Adani Enterprise Ltd - Ventura

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Adani Enterprise Ltd

A goose that lays golden eggs

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TABLE OF CONTENTS

Summary 03

Valuation and Peer Comparison 04

- SOTP Valuation for AEL 04

- Band Charts & Price Performance 05

- Peer comparison & Scatter plot 07

Financial Summary & Story in Charts 09

Company Overview 11

Financial Analysis & Projections 16

AEL’s Business Segments 17

Capital Management 17

Green Hydrogen – Adani New Industries Ltd (ANIL) 24

Coal – Commercial Mining, MDO & IRM 69

Road Construction 81

Data Center – Adani Connex 92

Airport Operations 101

FMCG – Adani Wilmar 121

Defence & Aerospace 137

Copper 150

Green PVC 155

Digital – Super App 160

Business Quality Score 165

Annual Report Takeaways 166

Key Management Personnel 169

Risk & Concerns 169

Summary of Management Commentary on Quarterly Performance 170

Financial Statement Analysis & Projections 171

Disclaimer 172

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On 9th Dec 2021, we initiated coverage on the listed business units of Adani Group

which included Adani Enterprises Ltd (AEL). Post our coverage, AEL has undertaken

several initiatives that warrant detailed coverage. Through Adani New Industries

Ltd (ANIL), the group’s recent incubator in the production of renewable energy,

green H2 and downstream products (ammonia, urea & methanol), AEL will emerge

as the world’s primary leader in the green H2 ecosystem. ANIL has a vision to be the

lowest cost producer of green H2 and in partnership with TotalEnergies, we expect

this platform to be extended to the global theatre in the forthcoming future. ANIL

will be leveraging TotalEnergies balance sheet to help lower cost of funds.

Apart from ANIL, AEL’s other incubating businesses, in the domains of Airports, Data

Centers, Roads and Defence are on the verge of gaining traction and should be value

accretive in the short to medium term. AEL’s new incubating forays into copper and

green PVC have significant drivers in place to ensure long-term profitability and the

equity contribution is expected to be funded from internal accruals.

The existing coal ecosystem (captive mines, IRM and MDO) has favourable tailwinds

which will endure the already appreciated energy pricing (post the Russia-Ukraine

conflict). The favourable pricing environment has ensured that the break-even for

the Carmichael mine is upended and profitability should be realized sooner.

Given the favourable outlook across all business segments, we value AEL at INR

2,900 per share based on our SOTP valuation methodology. This represents an

upside of 29.2% from the current CMP of INR 2,245. We believe that a demerger of

the incubating business can result in significant value unlocking and is an upside risk

to our estimates. A case in point is the 153% appreciation in the stock price of Adani

Wilmar Ltd post-IPO. We expect the airport business to be the next value-unlocking

story that should play out over the next couple of years.

Risks to our upside thesis are (i) unexpected downturn in the economy, (ii) delay in

project execution and (iii) project finance. Historically, AEL has proven adequately

its project execution skills with timely delivery and capital management discipline.

Hence in our view, the risk factors are significantly diluted.

Key Consolidated Financial Data (INR Cr, unless specified)

Net Revenue

EBITDA Net

Profit EBITDA

(%) Net (%)

Adj EPS (₹)

Adj BPS (₹)

RoE (%)

RoIC (%)

P/E (X)

P/BV (X)

EV/EBITDA (X)

FY21 39,537 2,505 923 6.3 2.3 7.8 159.6 5.4 6.3 288.3 14.1 111.9

FY22 69,420 3,713 777 5.3 1.1 6.6 227.3 3.5 4.2 342.6 9.9 81.6

FY23E 58,656 6,835 1,517 11.7 2.6 12.8 289.7 5.5 4.7 175.3 7.7 48.3

FY24E 78,084 13,738 6,122 17.6 7.8 51.7 388.2 16.7 7.2 43.5 5.8 27.1

FY25E 118,612 21,903 6,917 18.5 5.8 58.4 488.6 14.8 7.9 38.5 4.6 19.3

We have consolidated 75% of ANIL and 50% of AdaniConnex financials in our estimated numbers

BUY @ CMP INR 2,245 Target: INR 2,821 in 24 months Upside Potential: 25.7%

A goose that lays golden eggs

Industry Diversified

Scrip Details

Face Value (INR) 1.0

Market Cap (INR Cr) 255,976

Price (INR) 2,245

No of Sh O/S (Cr) 114

3M Avg Vol (000) 336

52W H/L (INR) 2,420/1,333

Dividend Yield (%) 0.05

Shareholding (%) Mar 2022

Promoter 72.3

Institution 21.5

Public 6.2

TOTAL 100.0

Price Chart

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Jun-19 Jun-20 Jun-21 Jun-22

AEL Nifty

Adani Enterprise Ltd

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Valuation

We value AEL on a SOTP basis for a price target of INR 2,821 per share# (FY25 EV/EBITDA of

21.9X) and recommend a BUY at a CMP of INR 2,245, representing an upside of 25.7% over the

next 24 months.

AEL valuation summary

Source: Company Reports

# Valuation is based on 1.0 MMTPA of green H2 capacity

Although the company has announced plans for 2.5 MMTPA of green H2 generation we have

clear visibility of 1 MMTPA production and hence we have valued ANIL on the basis of the

conservative numbers. Any announcements to ramp up capacity to 2.5 MMTPA will be an

upside risk to our price estimates.

ParticularsValuation

method

Mar 2025

Value

(INR Cr)

AEL Stake

(%)

AEL Stake

Value

(INR Cr)

Conglomerate

Discount (%)

Equity value

attributable

to AEL

(INR Cr)

Attributable

value per

share (INR)

Existing Businesses

Airports DCF 1,10,660 100 1,10,660 15 94,061 794

Road Consutruction DCF 34,742 100 34,742 15 29,530 249

FMCG DCF 63,438 44 27,913 15 23,726 200

Coal (Carmichael + IRM & MDO) DCF 12,882 100 12,882 15 10,950 92

Defence EV/EBITDA 9,112 100 9,112 15 7,745 65

Value from existing businesses 1,66,012 1,401

Future Businesses

Green Hydrogen DCF 2,07,397 75 1,55,548 15 1,32,216 1,116

Data Centers DCF 10,346 50 5,173 15 4,397 37

Copper DCF 22,503 100 22,503 15 19,128 161

Petrochemicals DCF 14,787 100 14,787 15 12,569 106

Value from future businesses 1,68,309 1,420

Consolidated Value of AEL 2,821

Current Market Value of AEL 2,245

Upside Potential (%) 25.7

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Source: Ventura Research

1,200

1,500

1,800

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2,400

2,700

3,000

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1 year forward EV/EBITDA

EV per sh 64.8x 68.8x

72.8x 76.8x 80.8x

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90

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EV/EBITDA and Std Deviation

EV/EBITDA Average

1 SD Lower Band 2 SD Lower Band

1 SD Upper Band 2 SD Upper Band

-20

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140

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Price performance: AEL vs RIL

AEL RIL

3.5

4.0

4.5

5.0

5.5

6.0

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r-2

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Valuation gap between AEL & RIL - Ready infra for H2 & RE has created a valuation gap

AEL to RIL EV/EBITDA (X)

A healthy mix of profitable businesses with high growth incubating businesses deserves premium valuation

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Adani Enterprise Ltd SWOT Analysis in a nutshell

Adani Enterprises Ltd

Growth Drivers

Changing energy mix towards renewables and green H2.

Increasing demand for data localization due to significant surge in local data usage.

Rise in construction activities of expressways for seamless connectivity between upcoming or new growth cities.

Focus on domestic procurement of defence equipments to increase indeginsation.

Increase in number of airports under UDAAN is expected to enhance airpassenger

Key Challenges

Green H2 is at nascent stage and therefore its cost of production is high. In addition, land availability for additoin solar capacity would be a challenge

Finding a real estate land for data center at a reasonable price is a challenge.

New Trends

Renewables and green H2 in India's energy mix could offer significant and decadal growth opportunity

We have been dependet on overseas data centers. localization of data has increased the demand for data centers in India

Investment Themes

Tieups with global leaders in different business verticals

- EdgeConnex in data center

- TotalEnergies in green H2

Infrastructure readiness for new age future businesses

Superior execution skills in large scale complex projects within stipulated time


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Valuation and comparable metric of domestic and global companies

Source: Ventura Research & Bloomberg

Company Name Mkt Cap PricePEG

20252022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025

Domestic Peers (fig in INR cr, unless specified)

Adani Enterprise Ltd 2,55,930 2,245.0 0.3 329.6 NA 41.8 37.0 11.5 9.3 7.0 5.5 80.7 43.1 23.0 15.6 3.5 5.5 16.7 14.8 3.7 6.5 10.8 12.1 69,420 58,656 78,084 1,18,612 5.3 11.7 17.6 18.5 1.1 2.6 7.8 5.8

Reliance Industries Ltd 16,46,090 2,433.0 1.0 27.0 20.0 17.9 17.1 2.1 1.9 1.7 1.6 15.6 11.8 10.3 8.9 7.7 9.5 9.7 9.2 9.4 11.8 12.5 14.5 6,94,803 8,67,101 9,06,712 9,64,233 16.0 17.0 18.0 17.8 8.8 9.5 10.1 10.0

Grasim Industries Ltd 88,837 1,350.0 0.2 13.0 12.6 9.0 6.0 1.2 1.1 1.0 0.8 6.5 6.4 4.9 3.0 9.3 8.6 10.7 13.5 2.2 14.0 18.4 23.9 88,958 1,13,715 1,23,494 1,36,713 21.6 19.2 21.6 22.3 7.7 6.2 8.0 10.8

ITC Ltd 3,53,369 287.0 1.6 23.2 20.6 18.7 17.2 5.6 5.5 5.2 5.2 17.5 15.6 13.7 11.9 24.2 26.5 27.9 30.2 31.6 36.2 45.9 58.5 57,495 64,056 69,209 76,141 34.7 34.8 35.5 36.2 26.5 26.8 27.3 26.9

Larsen & Toubro Ltd 2,19,828 1,564.0 0.7 23.7 19.6 16.2 14.0 2.7 2.5 2.2 2.0 17.3 14.8 12.7 11.5 11.3 12.5 13.8 14.5 8.7 9.8 11.0 11.7 1,57,184 1,79,192 2,02,283 2,26,755 11.8 12.0 12.4 12.5 5.9 6.3 6.7 6.9

Vedanta Ltd 80,607 217.0 0.4 4.2 3.3 3.5 3.3 1.2 1.1 1.0 0.9 2.5 2.1 2.1 1.9 28.7 34.0 28.8 28.1 37.1 44.7 40.6 34.2 1,21,482 1,37,566 1,34,007 1,33,594 36.7 37.4 36.6 38.3 16.0 17.7 17.1 18.1

Tata Power Ltd 67,981 213.0 1.4 30.2 25.4 23.5 20.2 3.1 2.8 2.5 2.2 14.6 12.8 11.4 10.1 10.2 10.9 10.6 11.0 7.3 8.5 9.1 7.8 37,975 47,625 51,555 59,598 20.0 18.6 19.3 19.8 5.9 5.6 5.6 5.6

NTPC Ltd 1,37,111 141.4 1.0 8.8 7.6 6.5 7.1 1.0 0.9 0.8 0.8 8.3 5.2 4.6 6.4 11.6 12.1 13.0 11.8 8.0 13.1 13.9 9.6 1,30,493 1,43,628 1,54,096 1,47,879 31.3 31.5 31.9 30.9 12.0 12.5 13.7 13.0

Coal India Ltd 1,12,932 183.3 0.4 7.0 6.1 6.1 4.8 2.7 2.3 2.1 1.7 4.2 3.5 3.5 3.0 39.3 38.5 33.5 34.8 51.4 50.6 45.6 46.9 1,05,598 1,17,009 1,21,209 1,23,162 21.8 22.4 22.0 19.8 15.4 15.9 15.2 19.1

NMDC Ltd 31,900 108.9 1.5 3.3 3.5 3.3 3.1 0.9 0.9 0.8 0.8 2.5 2.7 2.7 2.5 27.5 24.8 25.7 25.2 41.8 24.3 21.8 13.9 26,191 25,281 25,737 28,310 40.7 39.2 40.7 39.0 36.9 36.2 38.1 36.3

IRB Infrastructure Ltd 11,776 195.0 0.1 37.1 19.0 12.2 8.7 0.9 0.9 0.8 0.8 7.7 7.6 6.3 6.4 2.6 4.7 7.0 9.2 9.4 9.2 10.7 10.0 5,906 6,752 7,771 8,989 48.6 46.9 47.6 48.3 5.4 9.2 12.5 15.1

KNR Construction Ltd 6,647 236.0 0.8 19.0 14.1 12.8 12.5 2.8 2.4 2.1 1.8 9.8 8.4 7.6 7.0 15.0 16.9 16.4 14.5 26.8 23.2 25.0 22.2 3,200 3,900 4,471 4,716 20.3 19.5 18.8 19.2 10.9 12.1 11.7 11.2

Dilip Buildcon Ltd 2,891 198.0 1.3 9.0 9.5 8.3 7.5 0.7 0.6 0.6 0.5 7.1 3.7 3.4 3.1 7.5 6.4 7.1 7.2 8.0 14.5 14.2 14.8 9,303 10,408 10,755 11,831 8.6 13.9 13.9 13.9 3.5 2.9 3.2 3.2

Ashoka Buildcon Ltd 2,096 74.7 0.1 6.3 3.9 3.1 2.8 2.2 1.1 0.8 0.6 4.6 3.8 3.0 2.7 34.6 27.9 26.3 22.4 59.6 52.9 51.3 47.4 5,587 6,273 7,133 7,846 9.2 9.7 9.9 9.9 5.9 8.5 9.6 9.6

PNC Infratech Ltd 6,186 241.0 0.8 13.0 10.8 9.5 9.2 1.8 1.6 1.4 1.3 7.0 6.0 5.5 5.1 14.1 14.7 14.5 13.6 23.8 25.4 23.0 21.2 6,085 7,225 8,134 8,784 13.5 13.1 13.3 13.3 7.8 7.9 8.0 7.7

Global Peers (fig in USD mn, unless specified)

BHP Group Ltd (Australia) 1,50,503 29.7 -0.7 6.9 8.0 11.1 13.0 2.8 2.8 2.8 2.4 3.6 3.9 5.0 5.0 41.1 35.3 25.3 18.6 64.8 60.1 44.6 38.8 66,558 61,556 52,468 51,392 63.8 62.3 57.0 55.0 32.9 30.6 25.8 22.6

Rio Tinto (Australia) 1,10,919 74.8 -0.6 5.8 7.8 9.2 10.9 2.1 2.1 1.9 1.9 3.3 4.1 4.5 4.7 36.4 26.6 21.1 17.6 55.6 39.7 32.5 27.1 59,507 52,548 49,406 45,498 56.4 52.0 49.9 50.4 31.9 27.2 24.4 22.3

China Shenhua Energy (China) 90,870 4.9 1.4 8.9 8.7 8.4 7.6 1.6 1.6 1.5 1.3 4.1 4.1 3.9 3.6 17.9 17.9 17.9 16.5 41.2 35.8 34.6 30.1 50,708 51,783 52,861 58,147 35.0 35.7 36.3 36.3 20.0 20.2 20.6 20.6

Anglo American PLC (UK) 51,974 42.4 -0.6 6.1 7.6 9.2 13.2 1.6 1.4 1.3 1.2 2.9 3.2 3.6 3.7 26.7 19.1 14.5 9.1 46.4 34.4 27.0 21.8 41,743 39,124 36,994 33,518 46.4 43.4 40.7 41.7 20.3 17.6 15.3 11.8

Tronox Holdings PLC (USA) 2,492 16.0 0.3 4.9 4.3 4.1 3.4 1.1 0.9 0.8 0.6 4.4 3.8 3.5 2.2 21.7 20.9 19.4 19.0 17.2 18.2 17.7 25.0 3,992 4,130 4,203 4,443 27.0 28.1 28.6 30.9 12.8 14.0 14.4 16.5

Renew Energy PLC (USA) 2,361 5.9 0.2 78.7 54.4 41.4 12.8 1.6 1.6 1.4 1.3 9.6 9.0 8.8 7.4 2.1 2.8 3.4 10.0 8.3 8.0 8.0 9.5 797 1,125 1,336 1,471 88.5 80.3 82.9 77.8 3.8 3.9 4.3 12.6

Montauk Renewables (USA) 2,039 14.2 0.7 39.0 27.6 22.0 19.0 8.6 6.5 5.0 4.0 22.0 19.2 15.6 14.1 22.0 23.7 22.9 21.0 25.6 27.0 25.5 22.7 204 224 269 303 45.9 48.2 49.3 48.3 25.6 33.1 34.4 35.4

Transalta Corp (Canada) 2,968 11.0 -1.8 15.5 42.8 62.6 73.2 4.6 4.4 4.4 6.1 8.7 6.4 6.1 5.8 29.6 10.3 7.0 8.4 16.9 12.8 12.7 15.0 1,832 1,665 1,588 1,562 33.7 51.2 54.3 54.7 10.5 4.2 3.0 2.6

Ormat Technologies (USA) 4,128 73.6 1.3 55.4 37.0 32.8 29.8 2.0 2.0 1.8 1.7 14.0 11.7 10.6 9.6 3.6 5.3 5.5 5.7 5.2 6.8 8.3 4.8 722 872 942 955 59.5 59.7 59.6 64.6 10.3 12.8 13.4 14.5

Capital Power Corp (Canada) 4,115 33.9 3.1 16.7 21.5 17.8 14.6 2.3 2.3 2.4 2.8 8.7 7.7 7.7 7.5 13.9 10.9 13.7 19.2 10.7 9.3 11.3 12.9 1,547 1,534 1,569 1,539 49.0 56.4 55.7 56.2 15.9 12.5 14.7 18.3

Vistara Corp (USA) 9,725 22.5 19.5 13.3 7.4 12.1 13.0 1.8 1.8 1.8 3.0 5.8 5.0 5.4 5.4 13.7 24.1 14.8 23.2 9.3 15.7 9.7 7.0 14,972 15,037 13,796 12,124 21.1 23.7 25.9 28.9 4.9 8.7 5.8 6.2

Northland Power (Canada) 6,541 28.3 2.5 19.9 21.4 20.0 16.4 4.1 4.0 4.5 2.7 11.7 11.3 11.9 13.6 20.4 18.6 22.2 16.3 10.9 11.1 9.2 5.7 1,699 1,747 1,762 1,811 57.7 58.5 59.6 60.2 19.4 17.5 18.5 22.0

Clearway Energy Inc (USA) 6,125 28.7 1.6 38.0 25.6 26.0 24.6 1.8 1.8 1.7 1.6 10.0 9.6 9.6 9.3 4.8 6.9 6.5 6.5 4.1 5.0 4.9 5.7 1,367 1,325 1,333 1,373 90.2 96.9 94.7 95.5 11.8 18.1 17.6 18.2

Nextera Energy (USA) 5,638 67.2 1.8 28.2 24.0 24.2 20.4 2.7 1.4 3.1 7.6 6.5 6.0 5.8 5.4 9.4 5.7 12.7 37.2 7.8 7.2 10.5 14.2 1,741 1,968 2,142 2,291 97.8 96.0 96.8 95.7 11.5 11.9 10.9 12.1

Inergex Renewable (Canada) 2,690 13.2 0.2 126.6 46.5 31.7 19.3 3.6 3.9 5.0 3.7 13.0 12.3 12.8 12.7 2.9 8.4 15.9 19.1 5.2 5.9 6.3 6.0 683 721 751 762 75.9 75.5 74.4 74.6 3.1 8.0 11.3 18.3

Sunnova Energy Int. (USA) 2,012 17.6 0.2 33.5 ##### 72.5 10.0 1.2 0.8 1.4 1.2 54.5 43.1 37.8 31.7 3.4 -0.7 1.9 12.2 -1.0 -0.0 0.3 0.9 353 509 657 849 34.5 38.1 41.6 44.8 17.0 -3.5 4.2 23.6

Altus Power (USA) 1,186 7.7 -1.8 18.4 90.3 42.0 38.1 3.2 3.0 2.8 2.6 24.7 12.4 7.6 6.9 17.2 3.4 6.7 6.9 7.9 8.7 14.2 14.9 104 179 284 312 54.8 63.1 65.0 65.0 61.9 7.3 10.0 10.0

Terna Energy SA (Greece) 2,148 18.5 0.4 32.0 19.6 17.0 13.8 3.8 3.2 3.2 2.7 17.4 12.5 12.1 11.4 11.8 16.2 18.8 20.0 8.2 11.1 11.5 12.1 311 402 447 494 57.2 61.6 59.8 60.3 21.6 27.2 28.3 31.6

Voltalia SA (France) 1,789 18.8 1.1 43.4 27.4 25.2 24.1 2.4 2.2 2.0 1.9 13.8 11.0 9.7 9.5 5.5 8.1 7.8 7.9 6.5 8.2 9.2 8.9 488 579 588 603 43.9 49.9 55.3 59.1 8.5 11.3 12.1 12.3

ABO Wind AG (Germany) 524 56.8 0.7 33.7 22.2 18.8 17.1 3.0 2.7 2.4 2.1 16.0 11.6 10.0 9.1 8.9 12.0 12.9 12.4 10.0 14.3 16.5 16.3 217 260 280 377 17.6 19.6 20.5 16.7 7.2 9.1 9.9 8.1

CGN New Energy (China) 1,864 0.4 0.5 7.7 6.8 6.1 5.5 1.2 1.1 0.9 0.8 15.1 13.9 13.2 12.0 16.2 16.1 15.5 14.5 6.7 7.2 7.6 8.0 1,956 2,117 2,258 2,483 26.3 26.5 26.2 26.2 12.4 13.0 13.5 13.5

New Energy Solar (Australia) 180 0.6 -0.9 7.2 7.4 11.8 10.8 0.6 0.6 0.6 0.5 6.8 6.7 10.8 9.8 8.5 7.9 4.8 5.0 9.1 8.6 5.2 5.4 29 28 18 20 89.3 92.4 88.3 88.3 85.6 86.3 82.4 82.4

EBITDA Margin (%) Net Margin (%)P/E (X) P/B (X) EV/EBITDA (X) RoE (%) RoIC (%) Sales


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AEL is in a high growth phase, which could reduce its RoIC, however, it is well-positioned for decadal growth

Source: Ventura Research, ACE Equity & Bloomberg

Adani Ent

RIL

Grasim

LT

Vedanta

Tata PowerNTPC

Coal India

NMDC

IRB Infra

KNR Const

Dilip Build

Ashoka Build

PNC Infra

BHP Grp

Rio Tinto

China Shenhua

Anglo American

Tronox

Renew Energy

Montauk

Transalta

Ormat Tech

Capital Power

VistaraNorthland Power

Clearway Energy

Nextera Energy

Inergex Renewable

Sunnova Energy

Altus Power

Terna Energy

Voltalia SA

ABO Wind

CGN New Energy

New Energy Solar

-5

5

15

25

35

45

55

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

FY2

5 R

oIC

(%

)

EV/EBITDA to EBTIDA CAGR (X)

Adani Ent

RIL

Grasim

ITC

LT

Vedanta

Tata Power

NTPCCoal India

NMDC

IRB Infra

KNR Const

Dilip Build

Ashoka Build

PNC Infra

0

3

6

9

12

15

18

21

5 10 15 20 25 30 35 40 45 50

FY2

2-2

5 R

eve

nu

e C

AG

R (

%)

FY25 EBITDA Margin (%)

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AEL Consolidated Financial Summary

Source: Company Reports & Ventura Research

Fig in INR Cr (unless specified) FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Revenue from operations 37,238 38,424 41,056 43,403 39,537 69,420 58,656 78,084 1,18,612

YoY Growth (%) 9.7 3.2 6.9 5.7 -8.9 75.6 -15.5 33.1 51.9

RM Cost and Opex 34,891 35,166 38,914 41,118 37,032 65,707 51,822 64,346 96,709

Expenses to Sales (%) 93.7 91.5 94.8 94.7 93.7 94.7 88.3 82.4 81.5

EBITDA 2,348 3,258 2,143 2,284 2,505 3,713 6,835 13,738 21,903

EBITDA Margin (%) 6.3 8.5 5.2 5.3 6.3 5.3 11.7 17.6 18.5

YoY Growth (%) (34.2) 6.6 9.7 48.2 84.1 101.0 59.4

Depreciation -34.4 108.6 416 472 537 1,248 2,501 3,340 5,920

EBIT 2,382.1 3,149.5 1,726 1,812 1,968 2,465 4,333 10,398 15,983

EBIT Margin (%) 4.2 4.2 5.0 3.6 7.4 13.3 13.5

YoY Growth (%) (45.2) 5.0 8.6 25.3 75.8 139.9 53.7

Other Income 118.5 236.4 580 684 754 1,013 651 1,628 409

Finance Cost 491.6 337.1 1,637 1,572 1,377 2,526 3,178 5,236 8,633

Exceptional Items 1 (161) (158) 199 (259) 0 0 0 0

PBT 2,010 2,888 511 1,122 1,086 952 1,807 6,790 7,759

PBT Margin (%) 1.2 2.6 2.7 1.4 3.1 8.7 6.5

YoY Growth (%) -82.3 119.7 -3.2 -12.3 89.8 275.8 14.3

Tax Expense 60 127 194 324 340 477 738 1,272 1,569

Tax Rate (%) 3.0 4.4 38.0 28.9 31.3 50.1 40.8 18.7 20.2

PAT 1,950 2,761 317 798 746 475 1,069 5,518 6,190

PAT Margin (%) 0.8 1.8 1.9 0.7 1.8 7.1 5.2

YoY Growth (%) -88.5 152.1 -6.5 -36.3 124.9 416.2 12.2

Min Int/Sh of Associates (963) (2,004) 401 340 176 301 448 604 727

Net Profit 988 757 717 1,138 923 777 1,517 6,122 6,917

Net Margin (%) 2.7 2.0 1.7 2.6 2.3 1.1 2.6 7.8 5.8

YoY Growth (%) -5.3 58.7 -18.9 -15.8 95.4 303.5 13.0

Adjusted EPS 9.0 6.9 6.5 10.3 8.4 7.1 13.8 55.7 62.9

P/E (X) 250.0 326.1 344.3 216.9 267.6 317.9 162.7 40.3 35.7

Adjusted BVPS 128.5 137.2 134.2 154.1 156.0 202.4 248.9 333.1 423.9

P/BV (X) 17.5 16.4 16.7 14.6 14.4 11.1 9.0 6.7 5.3

Enterprise Value 2,85,066 2,81,713 2,75,564 2,75,020 2,80,193 3,03,073 3,29,931 3,72,917 4,21,802

EV/EBITDA (X) 121.4 86.5 128.6 120.4 111.9 81.6 48.3 27.1 19.3

Net Worth 14,136 15,089 14,756 16,947 17,159 22,261 27,378 36,639 46,616

Return on Equity (%) 7.0 5.0 4.9 6.7 5.4 3.5 5.5 16.7 14.8

Capital Employed 34,982 32,726 25,999 29,366 33,160 63,284 92,676 1,44,914 2,04,006

Return on Capital Employed (%) 4.4 4.5 4.1 4.4 4.1 1.9 2.8 5.8 6.3

Invested Capital 33,170 30,770 24,287 25,934 31,319 59,301 91,276 1,43,524 2,02,385

Return on Invested Capital (%) 5.1 6.5 7.1 7.0 6.3 4.2 4.7 7.2 7.9

Cash Flow from Operations 774 2,942 3,327 2,454 4,094 1,385 5,979 8,174 5,245

Cash Flow from Investing (1,229) (7,706) 1,809 (2,323) (7,902) (17,487) (31,245) (49,082) (48,592)

Cash Flow from Financing 716 5,120 -6,158 -221 3,059 15,901 24,696 40,880 43,542

Net Cash Flow 261 355 -1,023 -90 -750 -201 -570 -28 194

Free Cash Flow -1,476 -4,424 929 612 441 -11,582 -29,234 -43,010 -44,926

FCF to Revenue (%) (4.0) (11.5) 2.3 1.4 1.1 (16.7) (49.8) (55.1) (37.9)

FCF to EBITDA (%) (62.9) (135.8) 43.3 26.8 17.6 (311.9) (427.7) (313.1) (205.1)

FCF to Net Profit (%) (149.4) (584.2) 129.5 53.8 47.8 (1,491.5) (1,926.7) (702.5) (649.5)

FCF to Net Worth (%) (10.4) (29.3) 6.3 3.6 2.6 (52.0) (106.8) (117.4) (96.4)

Net Capex 1,765 2,722 3,359 13,493 31,172 46,857 46,803

Net Capex to Revenue (%) 4.3 6.3 8.5 19.4 53.1 60.0 39.5

Total Debt 20,846 17,637 11,243 12,419 16,001 41,024 65,298 1,08,275 1,57,390

Net Debt 19,034 15,681 9,531 8,988 14,161 37,041 63,898 1,06,885 1,55,769

Net Debt to Equity (X) 1.3 1.0 0.6 0.5 0.8 1.7 2.3 2.9 3.3

Net Debt to EBITDA (X) 8.1 4.8 4.4 3.9 5.7 10.0 9.3 7.8 7.1

Interest Coverage Ratio (X) 1.1 1.1 1.1 1.2 1.4 1.0 1.4 2.0 1.9

10 | P a g e ( 5 t h J u l 2 0 2 2 )



(40)

(20)

0

20

40

60

80

100

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Entry in new segments to accelerate revenue growth in the coming years

Coal ANIL/Solar Airport Roads

DataCenter Copper&PVC Others YoY (%)

INR Cr %


Revenue share of coal to decline and new businesses to evolve

Coal ANIL/Solar Airport Roads

Data Center Copper & PVC Others

0

5

10

15

20

0

5,000

10,000

15,000

20,000

25,000


Additional earnings from the new businesses to drive profitability

EBITDA Net Profit

EBITDA Margin (%) Net Margin (%)

INR Cr %

0

5

10

15

20

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000


Return ratios to follow the operating performance in the coming years

Net Worth Invested Capital

RoE (%) RoIC (%)

INR Cr %

0

2

4

6

8

10

12

0

50,000

1,00,000

1,50,000

2,00,000


Initial capex in the new businesses to increase debt on the balance sheet

Total Debt Net Debt

Net Debt to Equity (X) Net Debt to EBITDA (X)

INR Cr %

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

(50,000)

(40,000)

(30,000)

(20,000)

(10,000)

0

10,000

20,000


Initial capex to dent operating cash flow and FCF performance

CFO FCF

CFO to EBITDA (%) FCF to Net Profit (%)

INR Cr %

AEL Story in Charts

11 | P a g e ( 5 t h J u l 2 0 2 2 )


Understanding AEL’s business and growth opportunities

AEL is one of India’s largest listed incubators which have conceived, grown, matured and

demerged many successful businesses such as Adani Ports & SEZ (in the year 2007), Adani

Power (in 2009), Adani Transmission (in 2015), Adani Green Energy (in 2018), Adani Total Gas

(in 2018) and Adani Wilmar (in 2022). Each of these listed entities have themselves emerged

as leaders in their respective sectors.

AEL’s business journey


1988- Started commodity trading

1994- Listed on BSE and NSE @ INR 150

per share

1995- Mundra Port commences operations

1996- Bonus issue 1:1

1999- Commencement of IRm business.

Signed JV with Wilmar

2001- Started City gas distribution business

2005- Awarded india's first MDO contract

2006- Stock split of AEL (10:1)

2007- APSEZ IPO2008- Acquirede

Bunya Mine, Indonesia2009- Adani Power

IPO

2010- Acquired Carmichael Mine at

Australia

2015- Completed demerger of APL and

ATL

2017- Started manufacturing solar

PV panels

2018- Demerger of Adani Green and

Adani gas

2019- Emerged 2nd largest IRM player in

the world

2020- Forayed into airports business

2021- Formed data center JV 'Adani

Connex' with Edge Connex

2022- Adani Wilmar IPO subscribed 17X.

Completed the acquisition of MIAL

12 | P a g e ( 5 t h J u l 2 0 2 2 )


Currently, AEL is incubating a mix of new and old-world businesses which includes

• Existing businesses

o Airport operations – Managing 8 airports (7 operational and 1 under

construction) in India and their weighted average life is 70 years, providing

good long-term cash flow visibility.

o Road construction – 376 lane km of highways are under operation, while 1,694

lane km are under construction. An additional 3,676 lane km of concession

agreements have been signed.

o FMCG – A JV between AEL and Wilmar Group catering to essential kitchen

commodities like edible oil, rice, flour, pulses, etc. The company recently

acquired the Kohinoor brand in basmati rice.

o Commercial mining, MDO and IRM – It has one operational commercial mine

in Australia (Carmichael mine) and 4 commercial mines in India that are under

development. The segment also offers end-to-end logistics for coal consumers

(IRM business) and turnkey services to coal & iron ore mine owners (MDO

business).

o Other businesses include defence (production of small arms, UAVs, drones &

aircraft parts), water, digital etc.

• Future businesses

o Green Hydrogen – ANIL has outlined a capex plan of USD 50 bn to set up a 2.5

MMTPA of green H2 manufacturing capacity over the next 10 years. The first

phase of 1.0 MMTPA green H2 capacity is expected to be commissioned before

2030.

o Data centres – A JV between AEL and EdgeConneX should start with 8 MW of

operations in FY23 and grow into 323 MW by FY30

o Other future businesses include copper (to commence production from FY25

with an initial capacity of 0.5 MMTPA) and PVC (to commence production of

green PVC from FY25)

With most of the business verticals in the investment phase, profit metrics are in the nascent

stage and do not reflect steady-state run rates. Given its past records, execution skills, ready

infrastructure in place, foreign collaboration for technical tie-ups and low-cost funding, we

remain confident of the AEL’s ability to turn its new set of businesses into giant organizations

and unlock value from them either through a stake sale or through a direct listing.

13 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Business Structure


AEL

Existing Businesses

Others

Defence

(Adani Defence & Aerospace Ltd)

Water

(Adani Water Ltd)

Digital

(Adani Digital Labs)

Airports

(Adani Airport Holdings Ltd)

Roads

(Adani Road Transport Ltd)

FMCG

(Adani Wilmar Ltd)

AEL: 44% / Wilmar: 44%

Coal

Commercial Mines

(Adani Mining Pvt Ltd)

IRM and MDO

Future Businesses

Green Hydrogen

(Adani New Industries Ltd)

AEL: 75% / TotalEner: 25%

Data Center

(Adani ConneX Ltd)

AEL: 50% / ConneX: 50%

Copper

(Kutch Copper Ltd)

PVC

(Adani Petrochemicals Ltd)

14 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL has successfully incubated a number of businesses across a variety of sectors which have

grown to become large business opportunities in their own right. This has been aptly

demonstrated by the business growth and shareholder value created as shown in the table

below –

Demerged businesses from AEL and their performance


This success is largely derived from a broad-based competitive advantage comprising of:

• Timely project implementation,

• Ability to commission projects faster than the sectorial curve,

• Competence to do so at a cost lower than the industry average,

• Foresight to not merely service the market but to grow it,

• Establish a decisive sustainable leadership, and

• Evolve the company’s position into a generic name within the sector of its presence.

We believe that all the above characteristics will enable AEL to build strong businesses across

all the recent forays.

Company NameAdani Ports &

SEZ LtdAdani Power Ltd

Adani

Transmission Ltd

Adani Green

Energy Ltd

Adani Total

Gas LtdAdani Wilmar Ltd

Current status

in industry

Largest commercial

port operator in

India with 560 MMT

capacity

One of the largest

power companies in

India with the

thermal power

capacity of 13.6 GW

Largest private

transmission

company in India

with 18,795 ckm

line

One of the largest

renewable

companies in India

with a project

portfolio of 20.5 GW

Largest CGD

company in India

with presence

across 52 GAs

One of the largest

companies in India

to offer most of the

essential kitchen

commodities

Revenue FY17 8,439 22,616 2,876 502 1,087 22,973

Revenue FY22 15,934 27,711 11,258 5,133 3,038 52,361

5 yrs Revenue CAGR (%) 13.6 4.1 31.4 59.2 22.8 17.9

EBITDA FY17 5,418 5,980 1,983 403 278 643

EBITDA FY22 8,879 9,814 4,206 3,539 773 1,725

5 yrs EBITDA CAGR (%) 10.4 10.4 16.2 54.4 22.7 21.8

Net Profit FY17 3,912 -6,174 416 -47 101 230

Net Profit FY22 4,728 4,912 1,205 489 505 808

5 yrs net profit CAGR (%) 3.9 NA 23.7 NA 38.0 28.6

Date of demerger 39,416 40,046 42,216 43,273 43,405 44,603

Listing Price 184 103 28 30 80 381

Current Price 673 270 2,123 1,880 2,262 584

Price CAGR since listing (%) 9.3 7.8 86.6 181.1 149.4 212.0

15 | P a g e ( 5 t h J u l 2 0 2 2 )


Growth profile of incubating businesses


Early-stage incubating businesses

Source: Company Report

16 | P a g e ( 5 t h J u l 2 0 2 2 )


Financial Analysis & Projections

FY19-22: Maintained consistency in revenue performance

During FY19-22, AEL’s revenue grew at a CAGR of 19.8% to INR 69,420 cr, which was primarily

driven by

• 15.4% revenue CAGR to INR 51,324 cr in the coal segment due to a significant surge in

IRM volumes.

• 21.3% revenue CAGR to INR 2,527 cr in the solar manufacturing segment revenue to

due to a significant jump in the solar installation by EPC players

• Additional revenue of INR 2,517 cr from airport business (new business vertical started

in FY20).

• 33.7% revenue CAGR in other businesses to INR 13,051 cr

EBITDA and PAT grew at a CAGR of 23.6% and 23.8% to INR 3,713 cr and INR 788 cr,

respectively. Both EBITDA and PAT margins improved by 47bps to 5.3% and 11bps to 1.1%

respectively due to the improving contribution from the high-margin new business verticals.

An increase in PAT improved the RoE from 2.7% in FY19 to 2.9% in FY22, however, a rise in the

net debt from INR 8,239 cr in FY19 to INR 37,045 cr in FY22 impacted the RoIC performance.

As a result, RoIC declined from 6.8% in FY19 to 3.9% in FY22.

FY22-25E: Strong potential of the new business segments

Over FY22-25E, AEL’s sales are expected to grow at a CAGR of 19.5% to INR 1,18,612 cr, due to

• 5.5% CAGR decline estimated in coal segment revenue to INR 43,503 cr due to the

higher base of FY22, when commodity prices were at their peak. We believe that coal

prices may decline over a period of time.

• 63.9% CAGR growth estimated in airport segment revenue to INR 11,086 cr due to the

rise in passenger traffic in new airports from 40.4 mn in FY22 to 105.9 mn in FY25

• 53.7% CAGR growth estimated in defence segment revenue to INR 2,392 cr due to

increased sourcing from MoD and defence PSUs

• Total incremental revenue of INR 61,631 cr from the upcoming businesses such as INR

12,725 cr from the road, INR 19,647 cr from ANIL, INR 415 cr from the data centre, INR

25,492 cr from copper and INRN 3,352 cr from PVC business.

EBITDA and net profit are expected to grow at a CAGR of 80.7% and 107.3% to INR 21,903 cr

and INR 6,917 cr, respectively, while EBITDA and net margins are expected to improve by

1312bps to 18.5% and 471bps to 5.8% respectively due to the rise in contribution from the

new high margin businesses. Subsequently, return ratios – RoE & RoIC – are expected to

improve by 1135bps to 14.8% and 374bps to 7.9%, respectively.

17 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Capital Management

18 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Capital Management

Over the past 9 years, the Adani group has significantly expanded its presence across various

verticals. The group has become India’s largest private port operator, coal importer, private

thermal power producer, green energy producer, power transmitter & distributor, city gas

distributor and importer of edible oils and it has also expanded into airports, roads, defence

and aerospace. This growth has been aided by

• Buying projects from other companies,

• Starting new businesses and

• Investing in existing ones

This business expansion delivered a strong CAGR growth of 20.3% in its RR EBITDA (run-rate

EBITDA) during the last 9 years from INR 69 bn in FY13 to INR 365 bn in FY22, while the net

debt has grown has a CAGR of 11.1% from INR 521 bn in FY13 to INR 1,344 bn in FY22 over the

same period, which resulted in a decline in net debt-to-RR EBITDA over the same period.

Adani group has been reducing short-term debt in the overall debt mix


The net debt/RR EBITDA has been reducing over the years


FY13 FY16 FY22

RatingHighest Asset

Rating was AA

Highest Asset

Rating was AA+

Overall Group

Rating - AA

RR EBITDA INR 69 Bn INR 183 Bn INR 365 Bn

Net Debt INR 521 Bn INR 732 Bn INR1,344 Bn

Debt (% age ) 100% 86% 39%

69

183

365

7.6x

4.0x3.7x

0

2

4

6

8

0

50

100

150

200

250

300

350

400

FY13 FY16 FY22

RR EBIDTA Net Debt/ RR EBIDTA

19 | P a g e ( 5 t h J u l 2 0 2 2 )


How did Adani group manage to reduce pressure on its balance sheet while

expanding in capex-heavy businesses?

The Adani group philosophy before undertaking an investment in infrastructure projects is

summed up by the following 5 stages:

• Origination: In this stage, the company undertakes market intelligence and analysis of

the viability of the project and the strategic value of the asset.

• Site development: In this stage, the group acquires the site post-taking concessions

and regulatory requirements.

• Construction: In this stage, the company undertakes the engineering and designing of

the project and decides on the equity and debt funding for the project.

• Operations: The Company plans for the lifecycle O&M of the project. For example, for

its power business, Adani group has built the Energy Network Operation Centre (ENOC)

which enables centralized continuous monitoring of projects and installations on a

single cloud-based platform.

• Capital management: In this stage, AEL undertakes to redesign the capital structure of

the asset in such a way that the operational phase funding of the project is consistent

with the life of the asset.

Adani Group: Repeatable & proven transformative investment model


20 | P a g e ( 5 t h J u l 2 0 2 2 )


Internally, the group focuses a lot on capital management and reviews periodically its capital

requirement and how the cost of the same can be brought down. In order to bring down the

cost of funds, the group has laid down the following strategy:

• Tapping international markets to broadbase sourcing of funds – To gain funds at

competitive pricing, the group envisages the issuance of various green bonds,

especially for its renewable energy business. The bonds are issued for longer-term (>15

years) and in a way that the coupon payments are in tandem with the cash flow

generation of the underlying asset for which the money is raised.

Adani Group: Repeatable & proven transformative investment model


• Focus on ESG – Being ESG compliant has become foremost requirement of global

funds. High ESG compliant projects are able to tap international funds at cheap rates.

In order to attract international capital, AEL has focused on enhancing its ESG score.

AEL has improved its ESG score while RIL’s score remained flat

Source: Bloomberg

PSU Banks, 55 Private

Banks, 31

Bonds, 14

2016

PSU Banks, 18

Private Banks, 8

Bonds, 37

DII, 6

Global Banks, 25

PSU Capex LC, 6

2022

27 28 27 27

31 31

35 35 36

50 51

54 56

49

58

49 51

52

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

AEL Reliance

21 | P a g e ( 5 t h J u l 2 0 2 2 )


Since FY13, AEL has worked on ESG parameters and disclosures, which has improved

its overall Bloomberg ESG score from 27 in FY13 to 36 in FY21. AEL aligned its ESG

reporting standards with the Global Reporting Initiative (GRI), increased its public

disclosures in the annual report, management systems and business excellence

initiatives, and remains committed to improving its ESG performance by further

refining its policies and practices, as well as strengthening information disclosure

procedures. This has helped the company is getting foreign funding for its new

projects.

Further, we believe that in order to enhance its ESG commitment there is every

possibility that the coal business may be completely hived off once the incubator

businesses become cash flow positive.

• Partnerships with industry leaders – The group has partnerships with TotalEnergies

for its various businesses like green energy, city gas distribution, and green H2.

Especially for its green hydrogen business, ANIL will issue shares to TotalEnergies

representing 25% of its share capital. The partnership is a win-win situation for both

the investors as Adani group will contribute its knowledge of the Indian market,

execution capabilities, operations excellence and capital management philosophy

while TotalEnergies will bring its understanding of the global market, credit

enhancement and financial strength to lower the financing costs (we estimate the

finance costs to come down by atleast 150-200bps) along with expertise in underlying

technologies.

The complementary strengths of both partners will help ANIL deliver the largest green

H2 ecosystem in the world, which, in turn, will deliver the lowest cost of green H2 to

the consumer and help accelerate the global energy transition. It is to be noted that

ANIL’s ambition is to invest over USD 50 bn over the next 10 years in green H2 and

associated ecosystem. In the initial phase, ANIL will develop green H2 production

capacity of 1 MMMTPA before 2030.

With the help of its well planned capital management policy, Adani group has been able to

expand its business operations by taking measured risk. Over time, the group has been able to

completely de-risk 46% of its equity value (with thermal) & 37% (without thermal) from tenure

and other capital related risk.

22 | P a g e ( 5 t h J u l 2 0 2 2 )


46% of group’s equity value (with thermal) is fully protected from tenure and rate of capital employed risk


37% of group’s equity value (without thermal) is fully protected from tenure and rate of capital employed risk


23 | P a g e ( 5 t h J u l 2 0 2 2 )


How Adani group is applying its capital management policy to grow its green energy

portfolio?

The efficacy of capital management philosophy of Adani group can be seen in Adani Green

Energy Limited (AGEL). As per management, the total capital outlay for AGEL to attain its target

of 45GW will only be to the tune of cost of setting up 20GW installation of solar energy. The

revenues and net earnings of this 20GW will be locked up via PPA’s. Once the earnings are

locked, the cash flows from the same would be used in following priority:

• Debt repayment of initial 20GW portfolio.

• Growth capital of remaining 25GW portfolio.

Once the commissioning of whole 45GW is completed, the whole cash flow can be used for

debt repayment. In this way, the management will be able to fund its growth plan and also

keep debt levels in check.

AGEL is expected to fund >50% of its expansion through internal accruals due to its disciplined capital mgmt.

Source: Company Reports, Ventura reseach

Numbers in box represent GW installation estimates, Internal target of AGEL is to build 45GW by FY30 although we have assumed the same only post FY35

-10

-5

0

5

10

15

20

25

30

35

40

(40,000)

(30,000)

(20,000)

(10,000)

0

10,000

20,000

30,000

40,000

50,000

60,000

FY22 FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY35E FY40E FY45E FY50E FY55E

CFO FCFF Net debt/EBITDA (x) -RHS RoE %- RHS

INR cr

5

.

5

7 13

33

20

23 26 29 32 35 43

49 55

61 67

24 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Green Hydrogen Ecosystem

25 | P a g e ( 5 t h J u l 2 0 2 2 )


Adani New Industries Ltd

Green hydrogen (H2) has been identified as one of the cleanest energy sources that is going to

replace the existing carbon-based energy usage. As a result, this essential energy source

promises to provide a significant business opportunity with a long runway of growth. However,

this opportunity is prone to high risk given the extremely capital-intensive nature and the

rapidly evolving technology.

AEL by virtue of its proven skills at building large-scale profitable businesses across diverse

sectors, superior execution and access to global capital is best placed to exploit this

opportunity. With a view to partake in this opportunity, AEL incorporated a new subsidiary,

Adani New Industries Ltd (ANIL).

ANIL integrated business verticals and capacities


Adani New Industries Ltd

Supply Chain Products Manufacturing

Solar Panel

Current Capacity: 3,500 MW

FY30 Capacity: 10,000 MW

2.0 GW of mono-cristalline and 1.5 GW of multi-crystalline capacities.

Multi-crystalline will be replaced by TOPcon

Wind Turbine Generator

Current Capacity: 0 MW


Battery

Current Capacity: 0 MWh

FY30 Capacity: 10,000 MWh

Other Ancillaries (Tracker, Glass, EVA, etc)

Renewable Energy Generation

Current Capacity: 0 GW

FY30 Capacity: 30 GW

Green Hydrogen Generation & its supply chain

Green Hydrogen Generation

Current Capacity: 0 MMTPA

FY30 Capacity: 3 MMTPA

Electrolysers



Fuel Cells



Green Hydrogen Downstream Products

Ammonia


FY30 Capacity: 6.5 MMTPA

Urea



Methanol



26 | P a g e ( 5 t h J u l 2 0 2 2 )


ANIL envisages capturing the entire value chain of green H2

ANIL’s business plan and resource integration


• Green H2 and its downstream products (ammonia, urea, methanol, ethanol, etc.)

which are part of the fully integrated green H2 ecosystem will be manufactured at

Khavda and Mundra SEZ.

o Power generation – ANIL’s Khavda site has a land bank of ~71,000 acres which

has a large-scale renewable deployment potential of 20 GW due to its high

wind & solar resource potential. The company is targeting to enhance the

renewable power capacity to 45 GW by FY30. The solar panels and windmills

will be manufactured and supplied from AEL’s Mundra SEZ.

o Electrolysis – The company will use the alkaline and PEM electrolysis process

to produce 2.5 mn tonnes of green H2 annually (by FY31). The electrolyzers,

used in the electrolysis process, will be manufactured and supplied from the

company’s Mundra SEZ facility.

o H2 supply and use – H2 will be supplied from Khavda to Mundra SEZ through

a 42” pipeline (a cost-effective way of transportation), where it will be used

for the production of downstream products.

27 | P a g e ( 5 t h J u l 2 0 2 2 )


ANIL’s green H2 generation and supply


ANIL’s integrated green H2 hub in Mundra


• End-to-end manufacturing of the entire supply chain. There will be a complete

backward integration of solar manufacturing from polysilicon, ingots, wafers, and cells

to solar modules along with upcoming manufacturing facilities for wind turbine

generators, electrolyzers, batteries, etc. at the Mundra SEZ.

Khavda – 71,000 acres of land with a

capacity to generate RE power of 20

GW.

The company is targeting to enhance

the RE power capacity to 45 GW by

FY30.

Mundra SEZ – Manufacturing facility

for solar panels, electrolysers and wind

mill manufacturing facility. It is also

developing production facilities for

methanol, ethanol, ammonia and

urea.

28 | P a g e ( 5 t h J u l 2 0 2 2 )


ANIL’s solar and WTG manufacturing facility


Solar panel manufacturing process and ANIL’s automated solar manufacturing facility at Mundra

India's largest

Solar panel

manufacturer

with a capacity

of 3.5 GW

Ancillary supply

facility for Solar

Panels. It

manufactures

Backsheet, Solar

EVA and Solar

Modules

Ancillary supply

facility for Solar

Panels. It

manufactures

Glass Plates and

aluminum

frames for

panels.

Upcoming wind

turbine

manufacturing

facility. The idea

is to put up a

prototype,

check-out the

machine and

then get into

scale

manufacturing,

for self-

consumption,

sales in India and

exports.

29 | P a g e ( 5 t h J u l 2 0 2 2 )


Source: Industry Reports

• For supply chain assurance and cost efficiency from economies of scale, the company

is targeting full backward integration in solar and wind to

▪ reduce dependency on external supply chains,

▪ improve turnaround time and availability of ancillary parts, and

▪ reduce pressure on inventory and its carrying cost.

ANIL is building infrastructure from power generation for the electrolysis process to produce

green H2 and its downstream products.

ANIL’s readiness and complete integration of the renewable supply chain

Solar panel manufacturing facility at Mundra

Mundra Solar PV Ltd (MSPVL) (which in the future is expected to be subsumed into ANIL), is

the first and the largest vertically integrated solar company in the Indian market. Besides, it is

the first and only manufacturer from India to rank as the top performer for 4 consecutive years.

The quality of ANIL’s solar modules is amongst the best in the world and its products carry

Bloomberg’s tier-1 quality ratings. The current 3.5 GW of solar capacity includes

• Recently installed 2 GW monocrystalline capacity and

• 1.5 GW multi-crystalline technology, which is planned to be replaced with TOPCon.

Multi-crystalline is an old technology which is expected to get phased out slowly as there are

newer technologies with higher efficiencies. TOPCon is the latest technology being adopted

globally. The future capacity installations are likely to be HJT which is a fast-emerging

technology and offers a further improvement in efficiency.

30 | P a g e ( 5 t h J u l 2 0 2 2 )


At this facility 3 types of solar panels (for rooftop and utility-scale projects) would be

manufactured:

• Monocrystalline Solar Panel: These panels are characterized by their black PV cells

with rounded edges. They have a higher conversion efficiency than polycrystalline

panels, which means they produce more units of electricity. These are mostly used for

limited spaces and are costlier than poly/multi-crystalline panels.

ANIL manufactures two series of mono facial solar modules– the

o Eternal PRIDE series with 132 cells and 610-650 Wp, and

o Eternal SHINE series with 144 cells and 520-545 Wp.

ANIL’s monocrystalline solar panel

Source: kenbrooksolar

• Poly/multi-crystalline Solar Panel: These panels have blue-hued PV cells with straight

edges. They have a lower efficiency compared with monocrystalline cells, which means

more panels are required to match the same power output. However, these panels

also have a lower price, since their manufacturing process is simpler.

ANIL manufactures the Encore series of multi-crystalline solar panels that are used for

utility-scale projects.

31 | P a g e ( 5 t h J u l 2 0 2 2 )


ANIL’s multi/poly-crystalline solar panel

Source: kenbrooksolar

• Bifacial Solar Panel: These panels are designed in a way that they can generate

electricity using both surface areas. This means, that even the rear side of the module

which does not face the sun directly is light sensitive and can be utilized to generate

electricity from the module.

The panel top is equipped with solar cells facing the sun. This side of the panel works

similar to a common solar panel capturing the rays directly coming from the sun.

Whereas, the solar cells present on the other face, the bottom face, absorb the

reflected light off the ground. With proper installation, a great amount of sunlight is

captured which in turn increases the bifacial solar panel efficiency manifold.

How a bifacial solar panel works

Source: Kenbrooksolar

32 | P a g e ( 5 t h J u l 2 0 2 2 )


Mundra Solar PV Ltd 5 years of performance


Wind Turbine manufacturing at Mundra

ANIL is gearing up to put up a prototype of a 5.2 MW wind turbine at Mundra, Gujarat. When

it comes up, it would be the country’s biggest wind turbine and will count among the largest

on-shore wind mills in the world.

The machine will be built with technology from W2E Wind to Energy GmbH of Germany. The

idea is to install the prototype, monitor & measure its operational efficiencies, and

troubleshoot any operational challenges. Once the stability of the prototype is established and

then gets into scale manufacturing, for self-consumption, sales in India, and exports.

In the wind mill industry, turbines of a capacity above 4 MW to 14 MW are typically associated

with offshore installation. But onshore wind turbines of 5.2 MW are few globally and none

have been installed in India so far.

574 637

990

1,158 1,104

0

200

400

600

800

1,000

1,200

1,400

FY18 FY19 FY20 FY21 FY22

Solar volumes to improve with the rise in captive demand

Sales volume declined due to reduced EPC demand on

account of higher input cost

0

5

10

15

20

25

30

0

500

1,000

1,500

2,000

2,500

3,000

3,500


Per watt realization is expected to remain stable

Revenue (INR Cr) Revenue per Watt (INR)

0

10

20

30

40

50

60

0

100

200

300

400

500

600

700

800

900


Operating profitability to sustain at 15% in the long run

EBITDA (INR Cr) EBITDA Margin (%)

0

1

2

3

4

5

6

7

8

0

100

200

300

400

500

600

700

800

900


EBITDA per watt remained stable at 3-4 cents per watt

EBITDA (INR Cr) EBITDA per Watt (INR)

33 | P a g e ( 5 t h J u l 2 0 2 2 )


Wind turbine capacities – current and future

Source: Renewable Energy World

The 5.2 MW wind mill has blades that cover a circle of 165 meters in diameter at a tower height

of 140 meters. It can work at wind speeds of 3 meters per second (mps, which is very low) and

up to 20 mps, reaching its optimum power production at 12 mps wind speeds.

This plant will be located adjacent to MSPVL and in the initial phase, it is expected to supply

windmills for its Khavda power generation facility and later will sell turbines to global

renewable energy players.

ANIL’s focus is to manufacture the entire windmill in one place

Source: Industry Reports

Globally wind turbine manufacturers are targeting 5.5 MW by 2035, ANIL is targeting to

achieve turbine capacities of 5.2 MW by 2024 which is a decade ahead of its peers.

ANIL is planning to setup a facility which

can produce entire windmill covering

tower, nacelle, generator, hub, blade,

etc. It will provide a complete control to

the company in terms of supply chain

and just-in-time availability of

components

34 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s JV with TotalEnergies would be a game-changer for ANIL

ANIL’s ambition is to invest ~$50 bn (funded through a mix of debt & equity) over the next 10

years in green H2 and its associated ecosystem. In the initial phase, ANIL will develop a green

H2 production capacity of 1.0 MMTPA before 2030 (the planned road map is 2.5 MMTPA).

To execute this ambitious plan, AEL has signed a partnership agreement with TotalEnergies

and has entered into a strategic alliance, in which TotalEnergies will acquire a 25% stake in

ANIL from AEL (valuation is yet to be decided). TotalEnergies involvement will give a significant

boost to achieving ANIL’s ambitious goal to manufacture 2.5 mn tonnes of green H2 capacity

by FY31.

Post this agreement, it will become the fourth partnership between TotalEnergies and the

Adani group

• In 2021, TotalEnergies picked up a 20% stake in Adani Green Energy Ltd (AGEL), the

renewable power company of the Adani group.

• In 2019, TotalEnergies had acquired 37.4% of Adani Gas Ltd and 50% of the group’s

Dhamra LNG project. The JV involved the development of various LNG regasification

terminals, including Dhamra LNG, and a retail network of 1,500 service stations over

10 years.

• In 2020, TotalEnergies and Adani formed a 50-50 JV at an enterprise value of INR

17,385 cr for 2.3 GW of solar assets.

AEL and TotalEnergies JV philosophy


35 | P a g e ( 5 t h J u l 2 0 2 2 )


How this alliance will benefit ANIL

• Benefits from TotalEnergies to ANIL

o TotalEnergies is one of the largest players in the global energy industry and

hence the company can offer its thorough understanding of the global energy

markets, expertise in renewable technologies and large-scale industrial

projects for the development of ANIL’s green H2 capacities.

o TotalEnergies has over 20 years of experience in H2 retailing infrastructure.

The company is currently operating 120 H2 refuelling stations (HRS – 30 own

and 90 through strategic tie-ups with other fuel retailers) across Germany, the

Netherlands, Belgium and France. The company is planning to add 150 new

HRS across Europe by 2030 to further develop the H2 market for mobility in

Europe. For the seamless supply of H2, ANIL is expected to become a secured

steady source of H2 import.

To rollout HRS networks domestically, the strategic alliance with TotalEnergies

will help ANIL participate in this forthcoming opportunity.

o TotalEnergies is an active member of several H2 dedicated initiatives and

professional associations in Europe. The company is also an anchor sponsor of

the EUR 1.5 bn clean H2 infrastructure fund, which creates the blue H2

ecosystem in Europe.

ANIL is targeting the European market for the exports of its green H2, which

will generate high margin forex income. The strategic associations of

TotalEnergies in Europe could help ANIL in getting access to export its green

H2 in the European market.

o The AA rating of TotalEnergies is expected to help ANIL in raising low-cost

initial funding from the global market, which is expected to save 150-200 bps

in interest costs.

• Benefits from Adani Enterprises to ANIL

o AEL is known for its superior and time-bound execution of large-scale complex

projects in the areas of power, ports, logistics, infrastructure, etc. This

expertise will help in creating India’s largest green H2 ecosystem for ANIL

within the stipulated time.

o ANIL houses India’s largest solar manufacturing capacity with cell and module

manufacturing, which came as a legacy from AEL. The parent AEL has

significant experience in setting up and managing large renewable power

projects (AEL incubated AGEL and demerged in 2018) and their understanding

of India’s renewable sector dynamics is better than peers. It will help ANIL in

managing 45 GW of renewable hybrid power projects required for 2.5 mn

tonnes of green H2 production.

o Group company Adani Total Gas Ltd (ATGL) is currently operating 335 CNG

stations and it has committed 1,800 additional CNG stations in the 9th/10th/11th

round of CGD auctions.

36 | P a g e ( 5 t h J u l 2 0 2 2 )


In addition, ATGL is supplying gas to >2,000 industrial units, and this network

is expected to expand significantly in the coming years due to strict NGT orders

to switch from polluting coal to natural gas. ANIL can also use this ready

infrastructure to distribute its green H2 for automotive and industrial usage.

Limitations in the H2 ecosystem and readiness of ANIL and RIL

India has set an ambitious target of manufacturing 5.0 MMTPA of green H2 by 2030. The launch

of the 1st phase of the green H2 policy on 17th Feb 2022 is a step toward this gargantuan goal.

However, India’s total H2 demand is expected to be more than 11 mn tonnes by 2030, which

is more than double the GOI’s target. This will ensure that there is significant room for growth

in green H2 manufacture in the future. The country’s thrust for green H2 manufacture is

attracting many players, however, there are significant challenges which need to be overcome

including:

• Lack of expertise in building large capacities of green H2, which is necessary for lower

cost of production.

• Limited access to low-cost funding (for initial capex) from the global market due to

weak credit rating

• Limited availability of captive green renewable power for water electrolysis, and

• Lack of expertise in the manufacturing of downstream products – green ammonia,

green urea and green ethanol.

We have discussed ANIL’s H2 ecosystem and upcoming opportunities for the company.

However, India’s most valuable company, Reliance Industries Ltd (RIL) is building its own story

in green H2 space and has taken several strategically important decisions in the past 1 year.

RIL’s green H2 vision and its preparedness

• RIL is targeting to install 100 GW of solar & wind capacity by 2030, which will be utilized

in the water electrolysis to produce green H2.

• RIL has planned 4 Giga factories to manufacture all critical components of its green H2

ecosystem across key value chains, such as a solar PV module factory, an energy

storage battery factory, an electrolyser factory and a fuel cell factory. In order to

rapidly scale up manufacturing, RIL has acquired companies globally

RIL’s acquisitions and partnerships for its green H2 plan


Target Company MonthStake (%)/

CollaborationAmount Segment

Ambri Inc Aug-21 Investment in preferred stock USD 50 mn Batteries

Stiesdal A/S Oct-21 Collaboration Undisclosed Electrolyzers

NexWafe Oct-21 Investment in preferred stock USD 29 mn Solar Wafers

REC Solar Oct-21 100 USD 771 mn Solar Panel

Sterling & Wilson Oct-21 40 INR 2,800 cr Solar Project EPC

Faradion Dec-21 100 USD 135 mn Batteries

37 | P a g e ( 5 t h J u l 2 0 2 2 )


• With the complete integration, RIL is targeting a green H2 cost of USD 1/kg by 2030.

The company is planning to spend USD 10 bn on its new energy business in the next

three years towards achieving these targets.

• RIL has been working on

o Securing 4.5 lakh acres of ‘solar’ landbank in Gujarat to set up manufacturing

facilities and solar power installation

o Acquired REC Power, NexWafe and Sterling & Wilson to gain expertise in solar

module manufacturing and installation.

o Acquired Ambri Inc and Faradion to set up a large-scale battery manufacturing

and energy storage system in India.

o Partnered with Stiesdal A/S in Oct 2021 to develop and manufacture hydrogen

electrolysers

RIL is securing a landbank of 4.5 lakh acres to set up a renewable power capacity

RIL has started the process of securing land for its 100 GW renewable energy power project in

Gujarat. The company has requested 4.5 lakh acres of land in Kutch in Jan 2022, out of which

3.0-3.5 lakh acres will be utilized for the phase I of 100 GW renewable energy installation, while

the rest will be available for further expansion in phase II.

RIL acquires businesses in solar module manufacturing and installation

RIL is planning to set up a 4 GW of solar module manufacturing capacity in Dhirubhai Ambani

Green Energy Giga Complex, Jamnagar (a 5,000 acres complex). The company is targeting to

enhance this capacity to 10 GW by 2030. To gain the expertise, RIL acquired

• REC Solar in Oct 2021 for a total consideration of USD 771 mn from China National

Bluestar. REC Solar is the market leader in hetero junction technology (HJT) based solar

panels and has an annual production capacity of 1.8 GW. It has 3 manufacturing

facilities – two in Norway and one in Singapore. The company has to date installed

more than 14 GW of solar capacities globally.

• NexWafe in Oct 2021 for a total consideration of USD 29 mn. NexWafe is a German

manufacturer of silicon wafers for solar panels. Through this acquisition, RIL secured

access to NexWafe’s proprietary technology and plans to build large-scale solar wafer

manufacturing facilities in India using the NexWafe processes and technology.

RIL has also acquired Sterling & Wilson, a solar EPC firm, which will help RIL in the installation

and O&M of its 100 GW solar site.

RIL collaborated with the global battery manufacturers to setup energy storage systems

RIL acquired 42.3 mn preference shares in Ambri Inc for a total consideration of USD 50 mn.

Both the companies are in discussions for an exclusive collaboration to set up a battery

manufacturing facility in India.

38 | P a g e ( 5 t h J u l 2 0 2 2 )


To further strengthen its position in the battery storage system, RIL acquired Faradion, a UK-

based startup developing sodium-ion batteries, for a total consideration of USD 135 mn. RIL

aims to produce sodium-ion batteries in India based on Faradion’s technology.

RIL collaborated with Stiesdal to develop an electrolyzer plant in its giga-factory

RIL has partnered with Danish company Stiesdal A/S in Oct 2021 to develop and manufacture

alkaline electrolysers for green H2 (these are the same electrolyzers that AEL is planning to use

and manufacture). Both the companies have also agreed to extend their collaboration to the

development and implementation of

• Offshore wind energy,

• Next-generation fuel cells for conversion of hydrogen to electricity for mobile and

static electricity generation,

• Long-duration energy storage, and

• Production of carbon-negative fuels.

Both AEL and RIL are ready with their green H2 plan and working emphatically to achieve their

ambitious targets, however, we believe that AEL has achieved a few milestones, which are yet

to be achieved in the case of RIL.

AEL’s readiness vs RIL’s ambition for green H2


Adani Enterprise Ltd Reliance Industries Ltd

Captive green power

4 GW of operational solar plate manufacturing

capacities. Building a new wind turbine capacity 7.5

GW

Instaling a hybrid capacity (solar + wind) of 22-23 GW

on a ready land parcel of 71,000 acres in Khavda

Acquired stakes in REC Solar and NexWafe for the

production of solar modules and also acquired

Sterling & Wilson for the solar installation and O&M.

Committed to develop an installed capacity of 100

GW by 2030. The company has identified 4,50,000

acres of land in Kutch and made a request to state

government.

ElectrolysisBuilding new capacities of electrolysers (5 GW by

FY30) and batteries (10 GWh by FY30)

Partnered with Stiesdal A/S and acquired stakes in

Ambri and Faradion to develop and manufacture

Alkaline Electolyzers and batteries in India

Forward integration for

downstream products

Building new capacities of Ammonia, Urea and

Methanol, which are to be produced from green H2

While no information is available on forward

integration RIL already has presence in downstream

product manufacturing and hence in our opinion

only the tweaking of the process is required for

building the capacities

Partnership with global

companies for green H2

distribution

AEL has partnered with TotalEnergies, who has over

20 years of experience in H2 distribution and sales

RIL is already exporting refined petroleum products

globally and hence it should have no issues in

marketing H2 globally

Balance Sheet Strength

AEL has a domestic credit rating of A+, however, it

has TotalEnergies as a partner, which will enable AEL

in getting low cost funds by 150-200 bps.

Domestic credit rating of AAA with a net debt free

balance sheet

39 | P a g e ( 5 t h J u l 2 0 2 2 )


Green H2 plans of other companies

Source: Fortune India Story & Ventura Research

Company Name Project Details

JSW Energy LtdWorking with Australian Fortescue Future Industries to produce green H2 and utilize it for

making green steel, green ammonia and other industrial applications

Bharat Petroleum Corp LtdSetting up a 20 MW electrolyzer at Bina refinery in Madhya Pradesh to produce green H2,

which will be sold through BPCL fuel stations as a transportation fuel

Hindustan Petroleum Corp Ltd Setting up a 370 tonnes green H2 pilot plant at its Vizag refinery

GAIL India Ltd

Setting up a PEM electolyzer plant at Guna in Madhya Pradesh to produce green H2 by the

end of 2023

Setting up a pilot project on H2 blending with natural gas in the CGD network

Oil India Ltd Setting up 100 KW electrolyzer plant in Jorhat, Assam to produce green H2

NTPC Ltd

Setting up a pilot project on H2 blending with natural gas in the CGD network

Setting up a standalone fuel cell based micro grid with H2 production using electrolyzers at

NTPC Simhadri

Setting up a green H2 fuelling station at Leh and will operate five H2 fuel cell powered

vehicles for the Indian Army

GreenkoTeamed up with a Belgian alkaline electrolyzer maker John Cockerill to make electrolyzers in

India

ACME SolarSetting up a 7 GW of renewable power and green ammonia production facilities worth $6

bn in Tamil Nadu

Ohmium InternationalCurrently manufacturing PEM electrolyzers in Bengaluru (500 MW/annum capacity) and

supplying it to the US. The company is planning to enhance the capacity to 2 GW

Larsen & Toubro Ltd

Entered into an MoU with ReNew Power to develop, own, execute and operate green H2

projects in India

Signed an MoU with Norway's HydrogenPro to setup a JV for the manufacturing of alkaline

water electrolyser

Indian Oil Corp Ltd

Setting up a green H2 plant in Mathura and Panipat

Has teamed up with Larsen & Toubro and ReNew Power for setting up a green H2 plant

40 | P a g e ( 5 t h J u l 2 0 2 2 )


Key growth drivers for the adoption of the Indian green H2 market

Fossil fuels and renewables alone cannot fulfil the rising energy demand of India,

green H2 is a clean solution for future

In line with GOI’s stated objectives at COP26, phasing out of fossil fuels and replacing them

completely with a zero-carbon footprint, can be achieved only with green H2 and other non-

carbon sources like hydro and nuclear (which are again a limiting resource). Green H2

essentially would serve to decarbonize the industrial usage of energy while renewable sources,

solar and wind, would be replacing electricity consumption.

India energy consumption and mix of sources

Source: NITI Aayog

-8

-6

-4

-2

0

2

4

6

8

10

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

CY

90

CY

91

CY

92

CY

93

CY

94

CY

95

CY

96

CY

97

CY

98

CY

99

CY

00

CY

01

CY

02

CY

03

CY

04

CY

05

CY

06

CY

07

CY

08

CY

09

CY

10

CY

11

CY

12

CY

13

CY

14

CY

15

CY

16

CY

17

CY

18

CY

19

CY

20

CY

21

E

CY

22

E

CY

23

E

CY

24

E

CY

25

E

CY

26

E

CY

27

E

CY

28

E

CY

29

E

CY

30

E

India energy consumption - historical and forecast

Energy Consumption (TWh) YoY Growth (%)

TWh %

0.3 0.4 0.5 0.6 0.6 0.9 1.1 0.8 1.3 2.9 3.3 7.2 9.6 8.1 7.2 5.8 5.7 4.6 4.3 4.3 4.6 3.8 3.3

0.8 0.7 1.2 1.0 1.0 1.2 1.2 1.2 1.2 1.2

5.1 6.1 6.8 7.5 9.5 6.0 6.3 6.7 11.3

14.9

55.8 55.4 51.5 53.7 54.3 58.0 55.1 55.1 46.4 40.3

30.3 30.6 34.5 31.4 29.5 28.7 29.6 28.4 28.6 27.0

0.6 2.7

CY90 CY95 CY00 CY05 CY10 CY15 CY19 CY20 CY25E CY30E

India energy mix - Significant improvement for clean fuels

Biofuels & Geo Biomass Solar & Wind Hydro Nuclear Natural Gas Coal Crude Oil Green Hydrogen

41 | P a g e ( 5 t h J u l 2 0 2 2 )


India’s H2 demand in CY21 was 8.5 mn tonnes, which is expected to increase to 9.1 mn tonnes

by CY22 and to 11.0 mn tonnes by CY30. Currently, all the H2 consumed in India is produced

using fossil fuels with high emission intensities (11 kg CO2 per kg H2 through steam methane

reforming and 20 kg CO2 per kg H2 through coal gasification). Green H2 consumption of 11 mn

tonnes in CY30 will displace 24-25 mn tonnes of natural gas (76 mn tonnes of CO2) or 55 mn

tonnes of coal (125 MT of CO2).

India’s green H2 demand outlook

Source: Industry Reports & Ventura Research

Policy targets by GOI – India's consumption outlook for H2

Source: NITI Aayog

0.3

2.1

3.9

5.8

7.6

9.4

11.2

CY24 CY25 CY26 CY27 CY28 CY29 CY30

Data in mn tonnes

3.0 5.0 5.0 5.0

3.0

4.5 5.0 5.5

0.1

0.3

1.4 2.5

0.4

0.8

4.7

8.5 3.3

6.5

1.0

2.0

3.0

3.8

4.5

0

10

20

30

40

50

60

70

80

90

100

0

5

10

15

20

25

30

35

40

2020 2030 2040 2050

Refinery Ammonia Methanol Steel

Heavy Vehicles Power CGD Share of green H2 (%)

Mn Tonnes %

42 | P a g e ( 5 t h J u l 2 0 2 2 )


Development of new industrial corridors in India to fuel demand for green H2

The Indian government has approved the development of eleven Industrial Corridors with 32

Projects to be developed in four phases in the country as part of the National Industrial

Corridor Programme (NICP) which is under various stages of conceptualization/ development

/ implementation.

These industrial corridors are aimed at the development of futuristic industrial cities in India

which can compete with the best manufacturing and investment destinations in the world. The

same will create significant opportunities for clean energy infrastructure, leading to higher

sourcing of green H2 and its downstream products.

Industrial Corridors in India

Source: Ministry of Commerce & Industry

Industries need heat for various processes. Industrial heat can be classified as high, medium or

low, with

• High-temperature heat above 1000°C for blast furnace (BF), cement and glass

industries,

• Medium-temperature heat between 500°C and 1000°C for steam methane reforming

(SMR) and OEMs and

• Low-temperature heat below 500°C for paper, ammonia synthesis, textiles and other

allied industries.

Many decarbonized solutions exist today to produce low and medium-temperature heat. H2

combustion is the only solution which produces high-grade heat that meets almost all heavy

43 | P a g e ( 5 t h J u l 2 0 2 2 )


industrial applications. More than 85% of industrial heat is consumed in iron and steel,

chemicals and cement.

Around 95% of the high-temperature heat is currently provided by the combustion of fossil

fuels or combustible by-products. Small amounts of biomass are used in specific sectors, such

as in the pulp and paper industry.

Working temperature for selected fuels and temperature requirements of sectors

Source: IRENA 2021 Annual Report on H2

South Korea’s Posco and Adani Group have agreed to jointly build a USD 5 bn integrated steel

plant at Mundra SEZ in Gujarat. As part of an initial non-binding agreement between Posco and

Adani Group, the environment-friendly steel mill would be built, which will use green H2 as a

key fuel.

Posco intends to reduce its carbon dioxide emissions by 20% by 2030, 50% by 2040 and 100%

by 2050 compared with the average total emitted by the company’s South Korean units from

2017-2019. The company is planning to gradually move away from fossil-fuel-powered BF and

use green H2 to fuel existing furnaces. Collaboration with Adani Group is part of Posco’s green

H2 plan.

44 | P a g e ( 5 t h J u l 2 0 2 2 )


Traditional and green methods of steel production

Source: IRENA 2021 annual report on H2

Both Posco and Adani plan to further collaborate at the group level in other sectors such as

renewable energy and logistics.

Significant growth opportunities for green H2 in India’s city gas distribution (CGD)

network

With the completion of PNGRB’s 11th round of CGD auction by PNGRB, CGD coverage will now

encompass over 600 districts in 28 states/UT, covering ~86% of India’s geographical spread

and reaching ~96% of its population.

This gargantuan expansion in the CGD coverage represents a ready market for decarbonization

by replacing natural gas with green H2. As a first step, the government is planning to blend

15% green hydrogen with piped natural gas (PNG) for domestic, commercial and industrial

consumption. This move is in line with India's ambitious targets for reducing greenhouse gas

emissions and becoming carbon neutral by 2070.

45 | P a g e ( 5 t h J u l 2 0 2 2 )


In line with the government’s mandate, the PSU gas transmission and distribution companies

have already taken initiatives which are various stages of development

• GAIL India Ltd commenced India’s first-of-its-kind project of mixing grey and blue H2

into its natural gas supply for the city of Indore, Madhya Pradesh. This H2-blended gas

will be supplied for retailing CNG to automobiles and PNG to households and

commercial setups.

• NTPC Ltd has inked a pact with Gujarat Gas Ltd for an initiative to blend green H2 with

the CNG and PNG supplied by the latter. Green H2 will be produced by using electricity

from the existing 1 MW floating solar project of NTPC Kawas.

Group company Adani Total Gas Ltd (ATGL) can also use the green H2 produced from ANIL.

ATGL is currently operating 335 CNG stations and it has committed 1,800 additional CNG

stations in the 9th/10th/11th round of CGD auctions. In addition, ATGL is supplying gas to

>2,000 industrial units, and this network is expected to expand significantly in the coming years

due to strict NGT orders to switch from polluting coal to natural gas. ANIL can also use this

ready infrastructure to distribute its green H2 for automotive and industrial usage.

Supply chain of blending green H2 in natural gas network

Source: US Office of Efficiency & Renewable Energy

With the large-scale production plans and advancements in technology, the cost of green H2

is expected to come down in India from $6.2/kg in 2021 to $4.5/kg in 2030. However,

considering the recent surge in solar and wind installation by AGEL and ANIL along with

46 | P a g e ( 5 t h J u l 2 0 2 2 )


strong backward integration, ANIL is targeting $2.4/kg in FY24, which is expected to further

come down to $1.5/kg by FY30. It will make the blended gas (green H2 + natural gas)

affordable to the end consumer.

Green H2 demand from Europe will be a game-changer for ANIL

Geopolitical tension in Europe following soaring energy prices has hastened Europe’s transition

from a fossil fuel energy-dependent market to a non-fossil one. To decarbonize the industrial

and transportation sectors and reduce dependency on Russian gas and coal supplies, European

Union (EU) presented the REPowerEU strategy in May 2022, which is a blueprint to put an end

to the imports of fossil fuels from Russia and a complete ban on the usage of polluting coal by

the year 2030.

The REPowerEU will focus on:

• Diversifying the EU energy supply,

• Increasing energy savings, and

• Accelerating the green energy transition, especially to solar, wind and green H2. The

focus would be limited to nuclear power.

EU’s total annual energy requirement in the year 2030 is estimated to be in the range of 17,800

TWh to 18,000 TWh, which is 7.5% higher (in the absolute term) than the year 2019 energy

demand of 16,623 TWh.

EU energy consumption and mix of sources

17

,35

1

17

,26

7

16

,93

5

16

,79

6

16

,72

7

17

,14

1

17

,66

9

17

,58

9

17

,76

6

17

,68

0

17

,80

5

18

,15

2

18

,02

9

18

,37

0

18

,60

4

18

,60

0

18

,72

1

18

,46

9

18

,37

2

17

,25

0

17

,88

6

17

,33

3

17

,10

3

16

,94

3

16

,31

7

16

,52

4

16

,71

1

16

,92

3

16

,91

8

16

,62

3

15

,23

3

16

,66

0

17

,07

0

17

,17

0

17

,27

0

17

,37

0

17

,47

0

17

,57

0

17

,67

0

17

,77

0

17

,87

0

-10-8-6-4-2024681012

14,000

14,500

15,000

15,500

16,000

16,500

17,000

17,500

18,000

18,500

19,000

CY

90

CY

91

CY

92

CY

93

CY

94

CY

95

CY

96

CY

97

CY

98

CY

99

CY

00

CY

01

CY

02

CY

03

CY

04

CY

05

CY

06

CY

07

CY

08

CY

09

CY

10

CY

11

CY

12

CY

13

CY

14

CY

15

CY

16

CY

17

CY

18

CY

19

CY

20

CY

21

E

CY

22

E

CY

23

E

CY

24

E

CY

25

E

CY

26

E

CY

27

E

CY

28

E

CY

29

E

CY

30

E

EU energy consumption - historical and forecast

Energy Consumption (TWh) YoY Growth (%)

TWh %

47 | P a g e ( 5 t h J u l 2 0 2 2 )



EU’s green H2 demand outlook

Source: Industry Reports & Ventura Research

To achieve 18,000 TWh capacity and a complete shift from dirty coal, the EU is

• Aiming to 4X its solar power capacity from the current 150 GW to 600 GW by 2030,

which is expected to generate 1,600 TWh of energy annually.

• Targeting 20-25 mn tonnes of green H2 usage by 2030, which will be fulfilled by 10 mn

tonnes of domestic green H2 production and 10-15 mn tonnes of green H2 imports. A

total of 750-800 TWh of green energy is expected to be generated annually.

• Expected to sustain its nuclear power capacity at 1,900 TWh in the next 8-10 years.

Although nuclear is a proven source of low-carbon energy, the sector today faces

0.1 0.2 0.2 0.5 1.4 1.9 2.1 2.3 2.3 2.5 0.1 0.3 1.0 2.4 5.6 7.3 8.8 15.3

24.6

4.6 5.3 5.6 4.4 5.4 5.1 4.7 5.5

4.9

4.8

11.7 12.8 13.4 13.3 12.5

12.0 11.4 11.1 10.9

10.6

16.8 18.4 20.2 22.5

23.6 21.0 23.5 24.9

21.6

19.6 26.2 21.4 18.5 17.4

16.2 16.8 12.2 10.8 8.8 0.1

40.7 41.9 41.8 40.8 38.5 37.6 38.7 36.5 34.5 33.6

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 4.3

CY90 CY95 CY00 CY05 CY10 CY15 CY19 CY20 CY25E CY30E

Significant changes in EU's energy mix, in the favour of green fuel

Biofuels & Geo Biomass Solar & Wind Hydro Nuclear Natural Gas Coal Crude Oil Green Hydrogen

2.9

5.8

8.6

11.5

14.4

17.3

20.2

23.0

CY23 CY24 CY25 CY26 CY27 CY28 CY29 CY30

Data in mn tonnes

48 | P a g e ( 5 t h J u l 2 0 2 2 )


major challenges within the EU. Some member states are strongly anti-nuclear, and

energy markets are often structured in response to populist support for renewables.

We believe that post-2030, nuclear energy output in the EU will decline, due to the

closure of some reactors – either because they have reached the end of their operating

lifetimes or due to political interference, and the energy demand will be replaced by

solar/wind and green H2.

• Planning to reduce its energy sourcing from oil & gas. Currently, the segment generates

10,500 TWh of energy, which is expected to decline to 9,500 TWh by 2030, which will

be mostly fulfilled by the imports from North America and Africa.

• Gradually improving its hydro, biofuel and biomass capacities, which is expected to

increase from the current 1,200 TWh to 1,300 TWh by 2030

Import of green H2 will be an economical option for EU overproduction

Lower heat radiations and higher capex costs to set up hybrid renewable projects for the

electrolysis of water to produce green H2 will be capital intensive and inefficient compared to

imported green H2. It is expected to create a pricing gap between domestically produced green

H2 and imported green H2.

European infrastructure map for green H2 sourcing

Source: European Commission May 2022 report

49 | P a g e ( 5 t h J u l 2 0 2 2 )


As per the Rocky Mountain Institute (RMI), EU cost for imported green H2 would be ~$3.8/kg

in 2024, which will further reduce to $2.0/kg by 2030, while domestically produced green H2

is expected to cost around $4.0/kg in 2024 and $2.5/kg by 2030. In 2030, green H2 (imported

or domestic) is expected to be far more economical than blue or grey H2

To facilitate the import of up to 10 mn tonnes of renewable H2, the EU will support the

development of three major H2 import corridors via the Mediterranean, the North Sea area

and, as soon as conditions allow, Ukraine. Other forms of fossil-free H2, notably nuclear-based,

also play a role in substituting natural gas.

ANIL is targeting to sell ~40% of its annual green H2 production (by FY31) and with the

predicted export opportunity of this green fuel in Europe, we are expecting the EU to become

an export destination for the company. This is expected to generate a significant long-term

forex income for the company.

50 | P a g e ( 5 t h J u l 2 0 2 2 )


What is H2 and how is it produced?

H2 is envisaged to be the fuel of the future and it will replace fossil fuels in the years to come.

H2 production is an energy-intensive activity and based on the source of energy H2 is classified

as

• Grey hydrogen

• Blue hydrogen

• Green hydrogen

Widely used forms of hydrogen


Other forms of hydrogen

Source: Energyeducation.ca

Bituminous coal is used to make black hydrogen

Brown coal (lignite) is used to make brown hydrogen

Biomass is used to make red hydrogen

Nuclear power is used to make pink hydrogen

Renewable power along with electrical grid are used to make yellow hydrogen.

Methane pyrolysis is used to make turquoise hydrogen.

Naturally occurring geological hydrogen is called

white hydrogen.

51 | P a g e ( 5 t h J u l 2 0 2 2 )


Comparison of H2 with alternate energy sources

Source: US Dept of Energies

Petrol Diesel Biodiesel LPG CNG LNG Ethanol Methanol Hydrogen Electricity

Fuel Material

(Feedstock)

Crude Oil (85%

import

dependency)

Crude Oil (85%

import

dependency)

Fats and oils

from sources

such as

soybeans,

waste cooking

oil, animal fats

and rapeseeds

A byproduct of

petroleum

refining or

natural gas

processing

Natural Gas

Natural Gas

(100%

imported)

Corn, Grains,

Sugarcane and

agricultural

waste

Hydrogen,

Natural Gas,

Coal and

Woody biomas

Natural Gas,

Coal, Nuclear

Energy and

Water

Electrolysis

Natural Gas,

Coal, Wind,

Solar and

Nuclear Energy

Pump Octane

Number (Fuel

quality -

higher is

better)

84 to 93 Not Applicable Not Applicable 105+ 120+ 120+ 110 112 130+ Not applicable

Autoignition

Temperature

(in degree F,

higher is

better)

495 600 300 900 1000 1000 800 900 1080 Not applicable

Gasoline

Gallon

Equivalent

1 gallon = 1

GGE

1 gallon = 1.12

GGE

1 gallon = 1.05

GGE

1 gallon = 0.74

GGE1 lb = 0.18 GGE 1 lb = 0.19 GGE

1 gallon = 0.67

GGE

1 gallon = 0.50

GGE1 lb = 0.45 GGE

1 KWh = 0.030

GGE

Diesel Gallon

Equivalent

1 gallon = 0.88

DGE

1 gallon = 1

DGE

1 gallon = 0.93

DGE

1 gallon = 0.66

DGE1 lb = 0.16 DGE 1 lb = 0.17 DGE

1 gallon = 0.59

DGE

1 gallon = 0.45

DGE1 lb = 0.40 DGE

1 KWh = 0.027

DGE

Energy

Content (low

heating value)

1,15,000

Btu/gallon

1,28,500

Btu/gallon

1,23,500

Btu/gallon

84,250

Btu/gallon

20,160

Btu/lb

21,240

Btu/lb

76,330

Btu/gallon

57,250

Btu/gallon

51,600

Btu/lb

3,414

Btu/KWh

Energy

Content (high

heating value)

1,22,400

Btu/gallon

1,38,500

Btu/gallon

1,28,000

Btu/gallon

91,420

Btu/gallon

22,450

Btu/lb

23,730

Btu/lb

84,530

Btu/gallon

65,200

Btu/gallon

61,000

Btu/lb

3,414

Btu/KWh

Energy

Security

Impacts

A significant

portion is

domestically

produced from

the imported

crude oil.

Transportation

accounts for

30% of the

total cost

A significant

portion is

domestically

produced from

the imported

crude oil.

Transportation

accounts for

30% of the

total cost

Domestically

produced

A significant

portion is

domestically

produced from

the imported

crude oil.

Transportation

accounts for

30% of the

total cost

Domestically

produced from

domestic

Natural Gas.

Transportation

accounts for

30% of the

total cost

Imported.

Transportation

accounts for

30% of the

total cost

Domestically

produced

Blue H2 is

based on

Natual Gas, but

green H2 is

domestically

produced

Domestically

produced

Domestically

produced

52 | P a g e ( 5 t h J u l 2 0 2 2 )


H2 roadmap of leading countries

Source: NITI Aayog

CountriesCurrent H2

demandPolicy target demand Capital Allocated (US$) Focused H2 Source Demand Focus

Export /

Import Focus

European Union

6 GW capacity by 2024, 40

GW by 2030

10 MMTPA green H2 by 2030

609 BnLow Carbon - Blue &

Green

Chemical feedstock, Refining

and TransportationImport

Germany 1.65 MMTPA 2.7-3.3 MMTPA by 2030 15-20 BnLow Carbon - Blue &

Green

Steel, Chemical feedstock,

Refining and TransportationImport

France 0.9 MMTPA6.5 GW via electrolysis by

2030>7 Bn

Low Carbon - Blue &

Green


Refining and TransportationExport

Netherlands 1.5 MMTPA Not Available 40-50 mn per yearLow Carbon - Blue &

Green


Refining, Transportation and

Heating

EU Export /

Import Hub

Hungary 160 KTPA36 KTPA low carbon + 138

KTPA grey by 2030450 Mn

Low Carbon - Blue &

Green

Chemical feedstock, Refining,

Transportation and HeatingExport

Portugal 150 KTPA

2.0-2.5 GW via electrolysis by

2030

400 KTPA overall by 2030

No dedicated capital Green



Heating

Export

Spain 0.5 MMTPA 4 GW via electrolysis by 2030 No details GreenChemical feedstock and

RefiningExport

United Kingdom 0.7 MMTPA5 GW electrolysis capacity by

20302 Bn

Low Carbon - Blue &

Green


Transportation, Heating and

Power

Export

Norway 23 Mn GreenChemical feedstock and

Maritime

Japan 2 MMTPA3 MMTPA by 2030 and 20

MMTPA by 2050935 Mn per year Blue

Transportation, Heating and

PowerImport

South Korea 220 KTPA3.9 MMTPA by 2030 and 27

MMTPA by 2050653 Mn per year

Low Carbon - Blue &

GreenTransportation and Power Import

United States 10 MMTPA >15 BnLow Carbon - Blue &

Green

Refining, Transportation,

Heating and Power

Canada 3 MMTPA 20 MMTPA by 2050 1.2 BnLow Carbon - Blue &

Green



Heating

Export

Australia 650 KTPA 278 Mn per yearLow Carbon - Blue &

Green

Chemica feedstock,


Chile 59 KTPA5 GW by 2025 and 25 GW by

205050 Mn Green

Chemica feedstock, Refining,


China 22 MMTPA35 MMTPA by 2030 and 160

MMTPA by 205013 Mn Green Transportation and Power

Russia 2-4 MMTPA7 MMTPA by 2035 and 33

MMTPA by 20501.2 Bn

Low Carbon - Blue &

GreenRefining & Transportation Export

India 8-9 MMTPA5 MMTPA by 2030 and 35

MMTPA by 2050No details Green

Steel, Chemical feedstock

and RefiningExport

53 | P a g e ( 5 t h J u l 2 0 2 2 )


Why H2 is better than other fuels available in India

Hydrogen fuel cell technology presents several advantages over other power sources,

including:

• H2 is easy to store and transport due to its high auto-ignition temperature. It is the

lowest temperature in which any substance spontaneously ignites in a normal

atmosphere without an external source of ignition.

• H2 has the highest pump octane level (higher is better), which is a standard measure

of a fuel's ability to withstand compression in an IC engine without detonating.

• Unlike petrol, diesel and LPG, which are either imported directly or extracted from the

imported crude oil, green H2 is produced through water electrolysis, hence it has zero

import dependency.

• In terms of energy output, H2 is more efficient compared to any other fuel. 1 kg of H2

is equivalent to

o 3.76 litres of petrol. At the current petrol prices of INR 96.72/litre in Delhi, 3.76

litres of petrol (or 1.0 kg of H2) cost INR 364 or USD 4.66 (at INR 78 per USD).

o 3.34 litres of diesel. At the current diesel price of INR 89.62/litre in Delhi, 3.34

litres of diesel (or 1.0 kg of H2) costs INR 299 or USD 3.84 (at INR 78 per USD).

o 2.50 kg of CNG. At the current petrol prices of INR 75.61/kg in Delhi, 2.50 kg of

CNG (or 1.0 kg of H2) costs INR 189 or USD 2.42 (at INR 78 per USD).

Hence at the current market price of petrol, diesel and CNG in India, the minimum and

maximum range for H2 is ranging between USD 2.42 – USD 4.66 per kg, which is

significantly higher than the target of USD 1.0 per kg, set by ANIL and RIL.

• Unlike petrol, diesel and LPG, which are either imported directly or extracted from the

imported crude oil, green H2 is produced through water electrolysis, hence it has zero

import dependency.

54 | P a g e ( 5 t h J u l 2 0 2 2 )


Green H2: A zero carbon and a clean fuel for the future

Green H2 is produced through the electrolysis of water, which is the technique that splits water

(H2O) into H2 and oxygen (O2), by using electricity from clean energy sources – Solar and Wind.

Green H2 production process

Source: Fuel Cell & Hydrogen Energy Association

There are four main types of electrolyzers:

• Proton exchange membrane (PEM) Electrolyzers,

• Alkaline Electrolyzers,

• Solid Oxide Electrolyzers (SOEC) and

• Anion Exchange Membrane (AEM) Electrolyzers

Proton Exchange Membrane (PEM) Electrolyzers – PEM Electrolyzers use a Proton Exchange

Membrane with a solid polymer electrolyte. When current is applied to the cell stack, the water

splits into H2 and O2 and the H2 protons pass through the membrane to form H2 gas on the

cathode side.

Alkaline Electrolyzers – In Alkaline Electrolyzers, a reaction occurs between two electrodes in

a solution composed of water and liquid electrolyte. When sufficient voltage is applied, water

molecules take electrons to make OH⁻ ions and an H2 molecule.

Solid Oxide Electrolyzers (SOEC) – Under applied electrical potential, a solid oxide electrolyser

cell (SOEC) splits water into H2 by transferring oxygen ions (O2-) through a solid ionic

conductive membrane that after are recombining with electrons to form oxygen molecules.

Anion Exchange Membrane (AEM) Electrolyzers – In AEM electrolysis, a KOH electrolyte

solution, with water molecules carrying OH– ions, is circulated to the anode side of the

electrolyser. The liquid electrolyte hydrates the membrane and the catalyst layer on the GDL

without an additional supply of (excess) water.

55 | P a g e ( 5 t h J u l 2 0 2 2 )


Key performance indicators for the 4 electrolysers in 2020 and 2050

Source: International Renewable Energy Agency (IRENA)

Alkaline Electrolyzers have a dominant market share followed by the PEMs. Alkaline

Electrolyzers while being cheap and having a higher production rate than PEM needs to be run

continuously for the production equipment to get damaged. On the other hand, the PEM

electrolyzer while being more expensive yields higher quality H2 and can withstand

intermittent operations easily. ANIL has chosen the alkaline and PEM electrolyser route for the

manufacture of green H2.

Electrolyzer cost analysis

Source: Niti Aayog

Year 2020 Year 2050

Alkaline PEM SOEC AEM Alkaline PEM SOEC AEM

Cell Pressure (bara) <30 <70 <10 <35 >70 >70 >20 >70

Efficiency System

(KWh/KgH2)50 to 78 50 to 83 45 to 55 57 to 69 <45 <45 <40 <45

Lifetime (000 hrs) 60 50 to 80 <20 >5 100100

to 12080 100

Capital costs estimates

for large stacks ($/KW)270 400 >2000 NA <100 <100 <200 <100

Capital cost range

estimates for the entire

system ($/KW)

500

to 1000

700

to 1400NA NA <200 <200 <300 <200

56 | P a g e ( 5 t h J u l 2 0 2 2 )


Innovation is crucial to reduce costs and improve the performance of the electrolyser. The

ultimate goals are to:

• Reduce cost by standardising and simplifying manufacturing and design to allow for

industrialisation and scale-up;

• Improve efficiency to reduce the amount of electricity required to produce one unit of

H2; and

• Increase durability to extend the equipment lifetime and spread the cost of the

electrolyser facility over a larger H2 production volume.

The main challenge to the development of green H2 is its production cost, which is higher than

grey and blue H2 (produced using natural gas).

H2 production cost analysis (add $ sign)

Source: EIA & Industry Reports

Cost economics of H2 production – Green vs Grey vs Brown vs Blue

Source: NITI Aayog

LCOH – Levelized Cost of Hydrogen

The average production cost of green H2 is higher than grey & blue H2. However, as per

industry analysis, the green H2 is expected to reduce this gap by 2026 worldwide and many

breakthroughs are expected within the market in years to come, driven by increased support

from investors and government policies.

FuelQnty required to

produce 1kWhQnty Unit

Qnty required to

produce 50,000

kWh

Fuel PriceCost of 1,000 kg

H2 Production

Natural Gas 7.43 Cubic Feet 3,71,500 $7 per mmbtu 2,697

Coal 1.13 Pounds 56,500 $250 per MT 6,407

Solar 3,700

57 | P a g e ( 5 t h J u l 2 0 2 2 )


Production cost of Green & Blue H2 in 2021

Source: Goldman Sachs Global Investment Research

Production cost of Green & Blue H2 in 2030


58 | P a g e ( 5 t h J u l 2 0 2 2 )


A combination of cost reductions in electricity and electrolysers, combined with increased

efficiency and operating lifetime, can deliver an 80% reduction in H2 cost.

Green H2 cost reduction with efficiency and scale

Source: International Renewable Energy Agency (IRENA)

Projected price trajectory of green H2

Source: NITI Aayog

MENA, Chile, India, and Australia could emerge as key clean H2 exporting regions while Japan,

Korea, Central Europe, and potentially parts of East China could become clean H2 importing

regions, depending on the scale and importance of clean H2 in their respective economies.

59 | P a g e ( 5 t h J u l 2 0 2 2 )


As per global research, India’s green H2 cost per kg is expected to decline from $6.0/kg in 2021

to less than $2.0/kg in 2030. However, considering the recent surge in solar and wind

installation by AGEL and ANIL along with strong backward integration, ANIL is targeting $2.4/kg

in FY24, which is expected to further come down to $1.5/kg by FY30.

The global demand outlook for green H2


India: National Hydrogen Mission

• The proposed National Hydrogen Energy Mission aims to lay down the vision, intent

and direction for harnessing H2 energy by the Government of India.

• The aim is to develop India as a global hub for the manufacturing of H2 and fuel cell

technology across the value chain.

• The mission would put forward a specific strategy for the short term (four years), and

broad strokes principles for the long term (10 years and beyond).

• It will provide the necessary flexibility to capture benefits from the advances that are

taking place in the technological landscape.

• The Government of India will facilitate demand creation in identified segments.

Possible areas include suitable mandates for use of green H2 in the industry such as

fertilizer, steel, petrochemicals etc.

• Major activities envisaged under the mission include creating volumes and

infrastructure; demonstrations in niche applications including transport and industry;

goal-oriented research & development; facilitative policy support; and putting in place

a robust framework for standards and regulations for H2 technologies.

• The mission aims to aid the government in meeting its climate targets and making India

a green H2 hub. This will help in meeting the target of production of 5 mn tonnes of

green H2 by 2030 and the related development of renewable energy capacity.

56 70 98

196

539

0

100

200

300

400

500

600

CY15 CY20 CY30 CY40 CY50

Hydrogen demand outlook

Data in mn MT

Industry Feedstocks, 70

Building Heat & Power, 63

Industrial Energy, 77

Transportation, 112

Power Generation,

154

Others, 63

Segmental demand for green hydrogen in CY50

Data in mn MT

60 | P a g e ( 5 t h J u l 2 0 2 2 )


India’s progress toward Green H2

• India aims to become an energy-independent nation by 2047 where green H2 will play

an active role as an alternate fuel to petroleum/ fossil-based products.

• In 2020, India’s H2 demand stood at 6 mn tonnes per year, which is expected to see a

fivefold jump to 28 MT by 2050 where 80% of the demand is expected to be for green

H2.

• Some of the prominent companies such as AEL, Reliance Industries, GAIL, NTPC, Indian

Oil Corp and L&T plan to foray into the green H2 space. RIL plans to become a net-

carbon zero firm by 2035 and invest nearly INR 750 bn over the next three years in RE.

• India has declared its ambition to become an exporter of H2 to Japan, South Korea,

and Europe.

• Various H2-powered vehicles have been developed and demonstrated under projects

supported by the government. These include 6 Cell buses by Tata Motors., 50 H2-

enriched CNG (H-CNG) buses in Delhi by Indian Oil Corp in collaboration with Govt. of

NCT of Delhi, two H2 fueled Internal Combustion Engine buses (by IIT Delhi in

collaboration with M&M).

Applications of green H2

H2 is already widely used in some industries, but it has not yet realized its potential to support

clean energy transitions. Ambitious, targeted and near-term action is needed to further

overcome barriers and reduce costs.

• H2 use today is dominated by heavy industries, such as oil refining, ammonia

production, methanol production and steel production. Virtually all of this H2 is

supplied using fossil fuels, so there is significant potential for emissions reductions

from green H2.

• In transport, the competitiveness of H fuel c2ell cars depends on fuel cell costs and

refuelling stations while for trucks the priority is to reduce the delivered price of H2.

Shipping and aviation have limited low-carbon fuel options available and represent an

opportunity for H2-based fuels.

• In buildings and real estate, H2 could be blended into existing natural gas networks,

with the highest potential in multifamily and commercial buildings, particularly in

dense cities while longer-term prospects could include the direct use of H2 in H2

boilers or fuel cells.

• In power generation, H2 is one of the leading options for storing renewable energy,

and H2 and ammonia can be used in gas turbines to increase power system flexibility.

Ammonia could also be used in coal-fired power plants to reduce emissions.

• H2 can be used for the manufacturing of ammonia, urea and methanol

61 | P a g e ( 5 t h J u l 2 0 2 2 )


Downstream products and their production process

Green H2 from the electrolysis process and Nitrogen (N2) from the air is fed into the Haber-Bosch Process, powered by a

sustainable flow of green energy. In the process, H2 and N2 are reacted together at high temperatures and pressures to

produce ammonia. Then, ammonia is reacted with CO2 into the urea product.

Green H2 is reacted with CO2 to produce green methanol.


Potential application of green H2 in India

Source: NITI Aayog

Green H2

(1.0 KTPA)

Green Ammonia

(5.6 KTPA)

Green Urea

(10.0 TPA)

CO2 from factories

(4.4 TPA)

N2 from air

(4.6 KTPA)

Green H2

(1.0 KTPA)

Green Methanol

(5.2 KTPA)

CO2 from factories

(4.2 KTPA)

62 | P a g e ( 5 t h J u l 2 0 2 2 )


Sector wise demand for H2 and share of green H2 in total demand

Source: NITI Aayog

Aspirational targets by India for the usage of green H2 in various sectors

Source: NITI Aayog

Segment

Current

annual H2

demand

(mn tonnes)

Current

contribution

of green H2

(%)

Annual H2

demand by

2030 (mn

tonnes)

Contribution

of green H2

by 2030 (%)

Annual H2

demand by

2040 (mn

tonnes)

Contribution

of green H2

by 2040 (%)

Annual H2

demand by

2050 (mn

tonnes)

Contribution

of geen H2 by

2050 (%)

Refinery 3.0 0.0 5.0 20.0 5.0 60.0 5.0 100.0

Ammonia 3.0 0.0 4.5 15.0 5.0 55.0 5.5 95.0

Methanol 0.1 0.0 0.3 0.0 1.4 17.5 2.5 35.0

Iron & Steel 0.4 0.0 0.8 15.0 4.7 57.5 8.5 100.0

Heavy duty road freight 0.0 0.0 0.0 0.0 3.3 50.0 6.5 100.0

Power 0.0 0.0 0.0 0.0 1.0 50.0 2.0 100.0

City Gas Distribution 0.0 0.0 3.0 90.0 3.8 95.0 4.5 100.0

TOTAL 6.5 0.0 13.6 33.1 24.1 59.7 34.5 94.5

Sector Category Targets

Old PlantsFleet level carbon intensity by 2035 should be less than 2 tonnes of CO2 per tonne

of steel

New CapacitiesAt least 20 mn tonnes of green H2 based green steel to be made in India primarily

for exports

City Gas Distribution Pilot and subsequent scale-up 10% blending by 2025 and 20% by 2030

Green Ammonia Exports25 mn tonnes of exports to countries such as Japan, Korea, and the European

Union

Heavy Duty Vehicles Pilots on specific routes1,000 trucks, 50 boats, and 10 aircrafts to be piloted by 2030. Three H2 corridors to

be developed across the country based on state grand challenge.

Power Allow participation in RTC tendersWhere economics makes sense, allow H2 to compete with other storage

technologies in Round the Clock tenders by SECI.

Steel

63 | P a g e ( 5 t h J u l 2 0 2 2 )


ANIL’s 2.5 MMTPA green H2 ecosystem


Electrolyzer plays a key role and its cost accounts for 70% of the total capital cost. AEL will be

using the combination of Alkaline and PEM electrolyzers for the production of green H2.

Cost structure and capacity utilization of AEL’s electrolyzers


45-48 GW of Renewable Power

Capacity

1.0 MMTPA of H2 will be sold

outside

1.5 MMTPA of H2 for captive use

1.1 MMTPA of H2 for Ammonia

5.8 MMTPA of Ammonia

3.8 MMTPA

of Urea

0.4 MMTPA of H2 for Methanol

2.3 MMTAP of Methanol

Particulars

Electrolyzer Capacity (MW) 34,000

Per day working (hours) 12

Per day power generation (Mwh) 4,08,000

Heating Value (Kwh / H2 kg) 33

Electrolyzer Efficiency (%) 57

Per day H2 production (Kg) 70,47,273

No of Working Days 365

Annual H2 production (Kg) 2,57,22,54,545

Annual H2 production (tonnes) 25,72,255

Annual H2 production (mn tonnes) 2.57

Per KW capex on electrolyzer (USD) 325

Capex on Electrolyzer in USD mn 11,050

Capex in INR Cr (exchange rate 1 USD = INR 77) 85,085

Life of Electrolyzer (years) 20

Annual depreciation (USD mn) 553

Cost of renewable energy (INR/KWh) 1.9

Cost of renewable energy (USD/MWh) 24.7

Electrolyzer opex & depreciation per day (000 USD) 11,581

Green H2 price (USD per kg) 1.6

Consumes 78,000

GWh power @ of

52,000 GWh per

MMTPA of H2

Consumes 220 GWh

power @ 95 GWh per

MMTPA of Methanol

Consumes 5,450

GWh power @ 940

GWh per MMTPA of

Ammonia

Consumes 760 GWh

power @ 200 GWh

per MMTPA of Urea

Consumes 52,000

GWh power per

MMTPA

ANIL has a potential

capacity of 20 GW at

Khavda (Gujarat) and

planning to enhance

it to 45 GW by FY30

64 | P a g e ( 5 t h J u l 2 0 2 2 )


Currently, green H2 is a relatively expensive fuel as compared to conventional alternatives.

However, the increasing penetration of renewable energy in power generation, and

technological and cost improvements in electrolyzer technology collectively have the potential

to substantially alter this pricing structure favourably.

We have done a cost sensitivity analysis on the electrolyzer capex and energy cost to get the

per kg price of green H2 in the different scenarios. Our calculations are based on the above

table – ‘Cost structure and capacity utilization of AEL’s electrolyzers’

Sensitivity to Electricity Cost and Electrolyzer Capex for per kg H2 price

Electolyzer Capex ($/KW)


ANIL’s infrastructure requirements for green H2 production


ANIL has 71,000 acres of leased land in Khavda, which would be sufficient for a 20 GW of

renewable capacity. However, this capacity will become insufficient to fulfil the energy

requirement in FY27. ANIL is expected to work on two options

• ANIL will source additional renewable power from Adani Green Energy Ltd (AGEL) or

• ANIL will acquire additional ~65,000 acres of land to install new solar & wind capacities.

Like Khavda, we believe that ANIL will require land near its Mundra SEZ to manufacture

renewable energy.

1.6 325 375 425 475 525 575 625

10 0.79 0.83 0.86 0.89 0.93 0.96 0.99

15 1.08 1.12 1.15 1.18 1.22 1.25 1.28

20 1.37 1.41 1.44 1.47 1.50 1.54 1.57

25 1.66 1.70 1.73 1.76 1.79 1.83 1.86

30 1.95 1.98 2.02 2.05 2.08 2.12 2.15

35 2.24 2.27 2.31 2.34 2.37 2.41 2.44

40 2.53 2.56 2.60 2.63 2.66 2.70 2.73

Particulars Unit FY26 FY27 FY28 FY29 FY30 FY31

Sales Volumes

H2 Tonnes 0.2 0.5 1.0 1.5 2.0 2.5

Ammonia Tonnes 0.7 1.5 2.2 2.9 4.4 5.8

Urea Tonnes 1.3 1.3 1.3 2.5 2.5 3.8

Methanol Tonnes 0.0 0.0 0.8 1.5 2.3 2.3

Power Required

H2 GWh 8,760 26,280 52,560 78,840 1,05,120 1,31,400

Ammonia GWh 683 1,367 2,050 2,733 4,100 5,458

Urea GWh 254 254 254 508 508 761

Methanol GWh 0 0 71 143 214 214

Total Power Required GWh 9,697 27,901 54,935 82,224 1,09,941 1,37,833

PLF % 35.0 35.0 35.0 35.0 35.0 35.0

Required Power Capacity GW 3.2 9.1 17.9 26.8 35.9 45.0

Land required to produce 1 MW of hybrid renewable power Acres 3.0 3.0 3.0 3.0 3.0 3.0

Land required to install power capacity Acres 9,489 27,300 53,753 80,454 1,07,575 1,34,866

Re

ne

wab

le E

ne

rgy

Co

st

($/M

Wh

)

65 | P a g e ( 5 t h J u l 2 0 2 2 )


-10

0

10

20

30

40

50

60

70

80

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31

H2 & downstream products to accelerate revenue growth in the next 8-10 years

Total Operating Revenue YoY Growth (%)

INR Cr %

12 22 27 28 29 29 26 24

88 66 53 38 31 26 23 21

0 8

6

6 4 5

5 4

0 0 2

5 7 6

5 5

0 0 1

7 11 14 14 18

0 0 0 6 9 8 14 17

0 0 6 4 3 6 5 7 0 4 5 6 5 4 3 0


A well diversified portfolio of H2, ammonia, urea and RE power

Wind Mfg Poly-Module Electrolyzer

Fuel Cell Battery Hydrogen

Ammonia Urea Methanol

Renewable Power

20

30

40

50

60

70

80

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000


Operating margins to improve on higher capacity utilization

EBITDA Margin (%)

INR Cr %

0

5

10

15

20

25

30

35

40

0

5,000

10,000

15,000

20,000

25,000

30,000


Higher operating profits and faster debt repayments to improve bottom-line

PAT Margin (%)

INR Cr %

7

8

9

10

11

12

13

14

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000


Higher net profit to deliver strong ROE in the coming years

Net Worth Return on Equity (%)

INR Cr %

8

9

10

11

12

13

14

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

3,50,000

4,00,000


Improvement in operating profits to stablize RoIC

Invested Capital Return on Invested Capital (%)

INR Cr %

ANIL Story in Charts

66 | P a g e ( 5 t h J u l 2 0 2 2 )



20

30

40

50

60

70

80

90

100

0

10,000

20,000

30,000

40,000

50,000

60,000


Operating cash flow to improve on higher EBITDA margins

Cash Flow from Operations CFO to EBITDA (%)

INR Cr %

-500

-400

-300

-200

-100

0

100

-40,000

-30,000

-20,000

-10,000

0

10,000

20,000


FCF to become positive after initial periods of higher capex

Free Cash Flow to Firm FCFF to Cash Profit (%)

INR Cr %

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

-20,000

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000


Higher operating cash flow to be utilized for faster repayment of debt

Net Debt Net Debt to Equity (X)

INR Cr %

-1

-1

0

1

1

2

2

3

3

4

-20,000

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000


Faster repayment of debt to signifianctly improve debt to EBITDA ratio

Net Debt Net Debt to EBITDA (X)

INR Cr %

67 | P a g e ( 5 t h J u l 2 0 2 2 )


ANIL’s Financial Summary


Fig in INR Cr, unless specified FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31

Wind Mill 0 1,800 5,856 9,912 13,968 18,024 20,281 20,281 20,281

Poly Module 6,026 13,134 17,188 19,272 19,203 18,866 18,531 18,197 17,542

Electrolyzer 0 0 2,183 2,189 2,868 2,767 3,697 3,569 3,392

Fuel Cell 0 0 0 0 0 310 1,037 1,550 1,606

Battery 0 0 0 764 2,670 4,110 4,303 4,094 3,974

Hydrogen 0 0 0 430 3,489 6,694 9,906 11,228 14,725

Ammonia 0 0 0 24 2,813 5,482 5,500 11,169 14,297

Urea 0 0 0 2,090 2,045 2,001 3,998 4,076 6,260

Methanol 0 0 0 0 0 495 990 1,514 1,551

Renewable Power 0 0 970 1,940 2,999 2,992 2,877 2,637 0

Total Operating Revenue 6,026 14,934 26,196 36,619 50,054 61,741 71,118 78,315 83,628

YoY Growth (%) 147.9 75.4 39.8 36.7 23.3 15.2 10.1 6.8

Operating Expenses 4,820 11,476 19,985 22,069 27,423 29,592 29,010 26,360 23,883

OPEX to Sales (%) 80.0 76.8 76.3 60.3 54.8 47.9 40.8 33.7 28.6

EBITDA 1,205 3,458 6,211 14,550 22,632 32,150 42,107 51,954 59,745

Margin (%) 20.0 23.2 23.7 39.7 45.2 52.1 59.2 66.3 71.4

Depreciation & Amortization 346 824 1,586 3,212 5,162 7,363 9,551 11,519 12,315

EBIT 859 2,634 4,625 11,339 17,469 24,786 32,557 40,436 47,430

Margin (%) 14.3 17.6 17.7 31.0 34.9 40.1 45.8 51.6 56.7

Other Income 13 33 91 198 315 446 574 684 745

CSR Expenses 5 13 31 76 128 191 255 327 412

CSR Expenses to Sales (%) 0.1 0.1 0.1 0.2 0.3 0.3 0.4 0.4 0.5

Finance Cost 377 97 610 2,369 4,746 7,325 10,116 12,475 13,410

PBT 491 2,557 4,076 9,091 12,911 17,716 22,760 28,318 34,353

Margin (%) 8.1 17.1 15.6 24.8 25.8 28.7 32.0 36.2 41.1

Tax 83 435 693 1,545 2,195 3,012 3,869 4,814 5,840

Tax Rate (%) 17.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0

PAT 407 2,122 3,383 7,545 10,716 14,704 18,891 23,504 28,513

Margin (%) 6.8 14.2 12.9 20.6 21.4 23.8 26.6 30.0 34.1

Net Worth 11,299 24,712 40,368 60,894 85,162 1,13,077 1,44,816 1,79,641 2,17,586

Return on Equity (%) 3.6 8.6 8.4 12.4 12.6 13.0 13.0 13.1 13.1

Capital Employed 11,920 26,527 53,805 1,06,682 1,58,019 2,23,350 2,87,446 3,48,894 3,83,577

Return on Capital Employed (%) 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Invested Capital 6,471 22,643 49,091 93,757 1,46,185 2,10,121 2,71,511 3,29,582 3,68,508

Return on Invested Capital (%) 13.3 11.6 9.4 12.1 12.0 11.8 12.0 12.3 12.9

Cash Flow from Operations 302 1,452 3,416 9,992 17,865 26,171 35,415 45,332 51,921

Cash Flow from Investing -5,989 -15,404 -25,871 -44,744 -54,832 -68,077 -67,798 -67,424 -48,924

Cash Flow from Financing 11,136 12,388 23,285 42,962 35,875 43,302 35,089 25,470 -7,240

Net Cash Flow 5,449 -1,565 830 8,211 -1,091 1,395 2,706 3,378 -4,243

Free Cash Flow to Firm -5,375 -13,871 -21,948 -32,785 -33,028 -35,827 -23,987 -11,737 14,127

CFO to EBITDA (%) 25.0 42.0 55.0 68.7 78.9 81.4 84.1 87.3 86.9

FCFF to Cash Profit (%) -713.4 -470.8 -441.7 -304.8 -208.0 -162.4 -84.3 -33.5 34.6

Capex 0 -9,415 -19,882 -38,755 -48,843 -62,088 -61,809 -61,435 -42,935

Total Debt 621 1,815 13,437 45,788 72,857 1,10,273 1,42,629 1,69,254 1,65,991

Net Debt -4,827 -2,069 8,723 32,863 61,023 97,044 1,26,695 1,49,941 1,50,922

Net Debt to Equity (X) -0.4 -0.1 0.2 0.5 0.7 0.9 0.9 0.8 0.7

Net Debt to EBITDA (X) -4.0 -0.6 1.4 2.3 2.7 3.0 3.0 2.9 2.5

68 | P a g e ( 5 t h J u l 2 0 2 2 )


Valuation

ANIL is expected to emerge as India’s largest green H2 player. We have used the DCF valuation

methodology and discounted back the future cash flows to FY25 and value ANIL at INR 2,405

per share.

DCF Valuation for ANIL


With the completion of the 2.5 mn tonnes of green H2 planned capacities in FY31, ANIL is

expected to achieve steady-state EBITDA of INR 59,701 cr in FY32.

While the roadmap for ANIL is to reach 2.5 MMTPA of green H2 capacity, the recent

partnership agreement signed with TotalEnergies is for 1.0 MMTPA. If we consider only 1.0

MMTPA of green H2 capacity then the DCF valuation for ANIL works out to INR 1,750 (FY25

equity value of INR 2,07,397 cr).

Cost of Equity (%) 11.2

Cost of Debt (%) 6.6

WACC (%) 8.5

Terminal Value Growth (%) 3.0

Particulars FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40

FCFF (INR Cr) -21,948 -32,785 -33,028 -35,827 -23,987 -11,737 14,127 62,042 59,141 56,589 54,014 50,654 48,367 46,693 45,033 43,398

Discount Factor (X) 0.92 0.85 0.78 0.72 0.67 0.61 0.57 0.52 0.48 0.44 0.41 0.38 0.35 0.32 0.30 0.27

Discounted FCFF (INR Cr) -20,238 -27,875 -25,893 -25,899 -15,989 -7,214 8,007 32,422 28,498 25,143 22,129 19,136 16,848 14,998 13,337 11,852

Total of Discounted FCFF (INR Cr) 69,261

Terminal Value (INR Cr) 8,20,129

PV of Terminal Value (INR Cr) 2,23,970

Value of Operations (INR Cr) 2,93,230

FY25 Net Debt (INR Cr) 8,723

FY25 Value of Equity (INR Cr) 2,84,507

Value per share (INR) 2,401

69 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Coal Business

70 | P a g e ( 5 t h J u l 2 0 2 2 )


Adani Coal Business

Unless renewable energy becomes a source of stable base-load power through proven and

economically viable technologies, coal will continue to be a key contributor to India's energy.

The primary reason: it is affordable, accessible, and easily stored and transported, making it

well suited to meeting the energy needs of industrializing economies.

AEL is one of the largest coal mining and resource management companies in India. It operates

its coal business under three verticals –

• Integrated Resource Management (IRM),

• Mine Developer & Operator (MDO) and

• Commercial Mining.

Adani’s coal business verticals


71 | P a g e ( 5 t h J u l 2 0 2 2 )


Commercial Mining

AEL forayed into the mining business in 2010 through its wholly-owned subsidiary, Adani

Mining Pvt Ltd, in Australia which owns a 100% stake in the Carmichael mine in the Galilee

Basin in Queensland, Australia. The mine was initially planned to produce 60 MMT of coal per

year, however, funding difficulties resulted in downsizing the planned production to 10 MMT

per year. This is expected to be increased to 15 MMT by FY24. At 11% ash content and weighted

average calorific value of 5,000–5,500 kcal/kg Charmichael is a superior quality coal and

expected to command premium pricing.

Carmichael Mine Project in Australia


A brief history of the Carmichael mine project

• Carmichael is a thermal coal mine, which has been approved by the Queensland and federal governments.

• AEL had initially planned the project in 2010 with an investment of A$16.5 bn but later scaled it down to A$2 bn. This was

one of the biggest investments by an Indian company in Australia.

• The opposition to the project was so fierce that for several years, banks refused to fund it. In addition, it will increase

shipping traffic through the Great Barrier Reef heritage area and add around 4.7 bn tonnes of carbon pollution to the

atmosphere over its 60-year lifespan. The opposition grew so strong that over the years several banks refused to fund it.

• The group, however, went ahead with the project which included the construction of a new railway line connecting an

Australian port to the mine – situated 300 km away in Queensland.

• The project was given the final go-ahead in June 2019 and construction activities commenced later that year and the first

cargo dispatch started in Q4FY22.

• As per AEL, Carmichael will produce 14-15 MMTPA of thermal coal per annum at a peak capacity.

72 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Carmichael Mine Financial Summary


Over FY23-25, revenues from Carmichael mines are expected to grow at 10.7% CAGR mainly

due to the commencement of mines & increase in demand for coal. The EBITDA/tn is expected

to be at A$ 5.6/tn by FY25, while the absolute EBITDA is expected to grow at 7.7% CAGR to A$

81 mn over the same period with EBITDA margins expected to be at 7.2%.

Carmichael Mine (fig in A$ mn, unless specified) FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Coal Volume (000 tonnes) 3,876 11,705 14,399 14,465 14,926 15,048 14,974 14,894 14,868

YoY Growth (%) 202.0 23.0 0.5 3.2 0.8 -0.5 -0.5 -0.2

Avg Price Realization (A$/tonne) 83.5 78.3 74.8 77.7 82.1 84.1 87.2 89.8 91.6

Revenue 323 917 1,077 1,123 1,225 1,265 1,306 1,337 1,362

YoY Growth (%) 183.4 17.5 4.3 9.1 3.3 3.2 2.4 1.8

Royalties 20 58 68 71 78 81 83 85 87

Mine Cost 152 410 482 490 521 510 479 468 470

Rail Costs 90 264 331 341 360 370 339 344 351

Port Costs 34 86 99 102 109 113 115 117 119

Linc Royalty 9 29 36 37 39 40 41 41 42

EBITDA 18 70 61 81 120 151 248 281 293

EBITDA per tonne ($A) 5 6 4 6 8 10 17 19 20

EBITDA Margin (%) 5.5 7.6 5.7 7.2 9.8 11.9 19.0 21.0 21.5

Depreciation & Amortisation 62 88 92 91 89 86 84 82 80

EBIT -44 -18 -31 -10 31 65 164 199 213

EBIT Margin (%) -13.7 -1.9 -2.9 -0.9 2.5 5.1 12.6 14.9 15.6

Interest on deferred govt royalty 0 0 0 0 0 1 4 4 4

DSRA Interest -0 -0 -0 -0 -0 -0 -0 -0 -0

Withholding taxes - non-residents 0 0 0 0 0 0 0 0 0

Reversal of deferred revenue -25 -60 -53 0 0 0 0 0 0

Translation gains / (losses) 0 0 0 0 0 0 0 -0 0

Interest expense - Equipment lease 5 8 10 9 8 7 5 4 2

Interest expense - Working capital facility 0 0 0 0 0 0 0 0 0

Interest expense - CHPP 0 0 0 0 0 0 0 0 0

Interest expense - Other debt 10 22 24 23 21 20 18 16 14

Shareholders Loan Interest 0 0 0 0 0 0 0 0 0

PBT -34 12 -12 -42 1 37 137 175 193

PBT Margin (%) -10.6 1.3 -1.1 -3.8 0.1 2.9 10.5 13.1 14.2

Tax expense 0 3 0 0 0 9 34 44 48

Tax Rate (%) 0.0 25.0 0.0 0.0 25.0 25.0 25.0 25.0 25.0

Net Profit -34 9 -12 -42 1 28 102 131 145

Net Margin (%) -10.6 0.9 -1.1 -3.8 0.1 2.2 7.8 9.8 10.6

Net Worth 1,414 1,426 1,414 1,372 1,373 1,351 1,266 1,210 1,159

Return on Equity (%) -2.4 0.6 -0.8 -3.1 0.1 2.1 8.1 10.8 12.5

Capital Employed 1,949 2,111 2,096 1,997 1,931 1,858 1,701 1,567 1,435

Return on Capital Employed (%) -2.3 -0.6 -1.5 -0.5 1.2 2.6 7.2 9.5 11.1

Invested Capital 1,773 1,860 1,844 1,774 1,740 1,699 1,575 1,477 1,383

Return on Invested Capital -2.5 -1.0 -1.7 -0.5 1.8 3.8 10.4 13.5 15.4

Total Debt 535 685 682 625 558 507 435 357 276

Net Debt 359 434 429 402 366 348 309 266 224

Net Debt to EBITDA (X) 20.0 6.2 7.0 4.9 3.1 2.3 1.2 0.9 0.8

Net Debt to Equity (X) 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2

73 | P a g e ( 5 t h J u l 2 0 2 2 )


Domestic coal mining

India opened up coal mining to the private sector for the first time in 2020, after years of

lobbying by coal consumers. AEL won bids for the coal block development and production for

the following mines in India:

• Dhirauli (Madhya Pradesh) – It is AEL’s first commercial domestic mine with a proven

reserve of 302.6 mn tonnes (MT) and an estimated additional reserves of 283.8 MT.

The mine is yet to start operations, which is pending for final approval. The mine has a

target annual capacity of 5.0 MTPA.

• Gondulpara (Jharkhand) – It is AEL’s second domestic commercial mine with proven

reserves of 302.6 MT and estimated additional reserves of 283.8 MT (MT). The mine is

yet to start operations, which is pending for final approval. The mine has a target

annual capacity of 4.0 MTPA (open cast mine).

• Jhigador (Chhattisgarh) – Acquired in 2021, it has proven reserves of 250 MT. The mine

is in various stages of development

• Khargaon (Chhattisgarh) – The mine is under various stages of development

AEL’s Commercial Mining in India


Khargone

Dhirauli

Jhigador

Gondulpara

74 | P a g e ( 5 t h J u l 2 0 2 2 )


Financials and cash flow details of AEL’s Indian mines are yet to be disclosed, therefore we

have not considered it in our valuations. Further, to enhance its coal sourcing, AEL also

increased its coal volumes across its IRM and MDO verticals.

Integrated Resource Management (IRM) business

Domestic coal consumption has consistently outstripped domestic production, necessitating

the need for substantial imports. ~25% of the domestic consumption during FY18-21 was

imported from Indonesia, Australia and South Africa (which contribute to ~80% of our total

imports).

AEL ventured into coal management in 1999 to address the gap in the requirement of coal at

thermal power plants. Over the past 20 years, AEL has emerged as the largest domestic coal

supplier and importer in India. It is India’s largest non-coking coal importer from Indonesia,

South Africa and USA. The company has also enhanced its presence in the growing coal markets

of Sri Lanka, Thailand, Vietnam, China and Dubai.

Under this division, AEL provides complete logistics solutions which include:

• Sourcing resources from suppliers,

• Managing sea-borne logistics,

• Providing an intermediate holding facility at discharge ports, and

• Delivering resources to customers.

AEL’s IRM Global Footprints

Source: Company Presentation

75 | P a g e ( 5 t h J u l 2 0 2 2 )


While the primary customers for the IRM business consist of state or central-owned Electricity

Boards, AEL has over the years diversified to other businesses like steel, cement and other

metals to derisk its dependence. Currently, the IRM business has more than 600 customers

across various downstream industries and is a market leader.

India’s growing appetite for coal is set to add 130 MT to the coal demand over CY21-24. As per

EIA estimates, coal consumption in India is expected to increase at an average annual rate of

3.9%, to reach 1,185 MT in 2024.

India’s long term coal demand from different sectors (mn tonnes)

Source: NITI Aayog & Ventura Research

Global growth in coal consumption 2021-2024

Source: IEA Coal 2021 Report

As displayed in the above chart, coal usage in India is expected to only rise in contrast to

stagnation in other parts of the world, including China. India is also set to overtake China as

the world’s largest metallurgical coal importer due to the rising demand for coal from thermal

power plants and heavy industries.

Sector 2024 2030 2035 2040

Utility electricity

generation770-790 850-870

May increase

slowly from 2030

levels

Most likely lower

than 2035 levels

Industrial demand

(ex-captive)280-300 300-320

Continues to

increase334-420

Captive electricity

generation110-120 130-140

Continues to

increase 161-200

3.9

1.1

-5.3

-8.5

1.50.7 0.5

-10

-8

-6

-4

-2

0

2

4

6

India China USA EU Russia Africa World

CAGR %

76 | P a g e ( 5 t h J u l 2 0 2 2 )


Over FY22-25E, AEL’s IRM volumes are expected to grow at a CAGR of 2.0% to 68 mn tonnes

given that the business is more or less in a mature phase. However, revenues are expected to

decline at 13.8% CAGR to INR 912 cr due to the expected correction in the global coal prices

after the recent peak.

We have not considered any hikes in contract pricing in our forecasts and this remains an

upside risk to our revenue estimates. In terms of operating profits, we expect the same to

decline at 19.0% CAGR over the same period with FY25 margins at 2.9%.

AEL’s IRM Financial Summary


Mine Developer and Operator (MDO) business

AEL pioneered the concept of MDO in India. The MDO vertical undertakes mining operations

on a turnkey basis (from mine owners). These contracts are on a take-or-pay basis and

therefore secure AEL’s cash flow.

IRM Business (fig in INR Cr, unless specified) FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Coal Volumes (MMT) 67 79 63 64 66 67 68 70 71 73 74 75

YoY Growth (%) 16.8 -19.5 1.6 2.0 2.0 2.0 2.0 2.0 2.0 2.0 1.9

Total Revenue 31,764 30,903 24,280 33,227 30,245 30,848 31,463 32,091 32,730 33,383 34,049 34,728

YoY Growth (%) -2.7 -21.4 36.8 -9.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Revenue per MT (INR) 4,709 3,922 3,830 5,159 4,604 4,603 4,603 4,603 4,603 4,605 4,606 4,608

Operating Cost 30,651 29,620 23,403 31,769 29,372 29,956 30,551 31,158 31,779 32,412 33,058 33,716

Operating EBIDTA 1,113 1,283 877 1,458 873 892 912 933 952 971 991 1,012

EBITDA per MT (INR) 165 163 138 226 133 133 133 134 134 134 134 134

EBITDA Margin (%) 3.5 4.2 3.6 4.4 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9

Depreciation 23 28 28 28 28 28 0 0 0 0 0 0

EBIT 1,090 1,255 849 1,430 845 864 912 933 952 971 991 1,012

EBIT Margin (%) 3.4 4.1 3.5 4.3 2.8 2.8 2.9 2.9 2.9 2.9 2.9 2.9

Other Income 77 46 99 99 99 99 99 99 99 99 99 99

Finance Cost 539 534 330 309 310 305 296 287 279 270 262 254

PBT 628 767 618 1,220 634 658 715 744 772 800 828 856

PBT Margin (%) 2.0 2.5 2.5 3.7 2.1 2.1 2.3 2.3 2.4 2.4 2.4 2.5

Tax 19 40 28 115 57 59 64 67 70 73 76 78

Tax Rate (%) 3.0 5.2 4.5 9.5 8.9 9.0 9.0 9.0 9.1 9.1 9.1 9.2

PAT 609 727 590 1,105 577 599 651 677 702 727 753 778

PAT Margin (%) 1.9 2.4 2.4 3.3 1.9 1.9 2.1 2.1 2.1 2.2 2.2 2.2

Net Worth 12,673 13,111 14,465 15,503 16,013 16,543 17,124 17,729 18,360 19,015 19,696 20,402

Return on Equity (%) 4.8 5.5 4.1 7.1 3.6 3.6 3.8 3.8 3.8 3.8 3.8 3.8

Capital Employed 18,215 18,437 18,533 19,929 20,439 20,837 21,288 21,769 22,278 22,816 23,383 23,978

Return on Capital Employed (%) 6.2 7.2 4.8 7.9 4.5 4.5 4.7 4.7 4.7 4.6 4.6 4.6

Invested Capital 17,154 16,319 17,599 18,990 19,271 19,675 20,167 20,458 20,449 20,438 20,427 20,414

Return on Invested Capital (%) 6.4 7.7 4.8 7.5 4.4 4.4 4.5 4.6 4.7 4.8 4.9 5.0

Total Debt 5,542 5,326 4,068 4,426 4,426 4,293 4,164 4,039 3,918 3,801 3,687 3,576

Net Debt 4,481 3,208 3,134 3,486 3,257 3,131 3,043 2,729 2,089 1,423 731 12

Net Debt to Equity (X) 0.4 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.0 0.0

Net Debt to EBITDA (X) 4.0 2.5 3.6 2.4 3.7 3.5 3.3 2.9 2.2 1.5 0.7 0.0

77 | P a g e ( 5 t h J u l 2 0 2 2 )


The company has also set up its own Mineral Resource Exploration Division, which provides

complete mining solutions for surveying, coal block exploration and grading assessment. The

mining division manages exploration activity for the group in addition to providing services to

other companies.

AEL is a frontrunner in the domestic MDO business


Over FY22-25E, AEL’s MDO volumes are expected to grow at a CAGR of 38.5% to 72 mn tonnes,

while revenues are expected to grow at 38.8% CAGR to INR 5,749 cr. Similarly, EBITDA and PAT

are expected to grow at a CAGR of 45.9% to INR 2,481 cr and 43.9% to INR 1,581 cr respectively.

AEL’s MDO Valuation


MDO Business FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

ROM (Run of mine) Volume (MT) 15 16 18 30 57 64 79 89 97 107 115 124

Washed coal Volume (MT) 12 14 15 27 51 58 72 82 90 99 107 115

YoY Growth (%) 15.7 7.1 80.7 88.0 14.3 23.7 13.9 10.0 10.0 7.5 7.5

Reject Volume (MT) 2.9 1.5 2.5 3.3 5.8 5.7 6.5 6.5 7.2 7.9 8.5 9.1

Rejections as % of ROM 19.3 9.7 14.3 11.0 10.2 8.9 8.3 7.4 7.4 7.4 7.4 7.4

Total Revenue (INR Cr) 1,586 1,911 2,059 2,152 3,975 4,608 5,749 7,009 8,088 8,897 9,564 10,281

YoY Growth (%) 20.5 7.7 4.5 84.7 15.9 24.8 21.9 15.4 10.0 7.5 7.5

Revenue / Ton (Washed Coal) (INR) 1,311 1,365 1,373 794 780 791 798 854 896 896 896 896

Operating Cost (INR Cr) 605 967 916 1,354 2,605 2,878 3,268 3,929 4,448 4,893 5,069 5,449

Operating Cost / Ton (INR) 500 691 611 500 511 494 454 479 493 493 475 475

Operating EBIDTA (INR Cr) 981 944 1,143 798 1,371 1,730 2,481 3,080 3,640 4,003 4,495 4,832

Operating EBIDTA / Ton (INR) 811 674 762 295 269 297 344 375 403 403 421 421

EBITDA Margin (%) 61.9 49.4 55.5 37.1 34.5 37.5 43.2 43.9 45.0 45.0 47.0 47.0

78 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s coal segment financial summary


Fig in INR Cr, unless specified FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Revenue from Commercial Mining 5,133.2 6,032.4 6,290.6 6,862.8 7,085.9 7,315.7 7,489.9 7,626.2

YoY Growth (%) 17.5 4.3 9.1 3.3 3.2 2.4 1.8

Revenue share of Mining 13.0 14.5 14.5 14.9 14.8 14.8 14.7 14.5

Revenue from IRM 30,245.5 30,848.4 31,463.4 32,090.7 32,730.5 33,383.1 34,048.8 34,727.8

YoY Growth (%) 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Reveneu share of IRM 76.9 74.4 72.3 69.8 68.3 67.3 66.6 66.0

Revenue from MDO 3,975.4 4,607.8 5,749.3 7,008.9 8,087.8 8,896.6 9,563.8 10,281.1

YoY Growth (%) 15.9 24.8 21.9 15.4 10.0 7.5 7.5

Revenue share of MDO 10.1 11.1 13.2 15.2 16.9 17.9 18.7 19.5

Total Revenue from Coal 39,354.1 41,488.6 43,503.3 45,962.4 47,904.2 49,595.3 51,102.5 52,635.0

YoY Growth (%) 5.4 4.9 5.7 4.2 3.5 3.0 3.0

Total Expenses 36,717.8 38,524.1 39,654.4 41,280.1 42,466.9 43,229.3 44,041.9 45,151.0

Expenses to Sales (%) 93.3 92.9 91.2 89.8 88.6 87.2 86.2 85.8

EBITDA 2,636.3 2,964.5 3,848.8 4,682.2 5,437.3 6,366.0 7,060.7 7,484.0

EBITDA Margin (%) 6.7 7.1 8.8 10.2 11.4 12.8 13.8 14.2

Depreciation 692.0 767.2 773.0 817.8 834.5 857.8 866.0 873.4

EBIT 1,944.3 2,197.2 3,075.8 3,864.4 4,602.8 5,508.2 6,194.6 6,610.7

EBIT Margin (%) 4.9 5.3 7.1 8.4 9.6 11.1 12.1 12.6

Net Profit 1,464.0 1,567.5 1,995.4 2,746.0 3,345.4 4,040.7 4,604.8 4,957.2

Net Margin (%) 3.7 3.8 4.6 6.0 7.0 8.1 9.0 9.4

Cash Profit 2,156.0 2,334.7 2,768.5 3,563.8 4,179.9 4,898.5 5,470.8 5,830.5

Cash Profit Margin (%) 5.5 5.6 6.4 7.8 8.7 9.9 10.7 11.1

Net Worth 25,956.7 27,190.5 28,978.5 31,664.1 33,093.1 34,633.3 35,918.0 37,248.9

Return on Equity (%) 5.6 5.8 6.9 8.7 10.1 11.7 12.8 13.3

Capital Employed 39,205.3 41,196.5 43,798.7 46,602.9 47,185.2 48,018.6 48,318.0 48,666.3

Return on Capital Employed (%) 5.0 5.3 7.0 8.3 9.8 11.5 12.8 13.6

Invested Capital 36,631.2 38,622.3 41,431.2 44,219.8 44,464.3 44,938.2 44,856.4 44,809.2

Return on Invested Capital (%) 5.3 5.7 7.4 8.7 10.4 12.3 13.8 14.8

Cash Flow from Operations 2,144.8 2,026.4 2,225.9 1,956.3 2,764.1 3,930.2 3,216.1 3,335.8

Free Cash Flow to Firm 127.2 760.9 1,427.6 1,701.7 2,430.3 3,229.3 2,830.6 2,931.0

CFO to EBITDA (%) 81.4 68.4 57.8 41.8 50.8 61.7 45.5 44.6

FCFF to Cash Profit (%) 5.9 32.6 51.6 47.7 58.1 65.9 51.7 50.3

Net Capex 2,017.5 1,265.5 798.3 254.6 333.8 700.9 385.5 404.8

Net Capex to Sales (%) 5.1 3.1 1.8 0.6 0.7 1.4 0.8 0.8

Total Debt 13,248.6 14,006.1 14,820.2 14,938.8 14,092.1 13,385.4 12,400.0 11,417.4

Net Debt 10,674.5 11,431.8 12,452.7 12,555.7 11,371.2 10,304.9 8,938.4 7,560.3

Net Debt Equity (X) 0.4 0.4 0.4 0.4 0.3 0.3 0.2 0.2

Net Debt EBITDA (X) 4.0 3.9 3.2 2.7 2.1 1.6 1.3 1.0

79 | P a g e ( 5 t h J u l 2 0 2 2 )



2

3

4

5

6

0

10,000

20,000

30,000

40,000

50,000

60,000


Consistent revenue performance is expected to sustain due to rising domestic coal demand

Commercial Mining IRM

MDO YoY Growth (%)

13 15 14 15 15 15 15 14

77 74 72 70 68 67 67 66

10 11 13 15 17 18 19 20


Revenue share of MDO and commercial mining to pickup in the coming years

Revenue share of Mining Reveneu share of IRM

Revenue share of MDO

0

2

4

6

8

10

12

14

16

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000


Better capacity utilization of mines to improve operating profitability

EBITDA Net Profit

EBITDA Margin (%) Net Margin (%)

4

6

8

10

12

14

16

20,000

25,000

30,000

35,000

40,000

45,000

50,000


Retrun ratios to follow profitability and improve in the coming years


RoE (%) RoIC (%)

0

20

40

60

80

100

0

1,000

2,000

3,000

4,000

5,000


Higher operating profitability to improve operating cash flow and FCF

CFO FCFF

CFO to EBITDA (%) FCFF to Cash Profit (%)

0

1

2

3

4

5

6,000

8,000

10,000

12,000

14,000

16,000


Better operating cash flows would be utilized to repay the existing debt

Total Debt Net Debt

Net Debt Equity (X) Net Debt EBITDA (X)

Adani Coal Story in Charts

80 | P a g e ( 5 t h J u l 2 0 2 2 )


Valuation

AEL is expected to become one of the largest players in the coal mining and trading business

in India. With the capability to procure or extract coal from multiple sources, the company has

de-risked its coal business model. We have used the DCF valuation methodology and

discounted back the future cash flows to FY25 and value the business at INR 173 per share.

DCF Valuation for AEL’s coal business




WACC (%) 10.5


Particulars FY25 FY26 FY27 FY28 FY29 FY30

FCFF (INR Cr) 1,428 1,702 2,430 3,229 2,831 2,931

Discount Factor (X) 0.91 0.82 0.74 0.67 0.61 0.55

Discounted FCFF (INR Cr) 1,292 1,394 1,802 2,167 1,719 1,611


Terminal Value (INR Cr) 27,935

PV of Terminal Value (INR Cr) 15,351

Value of Operations (INR Cr) 25,335


FY25 Value of Equity (INR Cr) 12,882

Value per share (INR) 109

81 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Road Construction Business

82 | P a g e ( 5 t h J u l 2 0 2 2 )


Adani is a late entrant to the high-growth road sector

Even though Adani group’s vision was always to be the largest infrastructure player in India, it

had stayed away from the roads sector. Since contracts were only awarded only on an EPC

basis it did not evoke any interest from the group. However, the group was continuously on

the lookout for ruminated opportunities and continue to evaluating and monitoring the road

projects.

It was only in 2018 when NHAI started awarding contracts on HAM (Hybrid-Annuity Mode),

BOT (Build-Operate-Transfer) and TOT (Toll-Operate-Transfer) basis that the company started

focusing on the road sector.

AEL will primarily focus on HAM, BOT and TOT


AEL has every intent to become a giant domestic player in the roads vertical and is currently in

phase two of its growth strategy.

Items HAM BOT TOT EPC OMT Tolling

DescriptionMix of EPC & BOT

Design

Build – Finance –

Operate – Transfer

Right to collect user

fees or tolls on

highway stretches

Developer to lay roads

with no role in

ownership

Right to collect user

fees or tolls on

highway stretches

Concession

Period

Construction Period (2

– 2.5 years) + Fixed

Operations Period of 15

Construction Period (2

– 2.5 years) +

Operations Period of

20 years N/A 3-5 years

Revenue AnnuityToll collection /

AnnuityToll collection Based on Project Value Toll collection

Funding by

Developer

For funding 60% of Bid

Project Cost (BPC)

(Govt. Grant- 40%)

For funding 100%

project cost

For funding 100%

upfront Concession Fee

+ 100% augmentation

Working Capital based

on milestones

For funding 100%

Concession Fee in

installments

Financing

Risks

Concessionaire &

Authority. 40% of BPC

funded by Authority

Concessionaire Concessionaire Authority Concessionaire

O&M Risk Concessionaire Concessionaire Concessionaire Authority Concessionaire

Revenue

Risk Authority

BOT Toll –

Concessionaire BOT

Annuity - Authority

Concessionaire Authority Concessionaire

Award of

Contract

Lowest Bid NPV (NPV

of Bid Project Cost & 15

years O&M)

BOT Toll – Lowest Grant

/ Highest Premium BOT

Annuity – Lowest

Highest Upfront

Concession Fee

Lowest Construction

Cost

Highest 1st year

concession fee or

minimum O&M support

83 | P a g e ( 5 t h J u l 2 0 2 2 )


Strategic roadmap for roads business


The business enjoys a pan-India presence with current projects in the sates of Chhattisgarh,

Telangana, Andhra Pradesh, Kerala, Orissa, Gujarat and West Bengal. As a developer, AEL’s

strategy will be to primarily target PPP projects structured on the lines BOT/ TOT/ HAM models.

As far as EPC projects are concerned, AEL will only take those projects that can offer scale and

complexity, marked by relatively low competition.

AEL’s portfolio of road projects


84 | P a g e ( 5 t h J u l 2 0 2 2 )


The roads and highway business of AEL is expected to benefit from Bharatmala Pariyojana

Phase I. As per this 24,800 kms of national highways and 10,000 kms of residual road works

under National Highways Development Project (NHDP) are planned.

Bharatmala Yojna Phase I

Scheme Length kms Cost in INR cr

Economic corridors 9,000 120,000

Inter corridors and feeder roads 6,000 80,000

National corridor efficiency improvement 5,000 100,000

Border/International connectivity 2,000 25,000

Coastal and port connectivity 2,000 20,000

Expressways 800 40,000

Ongoing projects including NHDP 10,000 150,000

Total 34,800 535,000


AEL expects portfolio of 12,000 lane Kms by 2026 from 450+kms currently


85 | P a g e ( 5 t h J u l 2 0 2 2 )


Roads division project financing and debt tie ups for AEL


The roads division has also acquired a 49% stake in Maharashtra Border Checkpost Network

Ltd (MBCPNL) from Sadbhav Infrastructure Project Ltd at an enterprise value of INR 1,680 cr

(7x EBITDA), with an option to acquire additional stake, subject to approvals. With this

acquisition, AEL will get exclusive fee-collection rights from CVs at 24 entry points to

Maharashtra.

MBCPNL check posts - 18 operational, 5 near completion & 1 under construction


Project Name Type Lane km CounterpartyAppointed

Date

Project

Cost

NHAI

Grant

Equity

Contr. Debt Lenders

Equity

infused till

date

BPRPL HAM 213 NHAI 8-Mar-19 1,115 413 210 491 L&T, BOI 195

SKRPL HAM 235 NHAI 27-Dec-19 1,564 626 338 600 L&T, BOI 338

MRRPL HAM 168 NHAI 17-Aug-20 1,357 543 264 550 Axis, Canara,

PFS, KBL, IB 264

VBPPL HAM 107 NHAI 7-Aug-21 1,546 618 279 649 Axis 147

NPRPL HAM 190 NHAI 7-Oct-21 867 347 160 360 Axis 85

AVRPL HAM 247 NHAI 30-Oct-21 1,803 735 321 747 Canara 87

KKRPL HAM 127 NHAI 15-Jan-22 1,040 416 187 437 Canara 95

BKRPL HAM 285 NHAI 13-Apr-22 1,169 467 211 491 Canara 4

PPRPL BOT 407 NHAI 2-Apr-22 2,600 0 900 1,700 L&T 138

PRSTPL TOT 352 NHAI 25-Nov-21 1,295 0 453 842 SBI 376

Sub Total (a) 2,331 14,356 4,165 3,323 6,867 1,729

Project Name Type Lane km CounterpartyAppointed

Date

Project

Cost

UPEIDA

Grant

Equity

Contr. Debt Lenders

Equity

infused till

date

BHRPL BOT 912 UPEIDA - 7,442 1,720 1,717 4,006 - -

HURPL BOT 936 UPEIDA - 7,670 2,177 1,648 3,845 - -

UPRPL BOT 942 UPEIDA - 7,951 2,099 1,756 4,096 - -

Sub Total (b) 2,790 23,063 5,996 5,121 11,947 -

MBCPNL BOT 24 BCP MSRDC, GoM Operational 1,562 1,147 ICICI, YBL,

RBL-

Sub Total (c) 2,790 1,562 1,147 -

Total (a+b+c) 5,116 38,981 10,161 8,425 19,961

NHAI projects - financing tie-ups and construction debt (INR Crs)

State projects - financing tie-ups and construction debt (INR Crs)

86 | P a g e ( 5 t h J u l 2 0 2 2 )


NMP can accelerate the growth prospects for Road/Highways and airports business

Recently the government announced National asset monetization program (NMP). Under this

the strategic objective is to unlock the value of investments in brownfield public sector assets

by tapping institutional and long-term patient capital, which can thereafter be leveraged for

further public investments.

It is to be noted that under NMP only rights over asset will be transferred while ownership will

rest with the government. Thus the asset will be handed back to the government at the end of

the transaction life.

NMP Framework

Source: PIB & Ventura Research

The aggregate asset pipeline under NMP over FY22-25 is valued at INR 6.0 lakh cr of which

• Roads will constitute ~27% at INR 1.6 lakh cr

• Airports constitute ~3.5% at INR 0.2 lakh crore.

The monetization includes more than 20 asset classes totally besides roads & airports like

ports, railways, warehousing, gas & product pipeline, power generation and transmission,

mining, telecom, stadium, hospitality and housing.

The assets under the NMP are expected to be rolled out through public private partnership

concessions as well as capital market instruments such as InvIT’s.

The choice of instrument will be determined by

• the sector,

• nature of asset,

• timing of transactions (including market considerations),

• target investor profile, and

• the level of operational/investment control envisaged to be retained by the asset

owner etc.

87 | P a g e ( 5 t h J u l 2 0 2 2 )


NMP estimates an aggregate monetization potential of Rs 6.0 lakh cr


NMP envisages monetization of assets worth INR 6 lakh cr

Source: PIB & Ventura Research

88,190

1,62,422

1,79,544 1,67,345

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

1,80,000

2,00,000

FY22 FY23 FY24 FY25

INR cr

88 | P a g e ( 5 t h J u l 2 0 2 2 )



6,061

8,231

9,829 10,855

10,237

13,298

5,835

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FY16 FY17 FY18 FY19 FY20 FY21 FY22*

Highway Construction in India (Kms)

52,500

49,700 42,600

47,889

48,883

66,613

78,109

98,204

1,10,815

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY22F

Number of construction equipment units sold

873

422

209

505450

0

100

200

300

400

500

600

700

800

900

1000

FY16 FY17 FY18 FY19 FY22T

Projects awarded to BOT private players (in kms)

Roads, 55.2%

Others, 44.8%

Total PPP Projects in India (FY21)

7.10

17.03

12.9014.22

15.4813.14

14.85

26.04

0

5

10

15

20

25

30


Outlay for roads under the respective Union Budgets (USD bn)

9.18

2.25

10.65

1.23 0.76 0.12 0.10 0.54 0.22 0.61 0.27

25.93

0

5

10

15

20

25

30

FY01-11 FY13 FY15 FY17 FY19 FY21

FDI Inflow (USD bn)

Road Sector Story in Charts

89 | P a g e ( 5 t h J u l 2 0 2 2 )



213

403

954 800

414

1,120

880

1,767

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

FY22E FY23E FY24E FY25E

Annual Lane km Addition

Annuity Traffic

-50

0

50

100

150

200

250

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000


Segmentwise revenue breakup

Revenue - Annuity Projects Revenue - Traffic Projects

Annuity YoY Growth (%)-RHS Traffic YoY Growth (%)-RHS

INR cr

(5)

0

5

10

15

20

25

30

35

(1,000)

0

1,000

2,000

3,000

4,000

5,000


EBITDA margins are expected to improve from hereon

EBITDA Net Profit

EBITDA Margin (%)- RHS Net Margin (%)- RHS

INR cr

(30)

(20)

(10)

0

10

20

30

40

50

60

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000


We expect EBITDA from BOT projects to be negative initially

EBIDTA - Annuity Proj EBIDTA - Traffic Proj

Annuity EBITDA (%)-RHS Traffic EBITDA (%)-RHS

INR cr

0

20

40

60

80

100

120

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


We expect healthy cash flow generation over the forecasted period

CFO CFO to EBITDA (%)-RHS

CFO to Revenue (%)-RHS

INR cr

(2)(1)0123456789

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000


Return Ratios trajectory

Net Worth Capital Employed

RoE (%)-RHS RoCE (%)- RHS

INR Cr

Adani Road Story in Charts

90 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s road business financial summary


Fig in INR Cr (unless specified) FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E

Annual Lane km addition 627.6 2,150.1 3,984.2 6,550.7 11,295.7 12,615.7 13,695.7 14,575.7 14,575.7

Annuity 213.2 402.5 954.1 800.0 600.0 600.0 600.0 400.0 0.0

Traffic 414.4 1,120.0 880.0 1,766.5 4,145.0 720.0 480.0 480.0 0.0

Cummulative Lane km 627.6 2,150.1 3,984.2 6,550.7 11,295.7 12,615.7 13,695.7 14,575.7 14,575.7

Annuity 213.2 615.7 1,569.8 2,369.8 2,969.8 3,569.8 4,169.8 4,569.8 4,569.8

Traffic 414.4 1,534.4 2,414.4 4,180.9 8,325.9 9,045.9 9,525.9 10,005.9 10,005.9

Revenue - Annuity Projects 2,525.3 7,694.1 12,282.9 10,544.6 10,720.6 11,019.2 8,143.0 3,809.3 3,142.7

YoY Growth (%) 204.7 59.6 -14.2 1.7 2.8 -26.1 -53.2 -17.5

Revenue - Traffic Projects 442.6 1,141.0 1,748.9 2,649.0 4,298.6 6,156.1 7,721.0 8,967.0 10,146.8

YoY Growth (%) 157.8 53.3 51.5 62.3 43.2 25.4 16.1 13.2

Total Revenue 2,967.9 8,835.2 14,031.9 13,193.6 15,019.2 17,175.2 15,864.0 12,776.3 13,289.6

YoY Growth (%) 2.0 0.6 (0.1) 0.1 0.1 (0.1) (0.2) 0.0

Operating Expenses 2,322.2 6,797.4 11,014.6 9,274.6 9,336.6 9,587.9 6,866.2 2,817.4 2,213.4

Operating Exp to Sales (%) 78.2 76.9 78.5 70.3 62.2 55.8 43.3 22.1 16.7

EBITDA 645.7 2,037.8 3,017.3 3,919.0 5,682.6 7,587.3 8,997.8 9,958.9 11,076.1

EBIDTA - Annuity Projects 424.4 2,951.3 6,350.2 6,105.5 6,431.6 6,774.6 5,737.6 3,264.4 2,615.3

EBIDTA - Traffic Projects 221.3 (913.1) (3,332.1) (2,185.4) (747.6) 814.4 3,262.0 6,696.4 8,462.7

Depreciation 106.1 460.0 777.5 1,575.8 2,918.2 3,760.1 4,327.1 4,841.8 5,109.0

EBIT 539.6 1,577.8 2,239.8 2,343.2 2,764.3 3,827.2 4,670.7 5,117.1 5,967.1

Margin(%) 18.2 17.9 16.0 17.8 18.4 22.3 29.4 40.1 44.9

Finance Cost 202.8 774.5 1,358.2 2,405.1 4,439.8 5,575.7 6,057.7 6,396.4 6,408.2

Other Income 5.8 11.4 18.2 29.7 54.6 78.8 103.1 123.7 137.2

Profit Before Tax 342.6 814.8 899.8 (32.1) (1,620.9) (1,669.7) (1,283.9) (1,155.6) (303.8)

Margin (%) 11.5 9.2 6.4 (0.2) (10.8) (9.7) (8.1) (9.0) (2.3)

Tax Expense 94.5 255.2 325.4 221.5 235.1 266.2 256.9 202.8 223.0

Tax Rate (%) 27.6 31.3 36.2 (688.9) (14.5) (15.9) (20.0) (17.5) (73.4)

PAT 248.0 559.5 574.4 (253.6) (1,856.0) (1,935.9) (1,540.8) (1,358.4) (526.9)

Margin (%) 8.4 6.3 4.1 (1.9) (12.4) (11.3) (9.7) (10.6) (4.0)

YoY Growth (%) 125.6 2.7 (144.2) 631.8 4.3 (20.4) (11.8) (61.2)

Net Block 4,731.9 12,195.2 21,877.8 39,884.3 74,714.3 82,642.2 89,003.1 92,855.4 87,746.4

Net Worth 3,208.4 7,594.7 12,842.2 21,496.8 24,395.6 25,298.3 24,623.3 23,239.7 22,668.4

Return on Equity (%) 7.7 7.4 4.5 (1.2) (7.6) (7.7) (6.3) (5.8) (2.3)

Capital Employed 9,198.1 26,110.7 52,671.1 78,322.3 93,427.4 102,584.7 106,138.0 103,567.5 99,033.3

Return on Capital Employed (%) 2.7 2.1 1.1 (0.3) (2.0) (1.9) (1.5) (1.3) (0.5)

Cash Flow from Operations 726.7 2,205.4 3,148.7 3,784.3 5,787.7 7,837.4 9,122.4 10,147.2 11,554.7

Cash Flow from Investing (7,097.6) (17,110.7) (26,874.5) (26,348.2) (17,131.3) (12,117.9) (7,131.7) (1,443.8) 0.0

Cash Flow from Financing 6,706.2 15,148.9 24,120.3 22,962.9 11,445.9 4,713.1 (1,101.5) (7,819.3) (10,749.3)

Net Cash Flow 335.3 243.6 394.5 399.0 102.3 432.6 889.3 884.1 805.3

CFO to Revenue (%) 24.5 25.0 22.4 28.7 38.5 45.6 57.5 79.4 86.9

CFO to EBITDA (%) 112.5 108.2 104.4 96.6 101.9 103.3 101.4 101.9 104.3

CFO to Net Profit (%) 293.0 394.2 548.2 (1,492.1) (311.8) (404.8) (592.1) (747.0) (2,193.1)

CFO to Net Worth (%) 22.6 29.0 24.5 17.6 23.7 31.0 37.0 43.7 51.0

91 | P a g e ( 5 t h J u l 2 0 2 2 )


Valuation

AEL has every intent to become a giant domestic player in the roads vertical and is currently in

phase two of its growth strategy. AEL has been late entrant and it was only in 2018 when NHAI

started awarding contracts on HAM, BOT and TOT basis that the company started focusing on

the road sector. However, since then there has been no looking backward for the roads division

and the business has been scaled up very quickly.

We have valued the roads business by discounting the terminal value at the end of FY35

(arrived using EV/EBITDA multiple of 15x) and the interim period free cash flows at WACC of

11% and arrived at value of INR 330 per share.

DCF valuation of AEL’s road business




WACC (%) 11.0

Particulars FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35

FCFF (INR Cr) -12,473 -6,953 -5,489 -2,293 2,868 5,572 6,532 7,629 8,561 9,252 9,771

Discount Factor (INR Cr) 0.90 0.81 0.73 0.66 0.59 0.53 0.48 0.43 0.39 0.35 0.32

Discounted FCFF (INR Cr) -11,237 -5,643 -4,013 -1,510 1,702 2,979 3,146 3,310 3,347 3,258 3,100

Total of Discounted FCFF (INR Cr) -1,561

FY35 EBITDA (INR Cr) 14,484

EV/EBITDA multiple (x) 15

Terminal EV (INR Cr) 2,17,253

Discounted Terminal value (INR Cr) 76,513

Value of operations (INR Cr) 74,952

FY25 Net debt (INR Cr) 40,211

FY25 Value of equity (INR Cr) 34,742


92 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Data Center Business

93 | P a g e ( 5 t h J u l 2 0 2 2 )


Data Centres though at a nascent stage have high growth prospects

The Indian data centre industry is expected to double and exceed 1 GW by 2023 given the

increased data consumption driven by:

• Laws pertaining to data localization within India

• Significant usage of social media and messaging services.

• Increased use of smart devices like smartphones, tablets, smart home solutions, etc.

• Increased adoption of IoT and cloud services by corporates. Make in India and China+1

will attract more corporates to set up facilities in India, which is expected to improve

demand for IoT and cloud services.

Data consumption trends in India

Source: TRAI Reports

COVID19 led travel restrictions and work from home has accelerated the data usage resulting

in increased demand for bandwidth as well as storage capacities. Although India has emerged

as one of the largest data consumers in the world, the number of data centres and their

capacities are significantly lower than in the US and China.

India’s data center market size and growth opportunities


141 152

178

200

30 37 44 55

2 3 5 7

CY14 CY16 CY18 CY20

Data center market size (USD Bn)

Global APAC India

4.35

10.09

0

2

4

6

8

10

12

2021 2027

India's data center market size outlook

94 | P a g e ( 5 t h J u l 2 0 2 2 )


Why data centers will boom within India

• Data localization laws

• Data localization will reduce latency and increase the response speed of apps and

other online programs. This will benefit the end consumers and improve internet

usage.

• Data centres consume significant power and other resources and therefore, many

countries have paused the new construction of data centres to divert power supply for

other basic needs, and to focus on environmental sustainability. India is a natural fit

for global data centre operators looking at their expansion due to:

o The large domestic consumer base

o Significant scaling up of renewable power capacities, which will reduce the

reliance on thermal power for data centres.

Global majors have already started moving into India

Major investments announced in 2020 & 2021 besides Edge Connex and AEL JV:

• Carlyle bought a 25% stake in Extra Data (a wholly-owned subsidiary of Airtel) for the

USD 235 mn in July 2020.

• Equinix announced the acquisition of the India business of GPX Global Systems for USD

161 mn in August 2020.

• Iron Mountain agreed to form a joint venture with Indian colocation Data Centre

provider WebWerks. Iron Mountain expects to invest USD 150 million over the next

two years.

AEL entered into the data centre business in a JV with EdgeConneX, a company with a decade

of experience in serving global cloud service providers in mature markets.

95 | P a g e ( 5 t h J u l 2 0 2 2 )


India’s data center market size and growth opportunities


AEL will leverage the vast quantum of data generated by the company’s various consumer-

facing businesses – airports, electricity distribution, edible oils, household gas connections, etc.

– that interface every single day with millions of customers and are expected to cover an

estimated 500 mn consumers by 2025. Initially, the plan is to build data centres in Delhi/NCR,

Mumbai, Chennai, Vizag & Hyderabad.

Current capacity of data centers in India is relegated to the Top 7 cities

Source: Cushman and Wakefield

Total Capacity % Share Total Sft

Bengaluru 162 MW 25 1.74 mn

Mumbai 289 MW 44 3.60 mn

Delhi 72 MW 11 1.05 mn

Pune 32 MW 5 0.44 mn

Chennai 57 MW 8 0.92 mn

Hyderabad 38 MW 6 0.71 mn

Kolkata 5 MW 1 0.07 mn

Total 655 MW 100

96 | P a g e ( 5 t h J u l 2 0 2 2 )


Local data centre firms have received a considerable amount of financial backing from global

investment groups as each has looked at India as an attractive growth market. This backing will

enable each firm to scale across new markets and expand currently operating campuses to

respond to local demand. Investment has rapidly accelerated over the past two years, with

continued rumours of further new players coming soon.

Local data center players and tie-ups


97 | P a g e ( 5 t h J u l 2 0 2 2 )




While data centre capacity is constructed for a multitude of reasons, local population can be

an interesting proxy to determine the growth potential of a local market. Several long-

established metro areas around the world have a person-per megawatt of roughly 15,000 to

25,000 people. By this metric, every major metropolitan area in India has a long way to go

before reaching maturity, particularly as several large cities have yet to develop any data

centre ecosystem at all.

City Population MW People/MW

Kolkata 1,46,17,882 5 29,23,576

Delhi-NCR 2,64,54,000 72 3,67,417

Hyderabad 97,00,000 38 2,55,263

Pune 72,76,000 32 2,27,375

Chennai 89,17,749 57 1,56,452

Mumbai 2,07,48,395 289 71,794

Bengaluru 1,04,56,000 162 64,543

Beijing 2,18,93,095 359 60,984

Tokyo 3,74,68,000 735 50,977

Shanghai 2,48,70,895 585 42,514

Chicago 99,01,711 400 24,754

London 1,42,57,962 660 21,603

Dallas 76,73,305 422 18,183

Silicon Valley 96,60,000 541 17,856

Frankfurt 56,04,523 377 14,866

Singapore 57,03,600 410 13,911

Northern Virginia 98,14,928 1,619 6,062

98 | P a g e ( 5 t h J u l 2 0 2 2 )



8

0 0 0 0 0 0

17

4 3

6 6

2 0

17

10

6

20

25

10 10

0

5

10

15

20

25

30

Ch

en

nai

NM

1

NM

2

No

ida1

No

ida2

Hyd

era

bad

Pu

ne

Sales in MW across locations

FY23E FY24E FY25E

59.0

340.8

829.8

0

100

200

300

400

500

600

0

100

200

300

400

500

600

700

800

900

FY23E FY24E FY25E

Revenues are expected to commence meaningfully from FY24

Revenue from operations YoY growth % (RHS)

INR cr

44.1

271.2

644.1

11.2 38.8

(10.6) (10)

0

10

20

30

40

50

60

70

80

90

(100)

0

100

200

300

400

500

600

700

FY23E FY24E FY25E

Data centre business is expected to be highly profitable with high margins

EBITDA PAT

EBITDA margin % -RHS PAT Margin (%)- RHS

INR cr

2,826.9

5,665.7

7,756.0

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

FY23E FY24E FY25E

Debt is expected to be at elevated levels

Debt o/s Interest Coverage Ratio (X)- RHS

INR cr

(1,606.1)

4,935.5

6,437.5

(3,000)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY23E FY24E FY25E

NWC is expected to be high initially

Net working capital Net Working to Sales (%)

INR cr

4,440.1

7,740.4

10,108.5

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0

2,000

4,000

6,000

8,000

10,000

12,000

FY23E FY24E FY25E

Net fixed asset turnover is expected to be low initially

Net fixed assets Net fixed Asset Turnover (x)

INR cr

Adani Data Center Story in Charts

99 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s data center financial summary


Fig in INR Cr (unless specified) FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E

Sales plan (MW)

Chennai 8.0 17.0 17.0 17.0 17.0 17.0 17.0 17.0

NM1 0.0 4.2 10.0 30.0 50.0 50.0 50.0 50.0

NM2 0.0 2.5 6.0 6.0 6.0 6.0 6.0 6.0

Noida1 0.0 5.8 20.0 30.0 40.0 50.0 50.0 50.0

Noida2 0.0 5.8 25.0 25.0 25.0 25.0 25.0 25.0

Hyderabad 0.0 1.7 10.0 20.0 40.0 60.0 100.0 100.0

Pune 0.0 0.0 9.8 19.6 29.4 39.2 49.0 49.0

Edge 0.0 0.0 0.0 10.0 10.0 10.0 10.0 10.0

Chennai 2 0.0 0.0 0.0 10.0 16.0 16.0 16.0 16.0

Revenue from operations 59.0 340.8 829.8 1,268.6 1,700.3 2,015.5 2,461.9 2,544.4

YoY Growth (%) 477.8 143.5 52.9 34.0 18.5 22.1 3.4

EBITDA 44.1 271.2 644.1 947.2 1,248.2 1,481.0 1,823.6 1,899.7

EBITDA Margin (%) 74.7 79.6 77.6 74.7 73.4 73.5 74.1 74.7

Depreciation 15.3 83.1 196.3 286.7 370.4 428.6 482.4 484.8

As a % of revenue 25.9 24.4 23.7 22.6 21.8 21.3 19.6 19.1

EBIT 28.8 188.1 447.8 660.4 877.8 1,052.4 1,341.2 1,414.9

As a % of revenue 48.8 69.4 54.0 52.1 51.6 52.2 54.5 55.6

Interest 16.3 103.2 358.1 487.5 592.6 675.7 719.1 706.7

As a % of revenue 27.6 30.3 43.2 38.4 34.9 33.5 29.2 27.8

Other finance costs 1.3 46.2 100.3 130.5 173.4 207.6 234.4 224.3

As a % of revenue 2.2 13.5 12.1 10.3 10.2 10.3 9.5 8.8

PBT 11.2 38.8 (10.6) 42.4 111.8 169.2 387.7 483.9

As a % of revenue 19.0 11.4 (1.3) 3.3 6.6 8.4 15.8 19.0

Tax 0.0 0.0 0.0 0.0 0.0 0.0 0.1 3.5

As a % of PBT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7

PAT 11.2 38.8 (10.6) 42.4 111.8 169.2 387.7 480.4

As a % of revenue 19.0 11.4 (1.3) 3.3 6.6 8.4 15.7 18.9

Net working capital (1,606.1) 4,935.5 6,437.5 7,819.2 8,384.7 8,813.8 7,898.3 6,979.5

As a % of revenue (2,723.1) 1,448.4 775.8 616.4 493.1 437.3 320.8 274.3

Debt O/s 2,826.9 5,665.7 7,756.0 9,732.5 10,919.2 11,972.8 11,636.1 11,667.5

Net fixed assets 4,440.1 7,740.4 10,108.5 12,193.2 13,281.9 14,268.0 13,834.8 13,400.9

100 | P a g e ( 5 t h J u l 2 0 2 2 )


Valuation

The data centre business is in the nascent stage and is expected to commence operations in

FY23. However, post FY23 the business is expected to scale up rapidly. Also, being a new age

business we have assumed a terminal growth at 5.5% and hence arrive at FY25 value of INR 71

per share for AEL.

AEL’s data center DCF valuation




WACC (%) 12.0


Particularls FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33

FCFF (INR Cr) -3,422 -2,806 -776 -363 2,690 2,757 2,738 2,706 2,692

Discount Factor (X) 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40 0.36

Discounted FCFF (INR Cr) -3,056 -2,237 -553 -231 1,526 1,397 1,238 1,093 971

Total of discounted FCFF 150

Terminal value 43,690

Discounted Terminal value 15,755

Value of operations 15,905

FY25 Net debt 5,558

FY25 Value of Equity 10,346


101 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s Airport Business

102 | P a g e ( 5 t h J u l 2 0 2 2 )


Business structure of Adani Airports Holdings Limited (AAHL)

Through the Airports Authority of India’s globally competitive tendering process, Adani

Airports Holdings Limited (AAHL) won the mandate to modernize and operate six airports in

2019 – Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram.

AAHL will operate, manage and develop all these airports for 50 years.

Airport wise start and end date

Airport Start date End date

Ahmedabad 14-Feb-20 14-Feb-70

Mangalore 14-Feb-20 14-Feb-70

Lucknow 14-Feb-20 14-Feb-70

Jaipur 19-Jan-21 19-Jan-71

Guwahati 19-Jan-21 19-Jan-71

Trivandrum 19-Jan-21 19-Jan-71

Mumbai 4-Apr-06 4-Apr-66

Navi Mumbai 8-Jan-18 8-Jan-68


Besides the above airports' portfolio, the company has acquired a 74% stake in Mumbai

International Airport Limited (MIAL), a JV with the Airports Authority of India (by acquiring GVK

group’s 50.5% stake, 10% stake from the Airport Company of South Africa and 13.5% stake

from Bidvest).

Further, by acquiring the majority stake in MIAL, the company has gained direct control of the

upcoming Navi Mumbai airport as MIAL holds a 74% stake in the same.



103 | P a g e ( 5 t h J u l 2 0 2 2 )


Why the airport traffic in India is set to boom

The underpenetrated Indian market provides significant headroom for growth for

Airports

As per the International Air Transport Association (IATA), India is expected to overtake China

and the United States to become the world's third-largest air passenger market by 2030. Yet,

as measured by the Seat per Capita, India remains one of the most underpenetrated markets,

suggesting significant headroom for growth.

Seat per capita is low in India as compared to other countries


India’s growing middle class, rapid urbanization and increase in economic activity coupled with

its emerging status as an alternative to China's manufacturing augurs well for the growth of

the sector.

3.2

3.0

1.8

1.2

1.1

1.1

1.1

0.8

0.7

0.7

0.7

0.6

0.6

0.5

0.5

0.5

0.4

0.4

0.3

0.1

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Australia

United States

Canada

Japan

Malaysia

Spain

Saudi Arabia

Turkey

Thailand

South Korea

Italy

Brazil

Indonesia

Russia

China

Mexico

Germany

Vietnam

Philippines

India

Top 20 Domestic Markets

16.7

14.9

12.4

8.5

5.3

4.4

4.4

3.0

3.0

2.4

2.4

2.2

2.0

1.6

1.3

1.0

0.9

0.6

0.1

0.1

0.0 3.0 6.0 9.0 12.0 15.0 18.0

UAE

Singapore

Hong Kong

Switzerland

Netherlands

United Kingdom

Spain

Taiwan

Germany

Italy

France

Canada

South Korea

Thailand

Turkey

Japan

United States

Russia

China

India

Top 20 International Markets

104 | P a g e ( 5 t h J u l 2 0 2 2 )


India is expected to be 2nd fastest growing market in APAC


After the Regional connectivity scheme (UDAN) provided the initial boost to the airport

business, the draft new tourism policy is expected to usher in sustainable long-term growth.

Under the Regional connectivity scheme, the underserved airports are connected to key

airports through flights that were costing INR 2,500 for per hour flight. Since the introduction

of UDAN, air travel affordability got a boost along with air transport infrastructure

development.

UDAN has lead to better connectivity resulting in increase in flights to non-metro


89 106 122 116 122 139169

206243

275 275

3438

41 43 4751

55

59

65

69 67

0

50

100

150

200

250

300

350

400

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

India –Fastest growing aviation market over last decade

Domestic International

mn passengers

6.1% 6.2%

5.3% 5.2%

4.7%4.4%

0%

1%

2%

3%

4%

5%

6%

7%

India Vietnam Phillipines Indonesia China Malaysia

Passenger CAGR (2018-2040)

236268

357389 403

0

50

100

150

200

250

300

350

400

450

Dec,19 Aug,20 June,21 Oct,21 Jan,22

No of flights to non metros

105 | P a g e ( 5 t h J u l 2 0 2 2 )


UDAN policy impact on Indian airports


The draft tourism policy aspires to make India one of the top five global destinations by 2030.

As per the policy, five key areas are to be given significant focus in the next 10 years:

• green tourism,

• digital tourism,

• destination management,

• skilling the hospitality sector and

• supporting tourism-related MSMEs

While we believe that in the short run international traffic to India will lag domestic traffic

growth owing to the geopolitical conflict (post the Ukraine war), the increase in the number of

flights to non-metro routes will help improve domestic connectivity and in turn traffic growth.

In the long run, the adoption of the new tourism policy will help improve the perception of

India as a safe and preferred travel destination which will help in increasing international traffic

growth also.

106 | P a g e ( 5 t h J u l 2 0 2 2 )


Adoption of new tourism policy will promote international traffic although same will remain lower in short run


India’s economic development to boost international travel

India is the only large market which is expected to sustain high GDP growth. This coupled with

the explosion in the merchandise EXIM trade and services due to

• PLI schemes across various sectors

• China +1 policies

• Make in India

is expected to improve international business travel in the long run.

High growth projections and a rise in EXIM trade augurs well for the airport sector

Particulars Trade Type Mar 2022 (USD bn)

Mar 2021 (USD bn)

Mar 2020 (USD bn)

Growth vis-a-vis

Mar 2021 (%)

Growth vis-a-vis

Mar 2020 (%)

Merchandise Exports 42.2 35.3 21.5 19.8 96.5

Imports 60.7 48.9 31.5 24.2 93.0

Trade Balance -18.5 -13.6 -10.0 -35.7 -85.5

Services Exports 22.5 20.8 17.6 8.3 28.3

Imports 13.2 12.3 10.1 7.3 30.5

Net of Services 9.4 8.5 7.5 9.7 25.3

Overall Trade Exports 64.8 56.1 39.1 15.5 65.8

Imports 73.9 61.2 41.6 20.8 77.8

Trade Balance -9.2 -5.1 -2.5 -79.2 -265.1


265

308344 340

115

181

310

416

476

0

50

100

150

200

250

300

350

400

450

500

FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Air traffic in mn pax p.a

80% 81%91% 94% 93% 87%

20% 19%9% 6% 7% 13%

FY19 FY20 FY21 FY22 FY23 FY24

Internation traffic to lag due to geopolitical conflicts

Domestic International

107 | P a g e ( 5 t h J u l 2 0 2 2 )


Merchandise growth to pick up with the increase in EXIM trade


The government is looking to invest ~INR 1 trillion to develop 100 airports

As per the current civil aviation minister, the government expects a total investment of close

to ~INR 1 tn on India’s airports in the next four years (FY22-FY26). Off this, INR 22,000 crore

will be spent by the state-run Airports Authority of India on building terminals and other

infrastructure at existing airports.

However, the growing middle-class population, rapid urbanization and increase in economic

activity warrant investment in India’s aviation and airport sector. As per an industry report, the

capex intensity of airports is expected to increase by 51% over FY23-27E with the private sector

expected to account for 2/3rd of the increased capex.

Capex on airports is expected to increase 1.5x over next 5 years with private participation at 70-80%


3.7%2.1%

2.9% 2.3%

4.8%3.3% 3.7% 3.9% 4.4%

8.2%

2.0%0.8%

-8.5%-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

US

Ge

rman

y

Fran

ce

Ital

y

Spai

n

Jap

an UK

Can

ada

Ch

ina

Ind

ia

Mex

ico

Bra

zil

Ru

ssia

Growth projections for 2022

Private, 29,900

Public, 16,100

Overall INR 45,000 to 47,000 capex was spent over FY18-22E

Private, 29,900

Public, 16,100

...which is expected to increase by 51% over FY23-27E

108 | P a g e ( 5 t h J u l 2 0 2 2 )


Inclusion of ATF under GST is expected to lower airfare boosting air travel

To lessen the burden of increasing fuel prices, the government is planning to bring jet fuel

under the purview of the GST regime. In the meantime, the states have been requested to

lower VAT on the same.

The airports business is at an inflexion point given the expectation of high GDP

growth

As per research conducted by the International Air Transport Association (IATA), countries like

Norway and Switzerland average above two flights per capita per year while there are also

countries like Uganda where less than 1% of the population flies once a year. However, the

most significant point that came out of the IATA research was that countries on the higher end

of the spectrum in terms of flights per capita were also more economically developed than

countries with lower flights per capita.

As per an industry report, the number of passengers at airports grows at a rate of about 1.5x

that of GDP. We believe that the airport business of AEL is now at an inflexion point given the

expectation of a high GDP growth rate for India as compared to other advanced economies

which should ultimately lead to an increase in passenger traffic due to high business travel and

an increase in disposable income.

NMIAL is not expected to cannibalise the traffic of MIAL but will only help in the

acceleration of traffic growth

As per the management, the upcoming NMIAL (Navi Mumbai airport) is not expected to

cannibalise traffic of the existing MIAL airport given:

• Optimal utilization of MIAL prior to Covid-19 outbreak,

• Phase-wise commencement of capacity at NMIAL,

• Impact of traffic diversion assumed by independent consultant mitigate the traffic

diversion risk to a large extent.

109 | P a g e ( 5 t h J u l 2 0 2 2 )


Understanding the revenue mechanism of Airports business in India

An airport operator in India has two sources of revenue

• Aero revenues, and

• Non-aero revenues.

Aero revenues primarily comprise of:

• Landing and parking charges,

• Aero bridge charges, and

• User development fees.

The aero charges are regulated by an independent regulatory body - AERA (Airports Economic

regulatory authority). The creation of AERA has ensured that a well-defined Model Regulatory

environment is put in place for establishing a well-defined Tariff implementation process that

promotes efficiency and stability.

The non-aero revenue is unregulated and consists of food & beverages, retail, duty-free

shopping, cargo and ground handling etc.

The return on the regulated aero assets (RAB) is worked out using a hybrid till tariff structure

involving true-up/ true-down of the revenue takes care of the traffic fluctuations at the time

of the next tariff determination process thereby rendering visibility to the revenue stream.

Airport sector in India operates in a fairly regulated environment with assured returns


110 | P a g e ( 5 t h J u l 2 0 2 2 )


How AEL expects to improve aero revenues

The AEL management developed a four-pronged strategy to increase aero revenues in the long

term. It includes the following:

• Increasing network strength

o Leveraging network synergies to increase market competitiveness.

o Route development strategy to leverage the international gateway and

regional footprint.

• Asset utilization

o Slot planning to work cohesively with route development strategy.

o Optimizing slot planning to provide efficient service to airlines.

• Stakeholder Management

o Establishing long-term partnerships with anchor airlines to enable sharing of

data.

o Creating a market-pull mechanism to feed into airport infrastructure planning.

• Aero operational efficiency

o Minimizing turnaround time for airlines.

o Ensuring the highest level of safety.

o Providing full suite services to airlines.

How AEL expects to improve non-aero revenues

In order to increase non-aero revenues, AEL envisages converting the business model from B2B

to B2C. This is on the lines of the successes achieved at the Changi airport. This is to be

developed on the lines of Changi airport which houses several fancy shopping malls,

restaurants & world’s largest indoor waterfall.

Non Aero revenues for Indian airports still below developed world airports


# It is to be noted that the 7 airports (Navi Mumbai excluded) touch ~25% of India’s total air traffic consumer base of >300 mn people.

71

251

0

50

100

150

200

250

300

2017 2020

Non aero avg spend increased by 254% in 2020 over 2017

INR

1.6 1.7 1.81.6

1.8 1.6

3.8 3.7 3.7 3.8 3.74

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2014 2015 2016 2017 2018 2019

Non-aeronautical revenues per passenger (USD)

AAI airports PPP airports

65 64 60 57 56 50 49 45

35 36 40 43 44 50 51 55

AT

L

DA

A

AD

P

HK

G

SIN

DFW AD

L

Ind

ian

PP

P

…% contribution of non-aero revenues lower than key

international airports

Non Aero Aero

111 | P a g e ( 5 t h J u l 2 0 2 2 )


AAHL plans to increase passenger footfall and provide a network effect in the following ways:

• Establish first-rate infrastructure on the air and land sides of the airport to enhance

quality travel time for passengers.

• Creating locally relevant architecture in and around airports to attract foreign tourists

and domestic passengers.

• Developing entertainment destinations (airport villages, hotels and malls, among

others).

• Enhancing domestic airline connectivity with new and under-prioritised locations.

• Raise the number of international flights; reducing the delay between two flights.

The 7 airports handle ~25% of India’s air traffic consumer base of >30 cr


Non-aero strategy of airports business


45.9

11.4

5.5 5.4 3.91.9

5.0

0

5

10

15

20

25

30

35

40

45

50

Mumbai Ahmedabad Guwahati Lucknow Trivandram Mangaluru Jaipur

Passenger footfalls in mn in FY20

112 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s airport revenue structure


113 | P a g e ( 5 t h J u l 2 0 2 2 )


Case study of Changi airport

Singapore Changi International Airport received the World's Best Airport from Skytrax for the 8th consecutive year. According

to the Changi Airport Group (Changi Airport Group), the airport reported a 5.2% growth in passenger movement (66.3 mn

passengers) as of FY19. This number is a nearly 80% increase compared to when Changi was corporatized ten years ago.

The cargo traffic has been steady and was reported at 2.14 million tons, while commercial flights were steadily rising, with

386,000 flights as of the end of March 2019. However, what made Changi unique is the 10 points as defined under the Canvas

framework:

Customer Segments: There are several customer segments involving airport operations. They can be classified into the

aeronautical customer segments:

• Airline

• Airports

• passengers and

• nonaeronautical customer segments.

Thus, an airport should be considered a multiple-sided platform.

Customer segments of Changi airport


The Changi airport serves businesses and passengers and pays attention to residents of all ages as Changi regards itself as

operating as a transportation platform and performing as a destination. The business activities beyond aircraft taking-off and

landing, such as special events and holiday activities are held to attract diverse customer segments. For example, the Changi

Love Kid project is arranged to serve the family segment. Such projects encourage residents to stay within airport areas.

114 | P a g e ( 5 t h J u l 2 0 2 2 )


Value proposition: Singapore International Airport offers value propositions such as airport performance, customization, design

and usability to each customer segment. Daily airport operations and airside management serve thousands of aircraft taking off

and landing every day. Aprons, taxiways, baggage belts, safety inspections, and other tasks relevant to in-and-out airport areas

are delivered to the airlines. Creating passengers’ experiences is the heart of the value proposition.

The airport arranges attractions for children to adult passengers and residents. Everything is laid out in green environments.

They include event spaces, indoor gardens, community spaces with seating areas, activities for the family, an inflatable

playground, entertainment zones, movie theatres, and lounges.

Channels: To propose retail businesses' values, the airport connects passengers, Singaporean residents and travellers through

the highly interactive website and iShop Changi. The e-commerce portal represents an attempt to enhance the digital

experiences and ecosystem for linking the passengers with resident touch points. This platform is also redesigned to tailor and

personalized customer preferences through various other services. Correspondingly, Changi Rewards, the loyalty program, has

been developed to introduce several member benefits as after-sale services.

Website of iShop Changi


Customer relationships: There are many types of customer relationships provided at this airport. Self-services are available

throughout the process. With the automated FAST System (Fast and Seamless Travel), passengers can check in, drop off their

baggage, and pass through immigration and the boarding gate seamlessly.

Revenue streams: There are many types of customer relationships provided at this airport. Self-services are available throughout

the process. With the automated FAST System (Fast and Seamless Travel), passengers can check in, drop off their baggage, and

pass through immigration and the boarding gate seamlessly.

The airport also created the Changi Airport Growth Initiative (CAGi) for its customers. This program collaborates with airline

customers to drive the traffic connectivity to Singapore Changi International Airport. It encourages customers to pursue business

growth and especially helps airlines to strengthen their long-haul connections, which are key to the airport’s success. This

program also offers rebates to offset the incremental aeronautical charges.

115 | P a g e ( 5 t h J u l 2 0 2 2 )


Key resources: The key resources involve the sources of value propositions. Singapore Changi International Airport always

focuses on how to manage the talents in its organization. The airport values people’s development as the key success factor.

Through a series of talent pools via several engaging and training programs, Changi Airport Group creates a conducive culture,

a sense of belonging in the workplace through the CAG Home Project; internal communications via the CAG social-networking

application; a revamped company intranet; a collaborative and open atmosphere through crowdsourcing, personal

development and growth; an Employee-Engagement Survey; and skills training for the fast-changing environments.

Key activities: The airport’s development in the form of a multi-sided platform is a key activity to propose the values for all

stakeholders. Such development includes the FAST system in Terminal 4, the completion of 3 runways for sufficient capacity

management in the future, and the Jewel Changi Project.

The airport-development activities of the Jewel Changi Airport offer transit and department malls. To create fresh, green, and

exciting experiences for passengers and residents, the Jewel areas comprise four main iconic destinations – the HSBC Rain

Vortex, the Shiseido Forest Valley, Canopy Park, and the Changi Experience Studio.

Key Partnerships: The airport maintains charges for its airline and air cargo partners to ensure its position as an aviation hub.

The airport also facilitates quality input to support the needs for growth and future expansion. Changi Airport Group cooperates

with the Singapore Tourism Board (STB) and Costa Cruises to participate in a tripartite partnership to develop the airport as a

cruise destination in Southeast Asia.

Cost structure: The cost structure of the airport mostly comes from the depreciation, amortization, and service and security-

related fees of approximately 26% and 24%. As of the 2018/2019 financial year, the costs incurred from several airport

developments, such as capacity investments, additional human-resources planning, and terminal expansion, support the various

projects, whereas the new regulatory measures also contribute to an increase in operating costs.

Sustainability: Changi also focuses on sustainability. The airport pays attention to Sustainable Development Goals (SDGs) in

compliance with the United Nations. The Sustainability Working Group and Changi Foundation were established to initiate

social- responsibility programs across the country.

116 | P a g e ( 5 t h J u l 2 0 2 2 )


Airport business is expected to create strategic benefit for the group as per Group

Chairman

As per Mr Gautam Adani, the airport business will provide a transformational platform that

will help shape and create strategic adjacencies for other B2B businesses of the Adani group.

He expects Mumbai airport to not only be India’s leading airport, but a key domestic and

international hub as well on the back of air passenger traffic in the country growing five-fold

and the expectation of 200 new airports being built to handle over 1 billion domestic and

international passengers across tier-I, tier-II and tier-III cities—most of which will connect with

Mumbai.

We expect AEL to make further inroads in the airport business by participating in upcoming

bids for the privation of airports.

Upcoming airports for privatization

Privatization Plan

Till FY22 FY23 FY24 FY25

Triupati Bhubaneshwar Calicut Chennai Imphal

Kushinagar Varanasi Coimbatore Vijaywada Agartala

Kangra Amritsar Nagpur Triupati Udaipur

Aurangabad Trichy Patna Vadodara Dehradun

Jabulpur Indore Madurai Bhopal Rajamundhry

Hubli Raipur Surat Hubli

Gaya Ranchi Jodhpur

Source: Company Reports, Bloomberg & Ventura Research

117 | P a g e ( 5 t h J u l 2 0 2 2 )


977.0 1,060.0

2,341.0

5,360.4 5,750.7

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY21 FY22E FY23E FY24E FY25E

Aero rev in INR cr

INR cr

778.5

1,247.1

2,619.5

4,045.7

4,976.5

0

1,000

2,000

3,000

4,000

5,000

6,000


Non Aero rev in INR cr

INR cr

12.1 24.4 26.7

86.7

299.7

0

50

100

150

200

250

300

350


Rentals in INR cr

INR cr 104.5

19.8

31.4

45.1

59.1

0

20

40

60

80

100

120


Other operating revenues in INR crINR cr

249.4

(47.2)

1,262.6

4,818.3

5,888.6

-10

0

10

20

30

40

50

60

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Chart Title

EBITDA EBITDA margin % - RHS

INR cr

(1,391.9)

(1,976.0)

(935.7)

2,176.1 2,251.1

-100

-80

-60

-40

-20

0

20

40

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500


Chart Title

PAT PAT margin % - RHS

INR cr

Adani Airport Story in Charts

118 | P a g e ( 5 t h J u l 2 0 2 2 )



4.95.6

7.3

9.0 9.1

3.4

1.6 1.8 1.9 2.2 2.3

0.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0


Ahmedabad traffic data in mn

Domestic international

1.0 1.0

1.5 1.5

1.3

0.5

0.7 0.70.8 0.7

0.6

0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6


Mangaluru traffic data in mn


2.7

3.3

4.0

4.7 4.7

2.0

0.6 0.7 0.7 0.8 0.70.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


Lucknow traffic data in mn


45.1

51.3

58.562.1 60.3

0.5

17.1 18.4

0.8

21.318.8

2.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0


AAHL traffic data in mn


119 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s airport financial summary


Fig in INR Cr (unless specified) FY21 FY22 FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E

Revenue from operations 1,872.0 2,351.3 5,018.5 9,538.0 11,086.0 15,288.1 17,671.9 20,576.3 23,940.6 25,258.4

YoY Growth (%) 26% 113% 90% 16% 38% 16% 16% 16% 6%

Aeronautical revenues 977.0 1,060.0 2,341.0 5,360.4 5,750.7 8,469.7 9,384.0 10,857.5 12,539.4 12,228.5

YoY Growth (%) 8% 121% 129% 7% 47% 11% 16% 15% -2%

Non-Aeronautical revenues 778.5 1,247.1 2,619.5 4,045.7 4,976.5 6,241.0 7,490.9 8,643.4 10,034.1 11,385.6

YoY Growth (%) 60% 110% 54% 23% 25% 20% 15% 16% 13%

Rentals from development 12.1 24.4 26.7 86.7 299.7 510.5 726.8 1,005.1 1,299.0 1,570.4

Other operating income 104.5 19.8 31.4 45.1 59.1 66.9 70.2 70.3 68.0 73.9

Operating expenses (1,622.6) (2,398.5) (3,756.0) (4,719.7) (5,197.4) (6,364.2) (7,207.2) (8,055.2) (9,056.2) (9,550.5)

Operating expenses to Sales (%) (86.7) (102.0) (74.8) (49.5) (46.9) (41.6) (40.8) (39.1) (37.8) (37.8)

EBITDA 249.4 (47.2) 1,262.6 4,818.3 5,888.6 8,923.9 10,464.7 12,521.1 14,884.4 15,707.9

EBITDA Margin (%) 13.3 (2.0) 25.2 50.5 53.1 58.4 59.2 60.9 62.2 62.2

YoY Growth (%) (118.9) (2,774.3) 281.6 22.2 51.5 17.3 19.7 18.9 5.5

Depreciation (770.0) (773.4) (1,039.0) (1,076.7) (1,322.1) (2,140.5) (2,366.6) (3,064.6) (3,092.4) (3,202.2)

EBIT (520.6) (820.6) 223.6 3,741.6 4,566.5 6,783.4 8,098.1 9,456.5 11,792.1 12,505.7

Margin(%) (27.8) (34.9) 4.5 39.2 41.2 44.4 45.8 46.0 49.3 49.5

Finance Cost (871.3) (1,150.2) (1,067.4) (1,392.3) (2,126.3) (3,260.4) (3,552.2) (4,098.9) (4,539.7) (4,887.7)

Profit Before Tax (1,391.9) (1,970.8) (843.8) 2,349.2 2,440.2 3,523.0 4,545.9 5,357.6 7,252.4 7,618.0

Margin (%) (74.4) (83.8) (16.8) 24.6 22.0 23.0 25.7 26.0 30.3 30.2

Tax Expense 0.0 (5.2) (91.9) (173.2) (189.1) (282.0) (404.1) (571.5) (762.2) (1,141.4)

Tax Rate (%) 0.0 0.3 10.9 (7.4) (7.7) (8.0) (8.9) (10.7) (10.5) (15.0)

PAT (1,391.9) (1,976.0) (935.7) 2,176.1 2,251.1 3,241.0 4,141.8 4,786.1 6,490.2 6,476.7

Margin (%) (74.4) (84.0) (18.6) 22.8 20.3 21.2 23.4 23.3 27.1 25.6

YoY Growth (%) 42.0 (52.6) (332.5) 3.5 44.0 27.8 15.6 35.6 (0.2)

Net Block 8,094.0 9,833.1 15,158.2 22,906.2 43,844.8 52,350.8 53,508.3 63,048.2 61,594.3 64,852.4

Net Working Capital 320.6 329.9 598.6 1,033.5 1,173.3 1,515.2 1,697.1 1,946.1 2,229.5 2,359.3

Net Worth 3.7 (1,583.9) 2,495.3 4,618.1 6,871.5 9,841.9 13,195.3 17,285.1 22,685.8 28,235.9

Return on Equity (%) (38,079.8) 124.8 (37.5) 47.1 32.8 32.9 31.4 27.7 28.6 22.9

Capital Employed 14,420.5 26,050.8 36,281.2 50,227.0 59,722.4 69,388.2 79,538.0 87,995.1 97,979.4 109,605.1

Return on Capital Employed (%) (3.6) (3.2) 0.6 7.4 7.6 9.8 10.2 10.7 12.0 11.4

Cash Flow from Operations 1,192.3 (692.0) 899.2 4,207.5 5,557.0 8,297.4 9,876.9 11,700.2 13,838.3 14,436.3

Cash Flow from Investing (5,224.4) (8,502.6) (13,166.4) (12,146.1) (7,661.3) (7,432.0) (7,324.7) (6,707.3) (5,072.4) (9,094.4)

Cash Flow from Financing 4,160.2 11,968.2 11,409.5 11,144.1 5,622.0 2,784.6 3,670.5 876.4 22.0 1,218.4

Net Cash Flow 128.0 2,773.5 (857.6) 3,205.5 3,517.7 3,650.0 6,222.8 5,869.4 8,787.9 6,560.3

Free Cash Flow (655.8) (6,350.3) (12,148.2) (8,038.5) (2,266.3) 607.1 2,238.0 4,556.2 8,289.2 4,610.1

FCF to Revenue (%) (35.0) (270.1) (242.1) (84.3) (20.4) 4.0 12.7 22.1 34.6 18.3

FCF to EBITDA (%) (263.0) 13,450.7 (962.2) (166.8) (38.5) 6.8 21.4 36.4 55.7 29.3

FCF to Net Profit (%) 47.1 321.4 1,298.2 (369.4) (100.7) 18.7 54.0 95.2 127.7 71.2

FCF to Net Worth (%) (17,940.6) 400.9 (486.8) (174.1) (33.0) 6.2 17.0 26.4 36.5 16.3

Total Debt 14,416.9 27,634.7 33,785.9 45,609.0 52,851.0 59,546.3 66,342.7 70,710.1 75,293.6 81,369.1

Net Debt 13,895.1 23,858.5 30,647.6 44,620.3 51,406.4 58,000.7 64,656.4 68,966.8 73,412.7 79,319.3

Net Debt to Equity (X) 3,801.4 (15.1) 12.3 9.7 7.5 5.9 4.9 4.0 3.2 2.8

Net Debt to EBITDA (X) 55.7 (505.4) 24.3 9.3 8.7 6.5 6.2 5.5 4.9 5.0

120 | P a g e ( 5 t h J u l 2 0 2 2 )


Valuation

We have valued the airport business using DCF methodology for 6 airports namely

Ahmedabad, Mangaluru, Lucknow, Guwahati, Trivandrum and Jaipur. For MIAL and NMIAL ,

we have applied an EV/EBITDA multiple of 15x.

DCF valuation of Airport business


Valuation of 6 airports (excluding MIAL and NMIAL)



WACC (%) 11.0

Particulars FY25 FY30 FY35 FY40 FY45 FY50 FY55 FY60 FY65 FY70

FCFF (INR Cr) (327) 2,597 9,894 12,366 16,445 19,056 22,093 25,676 25,660 31,302

Discount Factor (X) 0.90 0.53 0.32 0.19 0.11 0.07 0.04 0.02 0.01 0.01

Discounted FCFF (INR Cr) (294.4) 1,541.5 3,484.5 2,584.5 2,039.8 1,402.7 965.1 665.6 394.8 285.8




Valuation of MIAL


EV/EBITDA multiple (X) 15

MIAL Enterprise Value FY30 (INR Cr) 36,622

FY25 Discounted EV (INR Cr) 21,733


FY25 Equity value (INR Cr) 13,495

Valuation of NMIAL


EV/EBITDA multiple (X) 15

MIAL Enterprise Value FY30 (INR Cr) 78,418

FY25 Discounted EV (INR Cr) 46,537


FY25 Equity value (INR Cr) 34,469

Equity value of 8 airports (INR Cr) 1,10,660


121 | P a g e ( 5 t h J u l 2 0 2 2 )


AEL’s FMCG Business

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Understanding how the AWL business is structured

Except for dairy products, Adani Wilmar is one of the few large FMCG food companies in India

to offer most of the essential kitchen commodities such as edible oils, wheat flour, rice, pulses,

sugar, etc.

Comprehensive B2C packaged consumer product portfolio


All of its products are offered under a diverse range of brands, ‘Fortune’ being the flagship

brand, across a broad spectrum of prices to cater to different customer groups.

The company’s portfolio spans across three categories namely,

• Edible Oils,

• FMCG and Packaged Food, and

• Industry Essentials

FY21 sales volume break-up


Industry Essentials, 25%

Food & FMCG, 11%Edible Oils, 65%

FY21 sales volume: 4.5MT

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Transformation to a Food FMCG company


Segment Offerings based on sales volume as of FY21

Source: Company RHP; 1) includes ricebran, groundnut, cotton seed, and coconut oil; 2) includes maida & suji; 3) VAP means value added products, includes

sugar as well; 4) includes soaps, sanitizers and handwashes; 5) includes de-oiled cakes, Palm Stearin and Palm Fatty Acid, etc.

124 | P a g e ( 5 t h J u l 2 0 2 2 )


Edible Oil – This segment is the largest, contributing 65% to the portfolio in terms of volume.

As of FY21, the Refined Oil in Consumer Packs (“ROCP”) market share of the company’s

branded oil was 18.3% making it the dominant No.1 edible oil brand in India. ‘Fortune’ is the

largest selling edible oil brand in India according to a Technopak report.

Market share and ranking of key edible oil products in India

Products Market Share Ranking

Soyabean Oil

Fortune 22.8%

First King's 6.4%

Total 29.2%

Sunflower Oil

Fortune 8.3%

Third Aadhar 2.6%

Total 10.9% Source: Company Reports

Packaged Food & FMCG – This segment contributes 25% to the portfolio in terms of volume.

Started in 2013, this is a relatively newer vertical wherein the company has leveraged its brand

and distribution network to offer a wide array of packaged foods including wheat flour, rice,

pulses, besan, sugar, soya chunks and ready-to-cook khichadi.

Amongst the large FMCG players, only a few like Emami Agrotech, Patanjali and Adani Wilmar

have registered a double-digit growth rate in the last 5 years. Adani Wilmar was among the

top five fastest-growing and most profitable packaged food companies in India based on

growth in revenues and EBITDA during the period FY15-20.

Revenue and EBITDA CAGR of some of the largest FMCG companies in India


AWL is focusing on further strengthening its position in this segment and has thus acquired

renowned basmati rice brands Kohinoor and Charminar from the US-based McCormick, to

expand its staple foods portfolio. Besides the above, Adani Wilmar has also acquired the

3% 2%

-1%

9% 8%3% 5% 6%

11%

-7%

-14%

35%

24%

-20%

-10%

0%

10%

20%

30%

40%

HU

L

Dab

ur

ITC

Ne

stle

Bri

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Go

dre

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Mar

ico

Par

le

Wilm

ar

Pe

psi

Co

Ru

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oya

Pat

anja

li

Emam

i Agr

ote

ch

FY15-20 Revenue CAGR (%)

9% 7% 7%

23%

16%11% 12%

8%

21% 20%

-10%

17%

28%

-15%-10%

-5%0%5%

10%15%20%25%30%35%

HU

L

Dab

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ITC

Ne

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Bri

tan

nia

Go

dre

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Mar

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Par

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Wilm

ar

Pe

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oya

Pat

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Emam

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FY15-20 EBITDA CAGR

125 | P a g e ( 5 t h J u l 2 0 2 2 )


Trophy brand which is popular in the HoReCa segment and accessed rights over Kohinoor’s

ready-to-eat curries and meals portfolio. While the total deal value is unknown, the purchase

is financed from the IPO proceeds.

Over FY22-25 we expect AWL to grow its revenues at a CAGR of 9.8% to reach INR 71,820 cr

by FY25. This is to be spearheaded by the FMCG vertical which is set to grow at a CAGR of

39.6% to reach INR 7,132.2 cr by FY25. The edible oil vertical is expected to grow at 8.0% CAGR

to INR 57,187 cr and the industry essentials segment is forecasted to grow at 6.6% CAGR to

INR 7,500 cr by FY25.

Industry Essentials – This segment contributes ~25% to the portfolio in terms of volume. It

includes oleochemicals, castor oil and its derivatives and de-oiled cakes. AWL enjoys a market-

leading position in this segment as well. India is the largest producer of Castor Seed by value

and AWL had a #1 market rank with a 26% market share in the category as of FY20. It has a

1,100 MT/day crushing capacity and 600 MT/day refining capacity. The market is expected to

grow at 8.1% CAGR to reach INR 129 bn by FY25.

Castor Seed Production in India in Value terms (INR bn)




50

87

129

0

20

40

60

80

100

120

140

FY15 FY20 FY25p

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The oleochemical market volume is expected to grow at 5.9% CAGR to reach INR 2.131 MT by

FY25. AWL enjoys a #1 market rank in Stearic Acid and Glycerin with 32% and 23% market

shares respectively. It has a 9% market share in soap noodles. The company has 800 MT/day

oleochemicals capacity in the Mundra facility.



Presence across primary kitchen commodities

Over the years, primary kitchen commodities such as edible oils, wheat flour, rice, pulses, sugar

and dairy have been largely handled by players focussed within a specific segment. Among the

large FMCG players, limited players like Adani and Patanjali have entered into multiple

categories in primary kitchen commodities. Adani Wilmar is present in most categories through

its brand ‘Fortune’. The company’s brand architecture using a single brand identity for multi

categories optimizes the marketing costs and enhances brand equity.

Presence of large FMCG companies across essential kitchen commodities

Edible Oils

Wheat Flour

Rice Pulses Sugar Dairy

HUL ✓ Dabur

ITC ✓ ✓

Nestle

Britannia Godrej

Marico ✓ Parle

Wilmar ✓ ✓ ✓ ✓ ✓ PepsiCo

Ruchi Soya ✓ ✓

Patanjali ✓ ✓ ✓ ✓ ✓ Emami Agrotech ✓


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The spend on primary kitchen commodities accounts for 23% of total spending on food and

grocery estimated to be INR 39,45,000 cr thereby presenting an opportunity size of INR

9,00,000 cr for any player in the primary kitchen commodity segments. Within these edible

oils, wheat flour, rice, pulses, sugar etc account for 66% i.e., INR 6,00,000 cr and the balance

comprises dairy products.

Key Growth Drivers

Underpenetrated market with significant potential for growth –

The penetration rate of packaged foods in India remains low, which provides significant

potential for growth for packaged edible oil and food products. This is further supported by

the favourable demographics with urbanization and rise in middle-class population, gradual

expansion of modern retail including e-commerce, convenience and healthy eating trends.

Annual per capita spend on packaged foods (‘000 INR)


113

16

5

0

20

40

60

80

100

120

USA China India

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Growth of the Indian Packaged Food Market


The packaged food market is growing at almost double the pace of the overall food category

and is expected to gain a market share of 17% by the fiscal year 2025 from a market share of

14% in the fiscal year 2015.

Shift of consumers towards branded products resulting in immense market potential

Select categories have seen a very strong shift from loose to branded.



With the onset of trends like

• urbanisation and rise in middle-class population,

• expansion of modern retail including e-commerce,

• increased in-home consumption due to Covid-19,

• government policies supporting food processing,

• convenience and healthy eating,

• consumers across the spectrum moving towards premium products,

3,760

6,020

10,130

14%

15%

17%

12%

13%

14%

15%

16%

17%

18%

0

2,000

4,000

6,000

8,000

10,000

12,000

FY15 FY20 FY25P

India's packaged food retail market (INR bn) % of total food & grocery retail market

129 | P a g e ( 5 t h J u l 2 0 2 2 )


a broader set of categories are expected to experience a similar shift toward branded products

–



Leadership position in Branded Edible Oil and Packaged Food Business –

The company has a sustained market leadership position in Edible Oil – It has clear leadership

in a fragmented market with a market share of more than 2x of the next competitor. It has

huge potential to consolidate market share given that ~50% share is held by regional brands.



Others, 60%

Adani Wilmar, 17%

Ruchi Soya, 8%

Emami, 6%

Cargill, 4%

Bunge, 3%

Marico, 1%

AWL has the largest market share in edible oil among branded players in FY20

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Ranking of AWL according to Market Share by Value


It has also demonstrated the ability to rapidly gain market share in new categories like Rice,

Soya Chunks and Wheat Flour. It has been leveraging the fortune brand to launch new products

with an increasing focus on value-added products and an aim to diversify revenue streams and

generate high-profit margins.


Source: Company Report; Source 1: Technopak Report, Source 2: Nielsen Retail Index, Note 3: Market share by value,

Note 4: Market share by volume

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Ranking of AWL according to Market Share by Value


AWL intends to expand its business based on this integrated business model and develop

additional integrated manufacturing facilities in the near future. Further, it plans to establish

additional food processing units at existing crushing units or refineries. The details of its capex

plans are given below.

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Expansion of distribution network with an omni channel approach –

From FY19-21, the number of distributors grew by 33%. As of March 31, 2021, the company

had 5,566 distributors located in 28 states and eight union territories throughout India catering

to over 1.6 mn retail outlets, representing approximately 35 % of the retail outlets in India.

The company strives to expand this network to further penetrate the market and increase

sales. It aims to expand its online reach from the current 20 cities to 100 cities in the next few

years and have more than 40 Fortune Mart stores opened across India in the next few years.

Location

Haldia, WB

Paradip, Odisha

Bundi, Rajasthan

Mantralayam, AP

Shujalpur, MP

Kadi, Gujrat

Neemuch, MP

Kolkata, WB

Gohana, Haryana

500 TPD oil mill

Setting up packing section with warehouse of 4,000 square meter

Nagpur, MH

Soya value added products plants, namely, (a) Soya Crushing Plants - seed cleaning

and dehulling section – 500 TPD, extraction section – 500 TPD, Silos & Conveying

system, and Meal Grading System, b) soya flour mill - 150 TPD, and (c) Flour Packing

- 100 TPD (Nagpur 2)

240 TPD chana dal plant (Nagpur 3)

300 TPD solvent extraction plant, revamp of solvent extraction process, and

warehouse for de-oiled cake

Developing new manufacturing facilities

250 TPD wheat flour plant

Integrated manufacturing including 12 TPH x 2 Line P2R and 8 TPH R2R x 2 lines, 400

TPD rice bran oil extraction, 100 TPD Rice bran oil refinery, 500 TPD mustard oil mill

and 200 TPD wheat flour plant

240 TPD dal plant

240 TPD dal plant and 150 TPD besan plant

200 TPD organic soya meal plant

Description

50 TPD soya nugget plant with BP and CP packing (Nagpur 1)

1,500 TPD palm oil refinery, 400 TPD neutralization plant, 300 kilo liters per day

(“KLD”) effluent treatment plant (“ETP”), 500 TPD fractionation plant, and suitable

expansion in acid oil

Expansion at manufacturing facilities

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Strong Raw Material Sourcing Capabilities –

Being the largest importer gives AWL the bargaining power to source better quality raw

materials. It has a well-established broad procurement network across the key raw material

producing belts which aides in it getting favourable commercial terms.

Global suppliers of palm oil


Wilmar, 30%

Global suppliers of palm oil

Adani Wilmar, 20%

Others, 80%

Largest importers of edible oil in India

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23,477 30,498

45,401 48,579 52,465

57,187

1,953

1,907

2,621 3,801

5,283

7,132

4,322

4,711

6,192

6,935

7,212

7,500

0

5

10

15

20

25

30

5,000

15,000

25,000

35,000

45,000

55,000

65,000

75,000

85,000

FY20 FY21 FY22 FY23E FY24E FY25E

Strong revenue growth on cards

Edible Oil FMCG

Industry Essentials YoY growth % (RHS)

INR cr

29,657

37,090

54,214

59,314

64,960

71,820

0

5

10

15

20

25

30

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000


Revenue- LHS YoY Growth (%) (RHS)

INR cr

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

250

750

1,250

1,750

2,250

2,750


Net margins set to increase

EBITDA- LHS Net Profit- LHS

EBITDA Margin (%) (RHS) Net Margin (%) (RHS)

INR cr

-3.0

-2.0

-1.0

0.0

1.0

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000


AWL is net debt free

Total Debt- LHS

Net Debt- LHS

Net Debt to Equity (x) (RHS)

Net Debt to EBITDA (x)(RHS)

INR cr

2,5713,298

7,6068,625

9,997

11,650

3,6464,138

6,236 5,940 5,764 5,684

5

10

15

20

25

30

35

500

2,500

4,500

6,500

8,500

10,500

12,500


Return ratios are set to expand from here


RoE (%) (RHS) RoIC (%) (RHS)

INR cr

781926

1,160

2,337 2,389 2,424

463204 182

1,111 1,171

1,566

0

20

40

60

80

100

120

140

0

500

1,000

1,500

2,000

2,500

3,000


Strong cash flow generation expected

CFO FCF

CFO to EBITDA (%) (RHS) FCF to Net Profit (%) (RHS)

INR cr

Adani Wilmar Story in Charts

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Adani Wilmar Financial Summary


Fig in INR Cr (unless specified) FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E

Revenue from operations 29,657.0 37,090.4 54,213.6 59,314.1 64,960.1 71,819.6 79,620.0 88,171.0 97,678.9 108,018.4 119,375.3

YoY Growth (%) 3.0 25.1 46.2 9.4 9.5 10.6 10.9 10.7 10.8 10.6 10.5

Edible Oil 23,476.7 30,497.8 45,400.8 48,578.8 52,465.1 57,187.0 62,333.8 67,632.2 73,211.9 78,885.8 84,802.2

YoY Growth (%) 9.0 29.9 48.9 7.0 8.0 9.0 9.0 8.5 8.3 7.7 7.5

FMCG 1,953.0 1,906.6 2,621.2 3,800.8 5,283.1 7,132.2 9,485.8 12,426.4 16,030.1 20,358.2 25,447.8

YoY Growth (%) 4.6 (2.4) 37.5 45.0 39.0 35.0 33.0 31.0 29.0 27.0 25.0

Industry Essentials 4,322.1 4,711.2 6,191.5 6,934.5 7,211.9 7,500.4 7,800.4 8,112.4 8,436.9 8,774.4 9,125.4

YoY Growth (%) (19.1) 9.0 31.4 12.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Raw Material Cost 25,370.2 32,489.8 48,791.4 52,196.4 54,891.3 58,173.9 62,501.7 68,773.4 75,212.7 82,094.0 88,934.6

RM Cost to Sales (%) 85.5 87.6 90.0 88.0 84.5 81.0 78.5 78.0 77.0 76.0 74.5

Employee Cost 223.9 321.7 392.2 533.8 519.7 538.6 597.2 661.3 732.6 810.1 895.3

Employee Cost to Sales (%) 0.8 0.9 0.7 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.8

Other Expenses 2,753.4 2,953.6 3,293.8 4,621.4 7,402.7 10,714.2 13,833.4 15,545.8 17,980.7 20,550.5 23,895.7

Other Expenses to Sales (%) 9.3 8.0 6.1 7.8 11.4 14.9 17.4 17.6 18.4 19.0 20.0

EBITDA 1,309.5 1,325.3 1,736.3 1,962.5 2,146.5 2,392.9 2,687.8 3,190.5 3,752.9 4,563.8 5,649.7

EBITDA Margin (%) 4.4 3.6 3.2 3.3 3.3 3.3 3.4 3.6 3.8 4.2 4.7

Edible Oil 1,634.4 1,651.7 1,783.8 1,944.4 2,119.3 2,333.3 2,562.4 2,879.3 3,222.5

EBITDA Margin (%) 3.6 3.4 3.4 3.4 3.4 3.5 3.5 3.7 3.8

FMCG 41.9 64.6 103.0 174.7 279.8 553.0 865.6 1,333.5 2,048.5

EBITDA Margin (%) 1.6 1.7 2.0 2.5 3.0 4.5 5.4 6.6 8.1

Industry Essentials 229.1 246.2 259.6 273.8 288.6 304.2 324.8 351.0 378.7

EBITDA Margin (%) 3.7 3.6 3.6 3.7 3.7 3.8 3.9 4.0 4.2

EBIT 1,068.3 1,058.0 1,427.2 1,562.8 1,692.6 1,906.1 2,172.3 2,642.8 3,167.1 3,929.8 4,965.6

EBIT Margin (%) 3.6 2.9 2.6 2.6 2.6 2.7 2.7 3.0 3.2 3.6 4.2

Interest 569.2 406.6 540.8 476.1 142.7 10.8 0.0 0.0 0.0 0.0 0.0

Interest cost to Sales (%) 1.9 1.1 1.0 0.8 0.2 0.0 0.0 0.0 0.0 0.0 0.0

Net Profit 460.9 727.7 803.7 1,018.6 1,372.0 1,652.6 1,952.1 2,388.5 2,885.8 3,598.6 4,541.4

Net Margin (%) 1.6 2.0 1.5 1.7 2.1 2.3 2.5 2.7 3.0 3.3 3.8

Adjusted EPS 3.5 5.6 6.2 7.8 10.6 12.7 15.0 18.4 22.2 27.7 34.9

P/E (X) 165.3 104.7 94.8 74.8 55.5 46.1 39.0 31.9 26.4 21.2 16.8

Adjusted BVPS 39.6 50.8 117.0 132.7 153.8 179.3 209.3 246.1 290.5 345.8 415.7

P/BV (X) 14.8 11.5 5.0 4.4 3.8 3.3 2.8 2.4 2.0 1.7 1.4

Enterprise Value 77,237.5 77,001.8 74,791.7 73,477.2 71,929.3 70,196.9 68,423.6 66,203.0 63,276.9 59,563.1 55,191.1

EV/EBITDA (X) 59.0 58.1 43.1 37.4 33.5 29.3 25.5 20.8 16.9 13.1 9.8

Net Worth 2,570.7 3,298.1 7,606.4 8,625.0 9,997.0 11,649.7 13,601.7 15,990.2 18,876.0 22,474.6 27,016.0

Return on Equity (%) 17.9 22.1 10.6 11.8 13.7 14.2 14.4 14.9 15.3 16.0 16.8

Capital Employed 5,077.8 5,376.0 10,779.7 10,402.9 10,560.4 12,163.3 14,218.3 16,721.2 19,729.7 23,468.3 28,158.6

Return on Capital Employed (%) 13.9 17.0 9.7 11.2 12.0 11.7 11.4 11.8 12.0 12.5 13.2

Invested Capital 3,645.7 4,137.5 6,235.7 5,939.8 5,763.9 5,684.1 5,862.9 6,030.8 5,990.5 5,875.3 6,044.7

Return on Invested Capital (%) 29.3 25.6 22.9 26.3 29.4 25.1 27.7 32.8 39.6 50.1 61.5

Cash Flow from Operations 781.3 926.0 1,160.0 2,337.4 2,389.1 2,424.4 2,439.2 2,958.7 3,726.2 4,601.8 5,312.1

Cash Flow from Investing (506.4) (483.8) (3,861.2) (651.6) (903.6) (1,719.9) (2,216.9) (2,920.8) (1,772.9) (1,952.5) (2,104.4)

Cash Flow from Financing (7.8) (731.0) 2,691.5 (1,684.1) (1,371.4) (85.3) 70.0 80.0 80.0 100.0 100.0

Net Cash Flow 267.1 (288.7) (9.8) 1.7 114.2 619.2 292.3 117.9 2,033.3 2,749.4 3,307.8

Free Cash Flow 463.1 203.6 182.4 1,111.3 1,170.7 1,566.5 1,678.2 2,016.2 2,674.7 3,295.3 3,831.7

FCF to Revenue (%) 1.6 0.5 0.3 1.9 1.8 2.2 2.1 2.3 2.7 3.1 3.2

FCF to EBITDA (%) 35.4 15.4 10.5 56.6 54.5 65.5 62.4 63.2 71.3 72.2 67.8

FCF to Net Profit (%) 100.5 28.0 22.7 109.1 85.3 94.8 86.0 84.4 92.7 91.6 84.4

FCF to Net Worth (%) 18.0 6.2 2.4 12.9 11.7 13.4 12.3 12.6 14.2 14.7 14.2

Total Debt 2,507.1 2,077.8 3,173.3 1,777.9 563.4 513.7 616.6 731.0 853.8 993.8 1,142.6

Net Debt 1,075.0 839.4 (1,370.7) (2,685.2) (4,233.1) (5,965.5) (7,738.8) (9,959.4) (12,885.5) (16,599.3) (20,971.3)

Net Debt to Equity (X) 0.4 0.3 (0.2) (0.3) (0.4) (0.5) (0.6) (0.6) (0.7) (0.7) (0.8)

Net Debt to EBITDA (X) 0.8 0.6 (0.8) (1.4) (2.0) (2.5) (2.9) (3.1) (3.4) (3.6) (3.7)

Interest Coverage Ratio (X) 1.9 2.6 2.6 3.3 11.9 176.2 NA NA NA NA NA

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Valuation

Amongst the large FMCG players, only a few like Emami Agrotech, Patanjali and Adani Wilmar

have registered a double-digit growth rate in the last 5 years. Adani Wilmar was among the

top five fastest-growing and most profitable packaged food companies in India based on

growth in revenues and EBITDA during the period FY15-20. We expect AWL to increase its sales

by 10.7% over FY22-30 and post that we have assumed a terminal growth rate of 5% at 9.9%

WACC to arrive at per share price of INR 556.

Adani Wilmar DCF Valuation




WACC (%) 9.9


Particulars FY25 FY26 FY27 FY28 FY29 FY30

FCFF (INR Cr) 1,566 1,678 2,016 2,675 3,295 3,832

Discount Factor (X) 0.91 0.83 0.75 0.69 0.62 0.57

Discounted FCFF (INR Cr) 1,426 1,390 1,521 1,836 2,059 2,179





FY25 Net Debt -5,966



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AEL’s Defence & Aerospace Business

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Adani Defence and Aerospace Ltd (ADAL)

ADAL’s Defence Business

ADAL is the Tier 1 supplier to the Ministry of Defence (MoD), DRDO, ISRO, HAL, BEL and the

Israel-based Elbit Systems. Through its comprehensive ecosystem of Tier I & Tier II capabilities

across the defence supply chain, ADAL is well-positioned to facilitate the integration of larger

platforms. The company is developing Tier-1 capabilities in

• Avionics & systems,

• Optoelectronics,

• Aero-structure & precision components,

• Aerospace composites

• Radar and electronic warfare systems.

ADAL Business Verticals


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ADEL is operating on four key objectives

• Focus on platforms and technologies of critical importance to meet the emerging

security & defence needs of India, and further leverage capabilities for the civil domain.

• Set up an ecosystem of capabilities through investment in MSMEs and start-ups in

India, with unique products and technologies which will help absorb and build

technologies. ADEL has amalgamated an integrated solution with heterogeneous

capabilities through its global partners and MSMEs in India including Comprotech,

AutoTEC, Alpha Tocol, and Alpha Design Technologies.

• Collaborate with credible and committed global partners for India and international

markets, who are willing to transfer true technology to India.

• Set up facilities and capabilities which are global, facilitating exports and furthering the

objective of reducing the net current account deficit for India and bringing India on the

global export map.

ADAL pan-India network


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Defence business product profile

Unmanned Systems – UAV, Drone and counter Drone/UAV systems

ADEL entered into a JV with Elbit Systems of Isreal in Feb 2018 to set up India’s first private

UAV manufacturing facility at Adani Aerospace Park in Hyderabad. The JV is currently

producing Hermes 900, Hermes 450, Sky Striker and Skylark 3, which has applications for civil,

defence and homeland security requirements.

ADAL UAV and Drone products


Except for the engine components, 70% of the production of the UAVs is being produced in the

company’s Hyderabad aerospace manufacturing facility (50,000 sq ft state-of-the-art facility),

which includes the UAV body of carbon fibre composites, avionics and integration of payloads

in collaboration with Bharat Electronics Ltd. The Rotex Engines which are currently used in

these UAVs are not yet produced in India, however, ADEL is targeting it as the next level of

development and working on the engine production plans.

ADEL has not started manufacturing drones yet. The company is sourcing the components from

the partners and supplying them to defence, which is a niche market. To explore opportunities

in the agriculture and civil market, which is a mass market, ADEL acquired a 50% stake in

General Aeronautics Ltd (Bengaluru-based startup) in Apr 2022. With this acquisition, ADEL is

planning to leverage its military drone and AI/machine learning capabilities to provide

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solutions for the agricultural sector. The company is exploring two revenue models for drone

services in the agricultural sector:

• Dealer-based – The equipment will be sold to the customers through the dealer

network

• Service-based – The equipment will be provided for various services for a fee in

partnership with a local entrepreneur or an institution

To diversify its drone product portfolio, the company is also promoting startups in the drone

sector and is looking at manufacturing a logistics drone which can carry a payload of up to 120

kg, which we believe could be a game-changer in express parcel and last-mile delivery segment.

Such products could also find applications in power transmission, oil & gas, mining and

construction.

In Mar 2021, ADEL got the government approval to set up counter-drone/counter-UAV

systems at all airports across India to halt the flight of rogue drones in no-fly zones. With this,

the ADEL became the first company to implement such systems at Indian airports.

The vertical – Anti-drone and anti-UAV systems

Source: Ministry of Defence, Industry Reports and Ventura Research

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PLI for the drone sector:

About:

• It covers a wide variety of drone components, including airframe, propulsion systems, power systems, batteries, inertial

measurement unit, flight control module, ground control station, communication systems, cameras, sensors, spraying

systems, and emergency recovery system, and trackers.

• It is expected to bring fresh investments of over INR 5,000 cr and incremental production of over INR 1,500 cr and create

additional employment of about 10,000 jobs.

Significance:

• It will encourage entrepreneurs to strive toward building drones, components, and software for the global market. It

will also open many more verticals for the utilisation of drones.

• It will help reduce imports. At present 90 %of the drones in India are imported.

• The government intends to make India a global drone hub by 2030.

Additional schemes for drones to enhance their areas of application

• The Union Budget pushed for the promotion of drones through startups and skilling at Industrial Training Institutes (ITIs).

• Startups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS).

Courses for skilling will also be started in selected ITIs across all States.

• DrAAS allows enterprises to avail of various services from drone companies, removing the need for them to invest in

drone hardware or software, pilots, and training programmes.

• Sectors, where drones can be employed, are endless. These include photography, agriculture, mining, telecom,

insurance, telecom, oil & gas, construction, transport, disaster management, geo-spatial mapping, forest and wildlife,

defence and law enforcement to name a few.

• Drones will also be promoted for crop assessment, digitisation of land records, and spraying of insecticides and nutrients

(Kisan Drones).

• The drone services industry is expected to grow to over Rs 30,000 crore in the next three years and generate over five

lakh jobs.

Adani's small arms and ammunition

ADAL acquired a 51% stake in PLR Systems in Sep 2020 and forayed into the small arms

segment. The rest 49% is with Israel Weapon Industries (IWI), Israel, which is the manufacturer

of TAVOR Assault Rifle, X95 Assault Rifle, GALIL Sniper Rifle and NEGEV Light Machine Gun

which are used by special forces.

In response to the ‘Make in India’ initiative, PLR Systems established a small arms

manufacturing facility at Malanpur Industrial Area, Gwalior, Madhya Pradesh and became the

first private sector company that was granted a license by the government for manufacturing

small arms and ammunition for Indian Army and police forces.

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ADAL small arms used by Indian Army and Para Military Forces


ADEL has also announced an investment of INR 1,500 cr to set up South Asia’s largest

integrated ammunition manufacturing complex in the defence industrial corridor in Kanpur,

Uttar Pradesh. The complex spread over more than 250 acres will have state-of-the-art

technology across small and medium calibre ammunition, along with short-range air defence

missiles.

Government thrust for ‘Make in India’ and indigenization of defence

procurement to significantly boost ADAL’s defence segment

In the defence budget, the finance minister allocated INR 1,52,369 cr for capital expenditure

in FY23 which includes purchasing new weapons, aircraft, warships and other military

hardware. The capital outlay is an increase of around 10% compared to the revised estimate

of INR 1,38,850 cr for FY22.

The defence procurement procedure is governed by the Defence Acquisition Procedure (DAP,

which started in Oct 2020). The six main defence procurement strategies are differentiated

based on whether the equipment is being manufactured by a domestic player or a foreign

company.

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Key defence procurement categories in Defence Acquisition Procedure


Around 68% of this capital procurement has been allocated toward local procurement. It is in

line with the 'Vocal for Local' push and it will certainly boost the domestic defence industries.

ADAL, with its technological capabilities and execution capabilities, qualifies for the first three

categories of defence procurement, and therefore, is expected to remain a key beneficiary of

‘Make in India’ in the defence segment.

India’s defence procurement and indigenization

Source: Ministry of Defence, Industry Reports and Ventura Research

• 1st priority given to Indian vendors with indigenous design

Buy from Indian IDDM

• 2nd priority given to Indian vendors who are using foreign design

Buy from Indian Company

• 3rd priority given to Indian vendors who remains in lead and form a JV with foreign partner

Buy the desing from outside and make in India

• Incentive for foreign vendors to tie up with Indian company for domestic manufacturing

Buy from Indian manufacturer of foreign equipments

• Incentive for foreign vendors manufacturing in India

Buy from foreign company manufacting in India

• Incentives to Indian vendors contributing at least 30% domestic components

Buy from foreign company

50

55

60

65

70

75

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

1,40,000

1,60,000

FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E

Domestic Import Localization (%), RHS

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ADAL’s aircraft services and MRO

AEL operates 7 airports in India and to strengthen its position and improve its offerings in the

civil aviation industry, ADEL started aircraft maintenance and MRO services.

ADAL offerings under aircraft services and MRO


In May 2022, the company announced the acquisition of Air Works Group, which is India’s

largest independent aircraft maintenance, repair and overhaul organization. With this

acquisition, ADEL will get services contracts for Lufthansa, Turkish Airlines, FlyDubai, Etihad,

Virgin Atlantic, IndiGo, GoAir and Vistara. In addition, ADEL has also signed an MoU with Airbus

India to explore opportunities for collaboration in the area of aircraft services for the Indian

and South Asian markets.

MRO opportunities in India

India is the 7th largest civil aviation market in the world and it is set to become the world’s 3rd

largest by 2026, representing a significant scope for MRO facilities in India. About 90% of MRO

requirements in India are met through imports and therefore India’s indigenous MRO sector is

at a nascent stage and hence offers significant growth potential for domestic players.

The Indian MRO industry size is expected to increase from USD 1.7 bn in 2021 to USD 4.0 bn

by 2031, representing a CAGR growth of 8.9% compared with the expected global CAGR of

5.6% (from USD 68.4 bn in 2021 to USD117.7 bn in 2031) over the same period.

With more than 1,000 aircraft currently on order, India is likely to become the 3rd largest buyer

of commercial passenger planes globally, after the US and China. This translates into demand

for 200–300 major maintenance checks annually. Replacing ageing aircraft in the fleets of

several airlines also creates scope for MRO. In addition, with the procurement of new fighter

Structural Maintenance

• Base & Heavy Maintenance Checks

• Airframe Maintenance

• One stop fleet maintenance

• Building infrastructure for the highest quality & turn-around times

• Civil & Defence Aircrafts

Component Maintenance

• Landing gears

• Avionics

• Digital control harness

• Electrical components

• Mechanical Components

Engine Maintenance

• One-stop tailored engine solutions

• Wide-ranging in-house repair

• Cost-effective alternatives to full replacement

• Deep working relationship with OEMs

• Ensuring maximum hours in the air

Paintiing Maintenance

• Commercial aircraft finish

• Parts and components painting

• High quality painting under ambient conditions

• Quick turnaround time

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jets, military transport aircraft and spy planes by the Indian Airforce for its ageing fleet, India

is also poised to become a large defence aircraft market, propelling demand for military MRO

capabilities as well.

MRO opportunities – Global vs India

Source: Delloite Report on MRO in India

MRO opportunities – Global vs India

Source: Deloitte Report on MRO in India

16.4 22.4

28.7

56.5 12.3

21.2

10.9

17.7

2021 2031

Airframes Engines Components Line Maintenance

68.4

117.7

0.3 0.6

0.8

2.0

0.3

0.8

0.3

0.6

2021 2031

Airframes Engines Components Line Maintenance

1.7

4.0

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In India, airlines operate aircraft built by global players, such as Boeing, Airbus, ATR, Embraer,

and Dornier. Therefore, most aircraft are sent abroad for major MRO services, which is costly

and sometimes increases the turnaround time. Though the cost of an MRO workforce in India

ranges between USD 30-35 per hour, which is almost 60% lower than that in Europe and the

US, however, lack of government support and a limited number of large OEMs reduced the

scope for MRO opportunities in India.

Key initiatives taken by the government to support the Indian MRO industry

In the next 20 years, India will need 1,750–2,100 aircraft valued at more than US$ 290 billion,

with an estimated 100 deliveries each year, valued at about US$ 5 billion of financing each

year, according to predictions of Airbus and Boeing. The government is making concerted

efforts to attract new business into India through aircraft leasing, financing, and MRO

operations and therefore have taken various steps to enhance business for MRO services -

• Liberalised land rentals – In Sept 2021, under the Aatmanirbhar Bharat Abhiyan, the

Airports Authority of India (AAI) introduced an MRO policy with highly liberalised land

rentals and abolished royalties (revenue share payments to AAI).

• Changes in land allotment policies – Entities setting up MRO facilities will be allotted

land for 30 years instead of the current three-to-five years. Under the new policy, the

lease rental rate would be decided through bidding instead of the current pre-

determined rates set by AAI. The land will be allotted through open tenders, not

through allotment based on an entity's request. There will also be changes in the

renewal of contracts of existing leaseholders. On the expiry of existing contracts, land

provided to MROs would be allotted through a bidding process.

• Concession GST on MRO services – In Apr 2020, the central government lowered the

GST rate from 18% to 5% on MRO services in respect of aircraft, aircraft engines, and

other aircraft components/parts.

• Supporting infrastructure – To encourage multinational companies to invest in India

and source their maintenance services in India, the government has permitted 100%

foreign direct investment in MRO via the automatic route. It has also liberalised the

policy for borrowing and lending in foreign currency and rupees on competitive terms

for MRO service providers. Additionally, the government has extended the stay of

foreign aircraft in India for the entire duration of MRO work or six months, whichever

is shorter.

With the favourable policies in place and with the entry of large OEMs like Tata and AEL in this

space, the segment is expected to become more competitive and localization of services are

likely improved.

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Financial Performance

ADEL is expected to witness revenue CAGR of 48.3% to INR 2,392 cr during FY22-25E, while

EBITDA and PAT are expected to grow at a CAGR of 78.9% to INR 1,527 cr and 306.1% to INR

268 cr respectively over the same period. EBITDA and PAT margins are expected to expand by

1084bps to 25.1% and 1065bps to 11.2% respectively by FY25. Subsequently, return ratios –

RoE and RoIC – are expected to improve by 1281bps to 13.1% and 1488bps to 16.5%

respectively by FY25.

0

10

20

30

40

50

60

70

80

0

500

1,000

1,500

2,000

2,500

3,000


Revenue growth to remain strong due to indigenization in defence

Revenue YoY Growth

0

5

10

15

20

25

30

0

100

200

300

400

500

600

700

800


Profitability is expected to improve with business diversification

EBITDA PAT Margin (%) Margin (%)

0

5

10

15

20

25

0

500

1,000

1,500

2,000

2,500


Return ratios to follow profitability in the coming years


RoE (%) RoIC (%)

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

-600

-400

-200

0

200

400

600

800


Higher operating profitability to improve balance sheet health

Total Debt Net Debt

Net Debt to Equity Net Debt to EBITDA

ADAL Story in Charts

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ADAL Financial Summary


Valuation

We have used the EV/EBITDA multiple to value ADEL and have given 15X EV/EBITDA for FY25,

which has resulted in the price target of INR 80 per share.

Valuation summary for ADEL


Fig in INR Cr, unless it is specified FY22 FY23 FY24 FY25 FY26

Revenue 734.0 1,267.9 2,042.1 2,391.7 2,667.7

YoY Growth 72.7 61.1 17.1 11.5

Material Cost 473.3 817.6 1,306.9 1,527.0 1,698.4

Manpower Cost 83.6 80.5 65.4 78.7 95.6

Other Expenses 72.2 100.9 148.3 167.5 184.7

General & Administrative Expenses 0.0 10.6 14.3 16.2 16.5

Marketing Expenses 0.0 0.0 0.0 0.8 0.8

EBITDA 105.0 258.3 507.3 601.5 671.7

Margin (%) 14.3 20.4 24.8 25.1 25.2

Depreciation 80.0 123.1 143.5 172.8 178.1

EBIT 25.0 135.2 363.8 428.7 493.5

Margin (%) 3.4 10.7 17.8 17.9 18.5

Finance Cost 21.0 79.9 71.5 70.8 109.0

PBT 4.0 55.2 292.4 357.9 384.5

Margin (%) 0.5 4.4 14.3 15.0 14.4

Tax 0.0 13.9 73.6 90.1 96.8

Tax Rate (%) 0.0 25.2 25.2 25.2 25.2

PAT 4.0 41.3 218.8 267.8 287.8

Margin (%) 0.5 3.3 10.7 11.2 10.8

Net Worth 1,224.7 1,335.2 1,646.0 2,038.5 2,326.1

Return on Equity (%) 0.3 3.1 13.3 13.1 12.4

Capital Employed 1,637.5 1,942.9 2,262.5 2,667.9 2,915.2

Return on Capital Employed (%) 1.5 5.2 12.0 12.0 12.7

Invested Capital 1,581.3 1,849.1 1,976.1 1,948.9 1,786.4

Return on Invested Capital (%) 1.6 5.5 13.8 16.5 20.7

Total Deb 412.8 607.7 616.5 629.4 589.1

Net Debt 356.6 513.9 330.0 -89.6 -539.8

Net Debt to Equity 0.3 0.4 0.2 -0.0 -0.2

Net Debt to EBITDA 3.4 2.0 0.7 -0.1 -0.8

Particulars Unit Details

FY25 EBITDA INR Cr 601.5

Target EV/EBITDA X 15.0

FY25 Enterprise Value INR Cr 9,022.0

FY25 Net Debt INR Cr -89.6

FY25 Value of Equity INR Cr 9,111.7

FY25 Price INR 76.9

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AEL’s Copper Business

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Adani Copper Business

AEL intends to set up a greenfield copper refinery project at APSEZ Mundra port at an

investment of INR 10,000 cr. The proposed greenfield copper refinery project would produce

1.0 MMTPA of copper cathode, 3.0 MMTPA of sulphuric acid, 0.5 MMTPA of copper wire rod

96,000 TPM of oxygen plant, 50 TPA of gold, 500 TPA of silver, 0.5 MMTPA of phosphoric acid

and 30,000 TPA of aluminum fluoride. Phase I copper cathode capacity of 0.5 MMTPA is

expected to be ready by FY24 and the production is anticipated to start from FY25, while the

development timeline of Phase II of an additional 0.5 MMTPA is yet to be decided.

Details of AEL’s copper and allied product capacities

Source: Environment Clearance Department report 2021

Copper Smelting & Refining Process


Products Units Phase I Phase II Total Capacity

Key Products

Copper Cathode TPA 5,00,000 5,00,000 10,00,000

Sulphuric Acid TPA 15,00,000 15,00,000 30,00,000

Continuous Cast Copper Wire Rod TPA 2,50,000 2,50,000 5,00,000

Gold TPA 25 25 50

Silver TPA 250 250 500

Phosphoric Acid TPA 2,50,000 2,50,000 5,00,000

Aluminum Floride TPA 15,000 15,000 30,000

By Products

Anode Slime TPM 250 250 500

Selenium TPM 12 12 24

PGM Concentrate TPM 3 3 6

Copper Slag TPM 92,500 92,500 1,85,000

Phosphogypsum TPM 1,04,167 1,04,167 2,08,334

Hydro Fluro Silicic Acid TPM 1,250 1,250 2,500

Copper Telluride TPM 21 21 42

Tellurium TPM 4 4 8

Nickel TPM 8 8 16

Bismuth Bisulphate TPM 60 60 120

Calomel (Mercury Chloride) TPM 9 9 18

Mercury TPM 8 8 16

CCR Mill Scale TPM 25 25 50

Raw Material Unit Phase I Phase II Total QuantitySource of

transportMode of transport

Source

distance from

plant site (Km)

Copper Concentrate TPA 16,00,000 16,00,000 32,00,000 Local & Import Road & Pipe Conveyor 12

Silica TPA 1,60,000 1,60,000 3,20,000 Local Road 500

Limestone TPA 40,000 40,000 80,000 Local Road 150

Quartz TPA 72,000 72,000 1,44,000 Local Road 500

Quick Lime TPA 30,000 30,000 60,000 Local & Import Road 12

Copper Scrap & E-scrap TPA 1,00,000 1,00,000 2,00,000 Local & Import Sea & Road 12

Rock Phosphate TPA 8,75,000 8,75,000 17,50,000 Local & Import Road & Pipe Conveyor 12

Aluminum Hydrate TPA 18,750 18,750 37,500 Local Sea & Road 12

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AEL’s copper input-output along with its smelting & refining process


Key Raw Materials Products

Copper Concentrate KTPA 1,600 Copper Cathode KTPA 500

Silica KTPA 160 Sulphuric Acid (>98%) KTPA 1,500

Lime Stone KTPA 40 Continous Cast Copper Wire Rod KTPA 250

Quartz KTPA 72 Oxygen (Technical) KTPA 48

Quick Lime KTPA 30 Gold TPA 25

Copper Scrap & E-Scrap KTPA 100 Silver TPA 250

Rock Phosphate KTPA 875 Phosphoric Acid (as 100% P2O5) KTPA 250

Alumina Hydrate KTPA 19 Aluminium Fluoride KTPA 15

Fuel Byproducts

High Speed Diesel TPA 25 Anode Slime TPM 250

Furnace Oil TPA 150 Selenium TPM 12

LPG TPA 50 PGM Concentrate TPM 3

Coal/ Pet Coke TPA 50 Ferro Sand/ Iron Silicate KTPM 93

Met Coke TPA 50 Phosphogypsum KTPM 104

Hydro Fluro Silicic Acid TPM 1,250

Copper Telluride TPM 21

Tellurium TPM 4

Waste Nickel TPM 8

ETP Waste Sludge & Scrubber Waste TPM 9,000 Bismuth Bisulphate TPM 60

Nickle Sludge TPM 265 Calomel (Mercury Chloride) TPM 9

Arsenic Bearing Sludge TPM 111 Mercury TPM 8

Used Oil KL / year 100 CCR Mill Scale TPM 25

Oil Sludge TPA 25 Waste Heat Recovery TPM 20

Spent Catalyst KL / year 200

Spent Resins KL / year 10

ETP Treated Water KL / day 2,516

Input to Reverse Osmosis Plant KL / day 356

Rejects from Multi Effect Evaporator KL / day 28

OUTPUT

WASTE

INPUT

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The total land required for the proposed project is about 256.58 ha (634 acres), of which

154.18 ha (381 acres) of identified land for this project belongs to the APSEZ and is already

designated for industrial purposes. Further, forest land of 102.38 ha (253 acres) is also involved

which will be converted for industrial use. The necessary Forest Clearance has also been

obtained. There is no Resettlement and Rehabilitation involved in the project.

The total estimated power requirement for the proposed project is 300 MW out of which 40

MW would be generated from internal process steam and a balance of 260 MW power would

be sourced from APSEZ Ltd. The water and power will be sourced from APSEZ Limited, through

Mundra Utility Private Limited (MUL, a subsidiary of Adani Transmission Ltd).

AEL’s copper segment financial summary


Fig in INR Cr, unless specified FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40

Sales Volume (tonnes)

Copper Cathode 3,20,000 3,37,500 3,50,000 3,25,000 3,00,000 2,75,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000

Copper Rods 80,000 1,12,500 1,50,000 1,75,000 2,00,000 2,25,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000 2,50,000

Gold 8.5 9.6 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7 10.7

Silver 169.4 191.6 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1 214.1

Revenue (INR Cr)

Copper Cathode 15,634.8 16,522.6 17,168.6 15,973.9 14,774.3 13,569.8 12,360.5 12,360.5 12,360.5 12,360.5 12,360.5 12,360.5 12,360.5 12,360.5 12,360.5 12,360.5

Copper Cathode share in sales (%) 61.3 57.5 53.6 49.8 45.9 42.1 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3 38.3

Copper Rods 3,952.4 5,569.8 7,442.0 8,700.6 9,964.4 11,233.4 12,507.7 12,507.7 12,507.7 12,507.7 12,507.7 12,507.7 12,507.7 12,507.7 12,507.7 12,507.7

Copper Rods share in sales (%) 15.5 19.4 23.2 27.1 31.0 34.8 38.7 38.7 38.7 38.7 38.7 38.7 38.7 38.7 38.7 38.7

Gold 3,679.4 4,150.0 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1 4,623.1

Gold share in sales (%) 14.4 14.4 14.4 14.4 14.4 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3 14.3

Silver 919.2 1,039.8 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7 1,161.7

Silver share in sales (%) 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6

Others 1,306.7 1,475.8 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7 1,647.7

Other share in sales (%) 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1

Avg per kg realization (INR per kg)

Copper Cathode 488.6 489.6 490.5 491.5 492.5 493.4 494.4 494.4 494.4 494.4 494.4 494.4 494.4 494.4 494.4 494.4

Copper Rods 494.1 495.1 496.1 497.2 498.2 499.3 500.3 500.3 500.3 500.3 500.3 500.3 500.3 500.3 500.3 500.3

Gold 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788 43,40,788

Silver 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8 54,259.8

Total Revenue 25,492.4 28,758.0 32,043.2 32,107.0 32,171.2 32,235.8 32,300.7 32,300.7 32,300.7 32,300.7 32,300.7 32,300.7 32,300.7 32,300.7 32,300.7 32,300.7

YoY Growth (%) 12.8 11.4 0.2 0.2 0.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Raw Material Cost 21,853.1 24,517.6 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0 27,148.0

RM Cost to Sales (%) 85.7 85.3 84.7 84.6 84.4 84.2 84.0 84.0 84.0 84.0 84.0 84.0 84.0 84.0 84.0 84.0

Rock Phosphate 548.6 619.6 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9 691.9

Rock Phosphate Cost to Sales (%) 2.2 2.2 2.2 2.2 2.2 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1

Operating Expenses 1,033.9 1,134.0 1,244.7 1,251.2 1,257.6 1,264.1 1,273.6 1,273.6 1,273.6 1,273.6 1,273.6 1,273.6 1,273.6 1,273.6 1,273.6 1,273.6

Operating Cost to Sales (%) 4.1 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9

Overhead Expenses 244.6 243.3 243.7 269.0 279.9 242.0 266.8 241.6 278.1 266.5 240.2 239.6 303.5 240.0 239.4 265.1

Overhead Exp to Sales (%) 1.0 0.8 0.8 0.8 0.9 0.8 0.8 0.7 0.9 0.8 0.7 0.7 0.9 0.7 0.7 0.8

EBITDA 1,812.3 2,243.5 2,714.9 2,747.0 2,793.8 2,889.8 2,920.4 2,945.6 2,909.1 2,920.8 2,947.0 2,947.7 2,883.7 2,947.2 2,947.8 2,922.1

Margin (%) 7.1 7.8 8.5 8.6 8.7 9.0 9.0 9.1 9.0 9.0 9.1 9.1 8.9 9.1 9.1 9.0

Depreciation 343.8 343.8 343.8 343.8 343.8 343.8 326.4 326.4 326.4 326.4 326.4 326.4 326.4 326.4 326.4 326.4

EBIT 1,468.5 1,899.7 2,371.1 2,403.2 2,450.0 2,546.0 2,594.1 2,619.3 2,582.7 2,594.4 2,620.7 2,621.3 2,557.4 2,620.8 2,621.5 2,595.7

Margin (%) 5.8 6.6 7.4 7.5 7.6 7.9 8.0 8.1 8.0 8.0 8.1 8.1 7.9 8.1 8.1 8.0

Interest Cost 729.7 800.2 803.4 777.1 739.5 695.7 645.7 590.1 528.2 460.2 386.0 348.9 348.9 348.9 348.9 348.9

PBT 738.8 1,099.5 1,567.8 1,626.1 1,710.5 1,850.3 1,948.3 2,029.2 2,054.5 2,134.2 2,234.7 2,272.4 2,208.5 2,271.9 2,272.6 2,246.8

Margin (%) 2.9 3.8 4.9 5.1 5.3 5.7 6.0 6.3 6.4 6.6 6.9 7.0 6.8 7.0 7.0 7.0

Tax 5.8 96.0 200.0 229.8 261.0 299.2 325.0 349.1 362.1 383.1 406.5 417.2 409.6 424.3 427.7 426.0

Tax Rate (%) 0.8 8.7 12.8 14.1 15.3 16.2 16.7 17.2 17.6 18.0 18.2 18.4 18.5 18.7 18.8 19.0

PAT 733.0 1,003.5 1,367.8 1,396.3 1,449.5 1,551.1 1,623.3 1,680.1 1,692.4 1,751.1 1,828.1 1,855.2 1,798.8 1,847.6 1,844.9 1,820.9

Margin (%) 2.9 3.5 4.3 4.3 4.5 4.8 5.0 5.2 5.2 5.4 5.7 5.7 5.6 5.7 5.7 5.6

Free Cash Flow -2,378.5 -1,061.4 -1,679.3 355.0 4,320.9 4,450.2 5,214.1 4,921.5 4,939.5 5,254.4 4,964.0 4,919.5 4,864.0 4,927.8 4,921.0 4,839.3

FCF to Net Profit (%) -324.5 -105.8 -122.8 25.4 298.1 286.9 321.2 292.9 291.9 300.1 271.5 265.2 270.4 266.7 266.7 265.8

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Valuation

We have used the DCF valuation methodology and discounted back the future cash flows to

FY25 and value AEL’s copper business at INR 197 per share.

DCF Valuation for AEL’s copper business




WACC (%) 10.1



FCFF (INR Cr) -2,378 -1,061 -1,679 355 4,321 4,450 5,214 4,922 4,939 5,254 4,964 4,919 4,864 4,928 4,921 4,839


Discounted FCFF (INR Cr) -2,160 -875 -1,257 241 2,668 2,495 2,655 2,276 2,074 2,003 1,719 1,547 1,389 1,278 1,159 1,035








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AEL’s PVC Business

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Adani PVC Business

AEL is setting up a 2.0 MMTPA (1.0 MMPTA by FY25 and another 1.0 MMTPA by FY30) coal to

PVC project at Mundra, Gujarat with an estimated investment of INR 29,200 cr. PVC grades

such as suspension PVC(Resin), Chlorinated PVC (C-PVC) and Emulsion PVC (paste) would be

produced along with several by-products such as Caustic Soda (1.3 MMTPA), Caustic Potash

(130 KTPA), Sodium Hypochlorite (16 KTPA), Tar (9 KTPA), Crude Benzene (26 KTPA),

Ammonium Sulphate (2.7 KTPA), Hydrated lime (3300 KTPA) are expected to be generated.

The project would be located in three separate land pockets with a total area of 688.9 acres.

The main raw materials for the proposed project (of 2.0 MMTPA) are Salt (2.0 MMTPA),

Limestone (5.0 MMTPA), Coal/Coke (3.1 MMTPA), and potassium Chloride (180 KTPA). Coal

and Coke required for the project would be imported or sourced indigenously. The limestone

required for the project will be sourced from Adani Cementation Ltd (ACL), a group company

which has secured a limestone mine through bidding in Gujarat and from other domestic

sources. Salt required for the project would be sourced from salt manufacturing units in

Gujarat. Potassium Chloride required for the project would be imported.

Process flow and the input-output ratio of AEL’s PVC project


During the operation phase, the total power consumption of the facility is 1850 MW. The steam

required for the PVC complex is catered through a 4X200 TPH Steam Boiler. Co-generation

Facility associated with a steam boiler generates power to the tune of 100 MW. The remaining

power requirement of 1750 MW will be given by DISCOM from APSEZ (MUL sold to Adani

Transmission Ltd).

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Using coal as a chemical feedstock to produce PVC is less polluting as compared to

conventional methods such as petrochemical refineries and ethylene crackers. Both processes

demand the use of carbon atoms as feed. While conventional methods source the carbon atom

from oil, sourcing it from coal does not produce CO2. Further, PVC is not toxic or single-use

plastic, but an infrastructure material with a life span of several decades. AEL will use

renewable energy to produce PVC which will further make the entire process a low carbon-

intensive.

Crude Oil to PVC and Coal to PVC manufacturing processes


PVC and caustic soda are two basic segments of the Indian industry which facilitate a chain of

downstream industries such as agriculture, infrastructure, housing and sanitation and other

similar industries. India currently imports more than 50% of its PVC requirements and these

imports are expected to rise further with no recent new capacity additions. PVC produced from

the facility will cater to the domestic market and will replace imports.

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AEL’s PVC segment financial summary


Fig in INR Cr, unless specified FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40

Volume

50wt% NaOH Export (tonnes) 90,000 2,40,000 2,70,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000

Flake Export (tonnes) 30,000 80,000 90,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000

50wt% NaOH (tonnes) 51,531 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062 1,03,062

Flake (tonnes) 1,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000

PVC (tonnes) 5,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000 10,00,000

Sodium sulfate (tonnes) 18,282 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564 36,564

Medium temperature tar (tonnes) 91,630 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260 1,83,260

Ammonium sulfate (tonnes) 4,277 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554 8,554

Crude benzene (tonnes) 4,229 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458 8,458

Sulphur cream (tonnes) 1,155 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310 2,310

Coking gas (mn m3) 340 680 680 680 680 680 680 680 680 680 680 680 680 680 680 680

Carbide slag (tonnes) 14,23,550 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100 28,47,100

Dichloroethane (tonnes) 2,406 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812 4,812

Revenue in INR cr

50wt% NaOH Export 333 905 1,039 1,177 1,201 1,225 1,249 1,274 1,300 1,326 1,352 1,379 1,407 1,435 1,464 1,493

Flake Export 111 302 346 392 400 408 416 425 433 442 451 460 469 478 488 498

50wt% NaOH 114 305 343 381 381 381 381 381 381 381 381 381 381 381 381 381

Flake 222 592 666 740 740 740 740 740 740 740 740 740 740 740 740 740

PVC 2,293 6,236 7,156 8,110 8,272 8,438 8,607 8,779 8,954 9,133 9,316 9,502 9,693 9,886 10,084 10,286

Sodium sulfate 7 19 21 23 23 23 23 23 23 23 23 23 23 23 23 23

Medium temperature tar 135 359 404 449 449 449 449 449 449 449 449 449 449 449 449 449

Ammonium sulfate 1 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4

Crude benzene 9 23 26 29 29 29 29 29 29 29 29 29 29 29 29 29

Sulphur cream 0 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2

Coking gas 82 218 245 272 272 272 272 272 272 272 272 272 272 272 272 272

Carbide slag 43 114 128 142 142 142 142 142 142 142 142 142 142 142 142 142

Dichloroethane 3 9 10 11 11 11 11 11 11 11 11 11 11 11 11 11

Per Unit Realization

50wt% NaOH Export (INR/tn) 37.0 37.7 38.5 39.2 40.0 40.8 41.6 42.5 43.3 44.2 45.1 46.0 46.9 47.8 48.8 49.8

Flake Export (INR/tn) 37.0 37.7 38.5 39.2 40.0 40.8 41.6 42.5 43.3 44.2 45.1 46.0 46.9 47.8 48.8 49.8

50wt% NaOH (INR/tn) 22.2 29.6 33.3 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0

Flake (INR/tn) 22.2 29.6 33.3 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0

PVC (INR/tn) 45.9 62.4 71.6 81.1 82.7 84.4 86.1 87.8 89.5 91.3 93.2 95.0 96.9 98.9 100.8 102.9

Sodium sulfate (INR/tn) 3.8 5.1 5.8 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4

Medium temperature tar (INR/tn) 14.7 19.6 22.1 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5

Ammonium sulfate (INR/tn) 2.9 3.9 4.4 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9

Crude benzene (INR/tn) 20.4 27.2 30.6 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0

Sulphur cream (INR/tn) 4.1 5.4 6.1 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8

Coking gas (INR/Nm3) 2.4 3.2 3.6 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0

Carbide slag (INR/tn) 0.3 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Dichloroethane (INR/tn) 13.5 18.0 20.3 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5

Total Revenue 3,352 9,085 10,388 11,732 11,926 12,124 12,325 12,530 12,740 12,954 13,172 13,394 13,621 13,852 14,088 14,329

YoY Growth (%) 171.0 14.3 12.9 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7

EBITDA 1,225 3,607 4,224 4,867 4,967 4,682 4,786 4,892 4,999 5,105 5,214 5,324 5,435 5,547 5,658 5,771

Margin % 36.5 39.7 40.7 41.5 41.6 38.6 38.8 39.0 39.2 39.4 39.6 39.7 39.9 40.0 40.2 40.3

Depreciation 547.0 1,094.0 1,094.0 1,094.0 1,094.0 1,094.0 980.9 952.7 952.7 952.7 942.7 942.7 942.7 942.7 942.7 942.7

EBIT 678.0 2,512.7 3,129.7 3,772.9 3,872.9 3,587.6 3,805.4 3,939.6 4,046.5 4,152.1 4,271.1 4,381.3 4,492.4 4,604.5 4,714.8 4,828.7

Margin % 20.2 27.7 30.1 32.2 32.5 29.6 30.9 31.4 31.8 32.1 32.4 32.7 33.0 33.2 33.5 33.7

Finance Cost 562 1,367 1,322 1,227 1,126 1,025 924 823 722 621 521 420 319 219 118 69

PBT 116 1,146 1,807 2,546 2,747 2,563 2,882 3,117 3,324 3,531 3,750 3,961 4,173 4,386 4,597 4,760

Margin % 3.5 12.6 17.4 21.7 23.0 21.1 23.4 24.9 26.1 27.3 28.5 29.6 30.6 31.7 32.6 33.2

Tax 0 0 0 243 556 573 679 776 867 951 1,031 1,107 1,180 1,250 1,317 1,367

Tax Rate (%) 0.0 0.0 0.0 9.5 20.2 22.4 23.6 24.9 26.1 26.9 27.5 27.9 28.3 28.5 28.6 28.7

PAT 116 1,146 1,807 2,303 2,191 1,990 2,203 2,340 2,458 2,580 2,719 2,854 2,993 3,136 3,280 3,393

Margin % 3.5 12.6 17.4 19.6 18.4 16.4 17.9 18.7 19.3 19.9 20.6 21.3 22.0 22.6 23.3 23.7

Free Cash Flow -6,633 3,283 3,951 4,207 3,959 3,664 3,660 3,677 3,705 3,743 3,792 3,847 3,907 3,972 4,039 4,112

FCF to Net Profit (%) -5,714.3 286.5 218.6 182.7 180.7 184.2 166.2 157.1 150.8 145.1 139.4 134.8 130.5 126.7 123.2 121.2

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Valuation

We have used the DCF valuation methodology and discounted back the future cash flows to

FY25 and value AEL’s PVC business at INR 130 per share.

DCF Valuation for AEL’s PVC business




WACC (%) 10.1



FCFF (INR Cr) -6,633 3,283 3,951 4,207 3,959 3,664 3,660 3,677 3,705 3,743 3,792 3,847 3,907 3,972 4,039 4,112


Discounted FCFF (INR Cr) -6,023 2,707 2,958 2,861 2,445 2,055 1,864 1,700 1,556 1,427 1,313 1,209 1,116 1,030 951 879








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AEL’s Digital Strategy

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Adani Digital strategy and the development of a SuperApp

Building a robust digital platform and a SuperApp is a long-term play which requires heavy

investments, partnerships and strategic collaborations. Globally, SuperApps have been

modelled around groceries, last-mile deliveries, social media, messaging, fintech (money

transfer & online shopping) and mobility.

To design a SuperApp, a company requires:

• Multiple businesses and consumer-centric products, which could provide

opportunities to cross-sell different products to the same consumer,

• Strong and diversified user base,

• High-frequency use case and resources

In Sept 2021, AEL set up a wholly-owned subsidiary, Adani Digital Labs, to transform its

consumer businesses into digital-first businesses by creating an omnichannel, integrated

platform enabling customers to interact with all B2C businesses of the Adani Group. AEL is

working on a strategy to integrate all of its consumer-facing businesses in a single super app

and leverage its network effect.

The partnership of AEL with WebEngage could be a game-changer

Adani group has over 400 mn consumers (through its subsidiaries) that engage with multiple

levels of Adani Group products & services, and can better avail opportunities of cross-selling

for its various businesses. This consumer base is growing at a CAGR of 15% and if every Adani

consumer is onboarded on its digital platform (or SuperApp), then its digital consumer base is

expected to cross 1.0 bn consumers before 2030.

Through a robust digital platform and a SuperApp in place, Adani Group will be able to analyze

the behavioural pattern of consumers by using various data science patterns and offer

customized solutions. To consolidate the data and information from various consumer-facing

businesses, AEL has formed a strategic partnership with WebEngage in May 2022, which is a

full-stack Retention Operating System.

WebEngage will power Adani Group’s all six consumer-facing businesses in their digital

transformation journey. The companies include Adani Airports, Adani Total Gas, Adani

Electricity Mumbai, Adani Wilmar, Adani Realty and Adani Capital. Aligned to this, WebEngage

will work closely with Adani Digital Labs to help the group companies organise customer data,

develop analytical dashboards and drive 1:1 personalised engagement to deliver the intended

customer experience across the web and mobile applications.

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The strengths of Adani Group’s consumer-centric businesses

Adani Group is currently serving over 400 mn customers on multiple levels across the

company's products and services. As per the management, the number is expected to cross

1.0 bn. AEL has built its B2C empire for its SuperApp through the businesses of its subsidiaries

and group companies –

• Adani Electricity Mumbai Ltd (AEML, a subsidiary of Adani Transmission Ltd - ATL) is

supplying electricity to ~3.1 mn households in Mumbai (~12 mn people), which gives

access to the power consumption pattern of households. AEML is also planning to

cross-sell consumer appliances to these customers to improve its engagement with

the households.

Coverage area and network of Adani Electricity Mumbai Ltd


ATL is also planning to install and take the O&M contract for ~20 mn smart meters in

and outside its electricity distribution areas of the company. It will give access to the

household data to the company.

• Adani Total Gas Ltd (ATGL) is supplying natural gas to ~5.6 lakh households. The

company has also committed to add

o 46.1 lakh PNG domestic connections in the 9th round by FY27,

o 2.6 lakh connections in the 10th round by FY28 and

o 65.0 lakh connections in the 11th round by FY29.

With this run rate, ATGL will have more than 50 lakh PNG domestic connections (more

than 20 mn people) by FY27, 60 lakh connections (more than 25 mn people) by FY28

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and 70 lakh connections (more than 30 mn people) by FY29. In line with ATL, ATGL is

also planning to install gas smart meters in its GAs which will give access to the

household data to the company.

Coverage area and network of Adani Total Gas Ltd


• Adani Group formed a strategic partnership with Flipkart (now a Walmart group

company), in which Flipkart will work with Adani Logistics Ltd (ALL) to strengthen its

supply chain infrastructure and Flipkart will also set up its 3rd data centre with Adani

Connex.

Both the companies are in advanced talks to expand their partnership beyond supply

chain and data centre into new domains of e-commerce, groceries and household

goods.

• Flipkart acquired 100% holding of Cleartrip in Apr 2021, and in Oct 2021 AEL bought a

20% minority stake in the same. The recent partnership with Flipkart and the

acquisition of a minority stake in Cleartrip will strengthen AEL’s position in the fast-

growing online travel and tourism market.

Consumers will be able to book online travel tickets in a single app. Further, they will

also be able to shop online through the Flipkart e-commerce platform across various

airports.

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Coverage area and network of Adani Airports


• Adani Wilmar Ltd (AWL), which offers a range of edible oils and food products under

the Fortune brand, has launched a mobile app for customers to order the products

online from their homes. AWL’s consumers will be able to buy various groceries online

and based on their buying patterns, the company will be able to judge their

preferences and offer additional products accordingly.

Adani Wilmar fulfilment centres


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Ventura Business Quality Score

Key Criteria Score Risk Comments

Management & Leadership

Management Quality 8 Low The management is of high quality. It has been able to deliver guidance; investor-friendly with timely updates on developments

Promoters Holding Pledge 6 Low The promoter holding stands at 72.3% and there is a pledge of 3.76% against this holding as of 31st Mar 2022

Board of Directors Profile 8 Low The average experience of directors is >30 years with significant experience in their respective sectors and expert areas

Industry Consideration

Industry Growth 8 Low AEL has a mix of old and new-age businesses, except its coal business, all other businesses such as airports, roads, defence & FMCG are evolving in India, while data centres & green H2 have significant growth prospects.

Regulatory Environment or Risk 8 Low Govt policies are in the favour of green hydrogen, data centres, defence, airports and roads. Import substitution for copper and PVC is expected to be favourable for the overall economy.

Entry Barriers / Competition 8 Low Most of AEL’s businesses are B2B and are long-term in nature. Corporates do not change their suppliers frequently due to the customization of products and quality checks. This is a strong moat.

Business Prospects

New Business / Client Potential 8 Low The category of products which AEL is offering come under Make in India, China+1 and PLI schemes, which is expected to provide significant scope for new business.

Business Diversification 8 Low AEL is either operating or working on around 6 business verticals, which represents a well-diversified portfolio

Market Share Potential 8 Low AEL’s business verticals have shown significant growth in their respective fields and gained market share, which is expected to continue in future due to the company’s superior execution skills.

Margin Expansion Potential 8 Low With new businesses in the investment phase, profit metrics are in the nascent stage and do not reflect steady-state run rates. However, given its past records, we believe that the AEL will manage to expand its margins.

Earnings Growth 8 Low

AEL’s business growth is expected to be strong, due to the revenue recognition from new businesses such as defence, roads & airports, and upcoming businesses such as data centres, green H2, copper & PVC. Existing businesses such as FMCG and coal will continue to sustain momentum.

Valuation and Risk

Balance Sheet Strength 5 Medium AEL has done foreign tie-ups to get the benefits of its strong balance sheet for the project funding, which has improved its balance sheet strength.

Debt Profile 3 High

AEL is the fastest-growing incubator in India, which has conceived, grown, matured and demerged many successful businesses. This growth has been driven by debt funding. However, the company has been working on various methods of debt financing to reduce the burden on P&L.

FCF Generation 3 High Higher capex on new businesses has been impacting the overall FCF.

Dividend Policy 3 High AEL has been paying a dividend in the range of 10-15% of its net profit, which is very low. The company is using its cash flow in capex and the development of new businesses, that’s why its dividend payout is low.

Total Score

Ventura Score (%)

100

67 Low

The overall risk profile of the company is good and we consider it as a LOW risk company for investments


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Annual Report Analysis

We analyzed the FY21 annual report of AEL and our key observations are as follows:

Key takeaways & outlook on various businesses:

• Mining – Intends to emerge as one of the largest and most diversified mining groups

in the world. It is expected that the Carmichael mine in Australia could commence

operations in FY22. AEL will operationalise at least three mines in India in FY22.

• Solar – AEL is in line to expand its installed capacity to 3.5 GW/year with a probable

backward integration into the manufacture of ingots, wafers and polysilicon. AEL will

focus on the development of ancillaries in the EMC cluster for ensuring the timely

localisation of raw materials & will align with the government's focus on the

solarisation of agricultural pumps and increasing rooftop solar installations across the

country.

• Airports – The outlook for the airport infrastructure business is positive on account of

the government’s decision to progressively divest ownership stakes in Indian airports

in favour of private operators. The Company intends to re-define India’s airports

infrastructure sector through gateway development, regional footprint growth, focus

on consumers and non-passengers and deeper investment in digital technology

interventions.

• Roads/Highways – Will seek mergers and acquisitions that enhance access to superior

assets that maximise cash flows.

• Water – Scope of big players like AEL is widened given India’s water infrastructure

sector is marked by a larger number of projects coupled with a higher value of most

projects.

• Data centres – India’s digital economy is expected to touch USD 1 Trn by 2025. India

possesses one of the world’s largest data subscriber populations. There is a growing

appetite for reliable infrastructure to support Cloud, Content, Network, IoT, 5G, AI and

enterprise requirements. India’s Data Centre Policy encourages companies to build

data centre parks (providing infrastructure status) through incentives.

• Packaged food and edible oil – Adani Wilmar intends to widen its foods platform

across different segments addressing the needs of a growing India. The growing

optimism with regard to the consumption of hygienic, branded and packages food

products, a trend that has deepened following the pandemic, is now being viewed as

irreversible and holds out attractive multi-year prospects.

• Agro products – The share of the organized retail (market size INR 7,050 Bn) at 11.9%

provides a large headroom for multi-decade growth. Interestingly, the organised share

of the food & grocery space is only 4.50% and projected to grow at 22% annually to

around 9% retail penetration by 2025.

• Defence – AEL plans to create a tiered vendor base to catalyse indigenisation and

localization. Further, it seeks to commission a final assembly and integration line

including MRO facilities by incorporating technology transfer to support products

during their lifecycle.

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Board meetings

During the FY21 the Board of Directors met 4 times on 6th May 2020, 6th Aug 2020, 4th Nov

2020 and 3rd Feb 2021 and the gap between any two Board Meetings did not exceed 120 days

as required by the Companies Act. The attendance of all the members was satisfactory.

Board member attendance has been excellent

Name of director Board

meetings Meetings attended % attendance

Gautam Adani 4 7 100% Rajesh Adani 4 4 100% Pranav Adani 4 4 100% Vinay Prakash 4 4 100% Hemant Nerurkar 4 4 100% V Subramanian 4 4 100% Vijaylakshmi Joshi 4 4 100% Narendra Mairpady 4 4 100% Total attendance 32 32 100%


Remuneration to KMP

The remuneration is commensurate with the size of the company and operating performance.

However, remuneration of independent directors is miniscule given the size of the company.

Remuneration of top management has more or less followed performance

FY19 FY20 FY21

Chairman 2.1 2.2 2.2

As a % of PBT 0.4 0.2 0.2

MD 4.2 4.3 4.5

As a % of PBT 0.8 0.4 0.4

Executive Directors 18.8 18.7 25.3

As a % of PBT 3.7 1.7 2.3

Independent Directors 0.7 0.8 1.0

As a % of PBT 0.1 0.1 0.1

Total 25.8 25.9 33.1

As a % of PBT 5.1 2.3 3.0


Auditor qualifications

Shah Dhandharia & Co LLP is the auditor. However, given the size of the company, appointment

of a bigger audit firm would have provided more comfort. No audit qualifications have been

given on financial statements.

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Related Party Transactions

Related party transactions are high given the complex business structure and multiple

businesses.

Due to the very nature of business, related party transactions are too high


Contingent Liabilities

Contingent liabilities as a % of networth are 38.8% of total networth as on FY21 However, 74%

of the same is on account of guarantees and LCs.

Contingent liabilities are high but consists mostly of guarantees


Fig in INR cr

FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21

Sale of goods 29.7 1,218.6 267.9 - 4,004.2 2,399.1 - - 4,301.8 3,617.7

As a % of revenue 0.1% 3.1% 0.6% 0.0% 9.2% 6.1% 0.0% 0.0% 9.9% 9.2%

Purchase of goods 0.0 0.0 - - 2,275.9 3,243.9 - - 2,276.0 3,243.9

As a % of RM cost 0.0% 0.0% 0.0% 0.0% 6.6% 10.7% 0.0% 0.0% 6.6% 10.7%

Loans given 1,096.4 5,379.1 255.5 76.4 4,308.9 7,155.8 - - 5,660.8 12,611.4

As a % of total assets 4.7% 17.9% 1.1% 0.3% 18.5% 23.8% 0.0% 0.0% 24.3% 41.9%

Loans taken 1,611.0 2,621.9 50.3 151.4 6,292.8 10,213.1 - - 7,954.1 12,986.4

As a % of total assets 6.9% 8.7% 0.2% 0.5% 27.0% 33.9% 0.0% 0.0% 34.1% 43.2%

Others 1,110.9 96.6 2.7 2.6 1,599.8 2,102.1 40.3 59.6 2,753.7 2,261.0

As a % of revenue 2.6% 0.2% 0.0% 0.0% 3.7% 5.3% 0.1% 0.2% 6.3% 5.7%

Jointly controlled

entitiesAssociates Other related parties KMP Total

INR cr FY20 FY21

Claims 4.0 4.3

Tax 1,776.3 1,739.7

Guarantee 3,925.8 3,843.0

LC 696.2 1,062.2

Total 6,402.2 6,649.1

As a % of networth 37.8% 38.8%

169 | P a g e ( 5 t h J u l 2 0 2 2 )


Management Team

Key Person Designation Details

Gautam Adani Chairman He has > 33 years of business experience. Under his leadership, Adani Group has emerged as a global integrated infrastructure player with interest across Resources, Logistics and Energy verticals.

Rajesh Adani MD He has been associated with Adani Group since its inception. He is in charge of the operations of the Group and has been responsible for developing its business relationships.

Pranav Adani Director He has been active in the group since 1999. He has spearheaded the JV with the Wilmar Group of Singapore and transformed it from a single refinery edible oil business into a pan India Food Company.

Vinay Prakash Director He has nurtured the Natural Resources business of the Group since its inception and oversees its diversification and expansion in India and abroad.

Hemant Nerurkar Independent and Non-

Executive Director

He has over 35 years of experience in steel industry in various functions. Mr. Nerurkar is an executive with multifaceted experience ranging from Project Execution, Manufacturing, Quality Control, Supply Chain and Marketing.

V. Subramanian Independent and Non-

Executive Director

He was the Secretary to the Government of India with the Ministry of New and Renewable Energy (MNRE) where he pioneered important initiatives for reforms and development of the renewable energy sector, including the introduction of the "Feed-in Tariff" concept.

Vijaylaxmi Joshi Independent and Non-

Executive Director

She is a 1980 batch IAS officer of the Gujarat cadre. She had served in various posts in the State and in the Centre. She had been Joint and Additional secretary in the Commerce Ministry between 2011 to 2014.

Narendra Mairpady

Independent and Non-Executive Director

He is an eminent banking professional having more than 40 years of wide experience and exposure. He was appointed as Chairman and Managing Director of Indian Overseas Bank in 2010 and retired as CMD in 2014.


Key Risks & Concerns

• Low ESG score: While AEL has put in place definite ESG targets, the company's ESG

score remains low due to the very nature of the mining business. This can affect the

investments into other businesses of the company by global funds/ strategic partners

who are now required to invest only in strict ESG compliant companies.

• Foreign Exchange Risk: AEL is exposed to risks resulting from exchange rate fluctuation

and interest rate movements. It manages its exposure to these risks through derivative

financial instruments.

• Commodity price risk: Being in infrastructure business, the rise in price of commodities

always affect margins as not all costs are pass through.

• Debt: AEL is expected to embark on a huge capex over the next 3-4 years and hence

net debt is expected to increase considerably.

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Summary of management commentary and quarterly performance over last few quarters

Key Criteria View Comments Q1FY22

Business Performance POSITIVE

Revenue grew at a YoY rate of 138.9% YoY to INR 12,579 cr, while EBITDA and net profit grew at a YoY rate of 1145.4% to INR 796 cr and 811.2% to INR 271 cr respectively.

The company operationalize the Kurmitar Iron Ore mine in Orissa during the quarter.

Outlook & Strategy POSITIVE The company is targeting its airport segment as a B2C business and the management has indicated increasing non-aero revenues rather than just focusing on aero revenues.

Q2FY22

Business Performance POSITIVE

Revenue and EBITDA grew at a YoY rate of 44.8% to INR 13,218 cr and 17.5% to INR 883 cr respectively, however, net profit declined YoY rate of 41.4% to INR 212 cr due to higher depreciation and a rise in interest cost.

In H2 FY22, the mining production volumes increased by 91% YoY to 10.9 mn tonnes, while mining dispatch increased by 77% YoY to 9.9 mn tonnes.

Outlook & Strategy POSITIVE

The Board of directors has approved the formation of a corporate responsibility committee with 100% independent directors.

The committee’s primary objective is to assure ESG commitments.

Q3FY22

Business Performance POSITIVE Revenue and EBITDA grew at a YoY rate of 61.4% to INR 18,758 cr and 0.4% to INR 772 cr respectively, however, the company reported a net loss of INR 12 cr.


Airports achieved 67% passenger volumes to pre-COVID levels and the company also won contracts for Jaipur, Guwahati and Trivandrum airports in Oct 2021.

The company set up a new entity – Adani New Industries Ltd (ANIL) to undertake green H2 business.

Q4FY22

Business Performance POSITIVE Revenue grew at a YoY rate of 83.8% to INR 24,866 cr, while EBITDA and PAT grew at a YoY rate of 39.7% to INR 1,262 cr and 30.1% to INR 304 cr respectively


The company completed the financial closure for the Greenfield Navi Mumbai International Airport project with SBI for the entire debt capital of INR 12,770 cr. The company also completed the refinance program for MIAL of USD 750 mn.

Road segment received LOA for Kagal-Satara road of 67 km in Maharashtra on a BOT basis with the project cost of INR 2,000 cr. The company has also signed a concession agreement for the construction and maintenance of 3 greenfield Ganga Expressway projects of INR 464 km.

Solar cell and modular line capacity expansion to 3.5 GW will be completed by Q2FY23 while the windmill and wind turbine setup has started in Mundra.


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AEL’s Financial Analysis & Projections

We have consolidated 75% of ANIL and 50% of AdaniConnex financials in our estimated numbers

Fig in INR Cr (unless specified) FY21 FY22 FY23E FY24E FY25E Fig in INR Cr (unless specified) FY21 FY22 FY23E FY24E FY25E

Income Statement Per share data & Yields

Revenue 39,537 69,420 58,656 78,084 1,18,612 Adjusted EPS (INR) 7.8 6.6 12.8 51.7 58.4

YoY Growth (%) -8.9 75.6 -15.5 33.1 51.9 Adjusted Cash EPS (INR) 12.3 17.1 33.9 79.9 108.3

Other Expenses 5,955 10,809 9,074 12,002 18,112 Adjusted BVPS (INR) 159.6 227.3 289.7 388.2 488.6

Other Exp to Sales (%) 15.1 15.6 15.5 15.4 15.3 Adjusted CFO per share (INR) 34.5 11.7 50.5 69.0 44.3

EBITDA 2,505 3,713 6,835 13,738 21,903 CFO Yield (%) 1.5 0.5 2.2 3.1 2.0

Margin (%) 6.3 5.3 11.7 17.6 18.5

YoY Growth (%) 9.7 48.2 84.1 101.0 59.4 Solvency Ratio (X)

Depreciation & Amortization 537 1,248 2,501 3,340 5,920 Total Debt to Equity 0.8 1.5 1.9 2.4 2.7

EBIT 1,968 2,465 4,333 10,398 15,983 Net Debt to Equity 0.7 1.4 1.9 2.3 2.7

Margin (%) 5.0 3.6 7.4 13.3 13.5 Net Debt to EBITDA 5.7 10.0 9.3 7.8 7.1

YoY Growth (%) 8.6 25.3 75.8 139.9 53.7

Other Income 754 1,013 651 1,628 409 Return Ratios (%)

Finance Cost 1,377 2,526 3,178 5,236 8,633 Return on Equity 5.4 3.5 5.5 16.7 14.8

Interest Coverage (X) 1.4 1.0 1.4 2.0 1.9 Return on Capital Employed 4.1 1.9 2.8 5.8 6.3

Exceptional Item -259 0 0 0 0 Return on Invested Capital 6.3 4.2 4.7 7.2 7.9

PBT 1,086 952 1,807 6,790 7,759

Margin (%) 2.7 1.4 3.1 8.7 6.5 Working Capital Ratios

YoY Growth (%) -3.2 -12.3 89.8 275.8 14.3 Payable Days (Nos) 109 93 80 70 60

Tax Expense 340 477 738 1,272 1,569 Inventory Days (Nos) 16 36 40 50 60

Tax Rate (%) 31.3 50.1 40.8 18.7 20.2 Receivable Days (Nos) 111 72 80 90 100

PAT 746 475 1,069 5,518 6,190 Net Working Capital Days (Nos) 18 15 40 70 100

Margin (%) 1.9 0.7 1.8 7.1 5.2 Net Working Capital to Sales (%) 5.0 4.1 11.0 19.2 27.4

YoY Growth (%) -6.5 -36.3 124.9 416.2 12.2

Min Int/Sh of Assoc 176 301 448 604 727 Valuation (X)

Net Profit 923 777 1,517 6,122 6,917 P/E 288.3 342.6 175.3 43.5 38.5

Margin (%) 2.3 1.1 2.6 7.8 5.8 P/BV 14.1 9.9 7.7 5.8 4.6

YoY Growth (%) -18.9 -15.8 95.4 303.5 13.0 EV/EBITDA 111.9 81.6 48.3 27.1 19.3

EV/Sales 7.1 4.4 5.6 4.8 3.6

Balance Sheet

Share Capital 110 114 116 117 119 Cash Flow Statement

Total Reserves 18,800 26,818 34,214 45,886 57,776 PBT 1,086 952 1,807 6,790 7,759

Shareholders Fund 18,910 26,932 34,330 46,003 57,895 Adjustments 1,435 1,779 8,485 11,203 16,576

Long Term Borrowings 9,523 20,803 44,728 70,088 99,546 Change in Working Capital 1,912 -869 -3,575 -8,547 -17,521

Deferred Tax Liabilities 409 2,606 2,202 2,932 4,453 Less: Tax Paid -340 -477 -738 -1,272 -1,569

Other Long Term Liabilities 1,624 7,293 6,728 7,842 9,877 Cash Flow from Operations 4,094 1,385 5,979 8,174 5,245

Long Term Provisions 77 279 208 240 308 Net Capital Expenditure -3,359 -13,493 -31,172 -46,857 -46,803

Total Liabilities 30,543 57,914 88,196 1,27,105 1,72,080 Change in Investments -4,543 -3,994 -73 -2,225 -1,789

Net Block 10,838 30,076 58,747 1,02,264 1,43,146 Cash Flow from Investing -7,902 -17,487 -31,245 -49,082 -48,592

Capital Work in Progress 8,686 19,564 19,564 19,564 19,564 Change in Borrowings 4,435 18,505 28,026 46,728 52,867

Intangible assets under development 139 3,980 3,980 3,980 3,980 Less: Finance Cost -1,377 -2,526 -3,178 -5,236 -8,633

Non Current Investments 5,473 4,276 6,363 8,570 10,323 Dividend Paid 0 -78 -152 -612 -692

Long Term Loans & Advances 5,201 9,209 8,495 9,902 12,472 Cash flow from Financing 3,059 15,901 24,696 40,880 43,542

Other Non Current Assets 1,265 3,535 3,261 3,801 4,788 Net Cash Flow -750 -201 -570 -28 194

Deferred Tax Assets 459 174 147 196 297 Forex Effect -708 447 0 0 0

Net Current Assets -1,520 -12,900 -12,361 -21,172 -22,491 Opening Balance of Cash 2,125 666 916 347 319

Total Assets 30,543 57,914 88,196 1,27,105 1,72,080 Closing Balance of Cash 666 912 347 319 513

172 | P a g e ( 5 t h J u l 2 0 2 2 )


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