Adani Power shares fell 4.5 percent in the morning trade on April 15 after global research house CLSA retained sell call on the stock despite the power regulator allowed higher tariff for Mundra unit.
The reasons behind maintaining sell call are elevated leverage and its expensive valuation of the stock.
The brokerage, however, raised price target to Rs 39 from Rs 23 earlier, implying 26 percent potential downside from current levels.
The Central Electricity Regulatory Commission (CERC) on April 12 approved higher tariff for Adani Power’s 2,000 megawatt (MW) capacities at its Mundra power plant.
CLSA said after this order, FY20 losses will come down by 88 percent and debt repayment visibility will improve going forward.
The power plant was facing hardships after compensatory tariff was disallowed by the apex court in April 2017. Adani Power has been seeking to pass through the higher cost of imported coal to run this plant.
The cost of fuel rose after Indonesia changed its regulations. The Mundra plant in Gujarat is an imported coal-based plant.
“The Commission in exercise its powers under Section 79 (1) (b) of the Act read with Article 18.1 of the PPAs (power purchase agreements) approves the Supplemental PPAs to Bid-01 PPA and Bid-02 PPA,” the CERC said in an order.
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