Adani Enterprises: diversification boost

Adani Enterprises: diversification boost

Just prior to announcing its September quarter results, Adani Enterprises Ltd (AEL) reported winning coal MDO (mine-developer-cum-operator) rights for mining 40 million tonnes per annum (mtpa) in Orissa, making it the largest private sector player with 110 mtpa of coal mining under its belt. But revenue and earnings visibility from these projects would be about four years away.

For now, it is predominantly a trading entity with infrastructure presence through its 71% stake in Adani Power Ltd and around 78% stake in Mundra Port Ltd. For the September quarter, consolidated sales growth is around 8%. Around 51% of it came from trading, the share of which, however, has steadily reduced from 78% a year back and 62% in the last quarter. During the September quarter, AEL revenue from power generation was up 11% on a quarter-on-quarter basis. The increase came from the incremental 330MW capacity that came in, from 660MW in the June quarter.

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Likewise, AEL’s business diversification is visible in this quarter’s segment-wise performance. While trading accounted for almost all its profit (before interest and tax) a year back, this quarter recorded 20% and 36% of its profits from the power and ports segment, with only 39% accruing from trading activity. The management says this is in line with its intent to gradually move from high-volume, low-margin businesses to those that generate higher profits.

The operating profit margin, therefore, jumped year-on-year (y-o-y) from 5% to 13%. Operating profit, likewise surged around 2.5 times to 726 crore on a y-o-y basis.

Yet, some analysts say it was marginally lower than expectations due to performance slippages in the ports and power segment. During the quarter, the real estate and agri-silos businesses posted losses, even as the latter constitutes a significant proportion of revenue.

AEL’s consolidated net profit surged 3.4 times y-o-y to 509 crore. This was buoyed by “other income" (non-recurring) of 223 crore, which was on account of the massive $1.2 billion ( 5,340 crore today) raised through the qualified institutional placement route during the quarter.

Improved performance with revenue gradually flowing in from its diversified infrastructure projects had a positive impact on AEL, which rose 1.3% to 685.20 apiece on the Bombay Stock Exchange. The project pipeline is strong with around 9.2Gw to be commissioned by fiscal 2014, besides becoming a large coal MDO. But, for investors, that is a long while away.

Graphic by Yogesh Kumar/Mint

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