Adani Power vs Tata Power: Which One Should You Buy?
Adani Power vs Tata Power : India’s power sector has witnessed remarkable growth over the past decade, with the total installed power generation capacity rising by 83.8% from 249 GW in 2014 to 457 GW by the end of 2024. A significant portion of this growth has been driven by renewable energy sources, which contributed 129 GW, including 91 GW of solar power.
With the Indian government emphasizing energy security and sustainability in the 2025 Budget, the sector is poised for further expansion. The country aims to achieve 500 GW of renewable energy capacity by 2030, fueled by urbanization and economic growth, which is expected to nearly double power consumption by 2040.
Among the top players in the power sector, Adani Power and Tata Power stand out as major contenders. But which one should investors consider for their portfolio? Let’s analyze both companies based on key financial and operational metrics.
Stock Price Performance
Adani Power’s stock moved up by nearly 1% on the BSE to Rs. 489.75 on Friday. However, it has delivered negative returns of approximately 12% over the past year and about 9% over the last month.
Meanwhile, Tata Power’s stock surged by 1.2% to Rs. 362.3 on the BSE. The stock has delivered positive returns of around 5% in one year and 2.3% in the last month.
Financial Metrics Comparison
A look at key financial ratios helps in understanding how the two companies perform in terms of profitability, valuation, and leverage.
| Metrics | Adani Power | Tata Power |
|---|---|---|
| Market Cap | TBD | TBD |
| Return on Equity (ROE) | 57.1% | 11.3% |
| Return on Capital Employed (ROCE) | 32.2% | 11.1% |
| Price-to-Earnings (P/E) Ratio | 14.5 | 28 |
| Debt-to-Equity Ratio | 0.67 | 1.73 |
Key Observations
- Profitability: Adani Power exhibits significantly higher ROE and ROCE, suggesting better capital efficiency and profitability compared to Tata Power.
- Valuation: Adani Power has a lower P/E ratio, indicating that it may be relatively undervalued compared to Tata Power.
- Debt Levels: Tata Power has a higher debt-to-equity ratio, meaning it relies more on borrowed capital compared to Adani Power.
Company Overview
Adani Power
Adani Power Limited is India’s largest private thermal power producer. The company is engaged in power sales through long-term Power Purchase Agreements (PPAs), Supplemental Power Purchase Agreements (SPPAs), and short-term merchant power sales. It is also involved in power trading and investments.
Tata Power
Tata Power Company Limited is India’s largest vertically integrated power company. It operates across the entire power value chain, including generation, transmission, and distribution. The company has a strong focus on renewable energy and energy-efficient solutions.
Operational Capacity (As of Q3 FY25)
| Metrics | Adani Power | Tata Power |
|---|---|---|
| Installed Thermal Capacity | 17.55 GW | 8.9 GW |
| Additional Capacity Pipeline | 13.12 GW | ~10.1 GW |
| Total Projected Capacity | 30.67 GW | ~25.6 GW |
| Renewable Energy Contribution | 40 MW | ~16.8 GW |
| Solar Manufacturing Capacity | N/A | 4.9 GW |
Key Insights
- Adani Power remains heavily focused on thermal power, with a significant capacity expansion pipeline.
- Tata Power is more diversified, with a strong push towards renewable energy. Over 65% of its planned capacity is Clean & Green Energy.
- Tata Power’s solar manufacturing capabilities provide an additional revenue stream.
Brokerage Recommendations
| Company | Brokerage Rating | Target Price | Potential Upside |
|---|---|---|---|
| Adani Power | Buy (Jefferies) | Rs. 660 | ~38% |
| Tata Power | Buy (Sharekhan) | Rs. 485 | ~36% |
Financial Performance (Q3 FY25)
| Metrics | Adani Power | Tata Power |
|---|---|---|
| Revenue Growth (YoY) | 5.2% | 5% |
| Net Profit Growth (YoY) | 11.7% | 8.2% |
| Total Revenue | Rs. 13,671 Cr | Rs. 15,391 Cr |
| Net Profit | Rs. 3,057.2 Cr | Rs. 1,030.7 Cr |
Key Observations
- Adani Power’s profitability is higher, with a better YoY net profit growth.
- Tata Power’s revenue is larger, but its profit margins are lower.
Which Stock Should You Buy?
Adani Power – Best for Aggressive Investors
- Strong growth potential with a significant thermal power expansion pipeline.
- Higher ROE and ROCE indicate better capital efficiency.
- Lower P/E ratio suggests it may be undervalued.
- Lower debt-to-equity ratio provides financial stability.
- However, it is more dependent on thermal power, which may face regulatory and environmental risks.
Tata Power – Best for Conservative & ESG-Focused Investors
- A well-diversified portfolio with a significant focus on renewable energy.
- Higher debt levels, but investments in clean energy could lead to long-term growth.
- Strong presence in power distribution, transmission, and energy solutions.
- Tata Power’s solar manufacturing capacity provides additional revenue diversification.
Final Verdict
If you’re looking for a high-growth stock with strong financial performance, Adani Power could be a good choice, especially given its lower valuation and higher profitability. However, if you prefer a stable and sustainable investment with a focus on renewable energy, Tata Power may be the better pick for long-term wealth creation.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.