverage factor has enhanced ROE in 2021. It is a favourable sign for a
company if its ROE increases due to a rise in net profit margin or asset turnover. The
company's net profit in 2021 is 1269, compared to a negative sum in 2020.

ECONOMIC VALUE ADDED OF ADANI POWER

PARTICULARS 2021 2020


EBIT 7,395 3,049
TAX 25% 25%
NOPAT 5,546.25 2,286.75
Share Capital 3,945 3,933
Reserves & Surplus -3,359 -5,991
Shareholder's Fund 586.00 -2,058.00
Rf 6.30% 6.30%
Rm-Rf 7.50% 7.50%
β 0.97 0.97
Ke 13.6% 13.6%
Interest 5,106 5,314
Ke*Shareholder's fund 79.55 -279.37
Cost of Dept 3,829.50 3,985.50
WACC*Capital Employed 3,909.05 3,706.13
EVA 1,637.20 -1,419.38

INTERPRETATION

We can infer from this that the company is doing well in the current year of 2021. The
corporation is generating profit for its owners. Due to the fact that EVA was negative in 2020
and has now turned positive in 2021. The money is being used effectively by the company.
We can notice a rise in the NOPAT as well. As a result, the organization generates value for
its shareholders.

MARKET VALUE ADDED OF ADANI POWER

PARTICULARS 2021 2020

M Cap 42,869 41,694


3,945 3,933
Share Capital
-3,359 -5,991
Reserves & Surplus

Shareholder's Fund 586.00 -2,058.00

MVA 42,283.00 43,751.51

INTERPRETATION

The MVA of a firm is a measure of its ability to increase shareholder value over time. Effective
management and good operational capabilities are evidenced by a high MVA. A low MVA indicates
that the value of management's activities and investments is less than the value of shareholder capital.
A negative MVA indicates that the value of capital invested by shareholders has been lowered and
reversed as a result of management's activities and investments. Adani Power's MVA is lower in FY
2021 than in FY 2020, indicating that the value of management's activities and investments is less
than the value of the capital contributed by shareholders.

TOTAL STOCK RETURN

PARTICULARS 2021 2020

48.45
Opening Share Price 1st April 27.75

83.2
Closing Share Price 31st March 27.75

Dividend Pay-out in the year 1.998198 -0.42724

TSR 2.070205 -0.436

Total Stock Return = [(P1 – P0) + D] / P0

P0 = Initial Stock Price

P1= Ending Stock Price

D= Dividend

INTERPRETATION

Adani Power's overall stock return for FY 2019-20 is negative, indicating a loss. The main
reason for the negative stock return is the covid-19 epidemic, which has affected the global
stock market. The total stock return in FY 2020-21 is positive, indicating a profit. The
company's overall stock return is boosted by the removal of covid restrictions, increased
demand for the company's product across the sector, and more common investor investment.
For FY21, the corporation paid a dividend to shareholders. It gives shareholders a return in
the form of capital appreciation and dividends.

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