The Indian power sector, in terms of the installed base, is assumed to rise from 418 gigawatts (GW) as of May 2023 to 692 gigawatts by 2028, accomplishing a compounded annual growth rate of 10.6%.

Supported by government policies, an increase in electrical demands is expected to lead to this growth. Along with it, the electricity bill 2022 will act as a catalyst and proof to be a game changer. The amendment of this bill will allow revision in tariffs over a year.

The Indian power sector, a cornerstone of economic growth, has witnessed and will continue to have significant transformation in recent years. Two Behemoths stand tall: Tata Power Company Ltd. and Adani Power Ltd. These companies emerged as e contenders in this zestful sector.

However, in this rapidly changing market driven by sustainability concerns or regulatory reforms, which of these titans will emerge as a dominant force in the upcoming years? Will it be Adani Power share or Tata Power share? As this question looms over traders’ minds to decode possibilities supported by statistics and data, we have crafted this piece to provide a comprehensive understanding of the future landscape.

Overview of the company

Adani Power

One of India’s largest private thermal power producers is Adani Power, which has a power generation capacity of 152.5 GW. The power plants are spread across various states of the country, including Rajasthan, Karnataka, Maharashtra, Chhattisgarh, Madhya Pradesh, Gujarat, and Jharkhand. This power giant is the world’s first company to set up a coal-based super-critical thermal power project. It is registered under the Clean Development Mechanism of the Kyoto Protocol.

Tata Power

This is India’s largest vertically integrated power company that not only generates power but transmits and distributes it. The company’s primary goal is to produce electricity mainly through renewable resources. Additionally, they also manufacture solar roofs. Apart from this, Tata Power is also India’s number one electric vehicle charging company, with over 49000 public charging stations across 178 cities.

Adani Power is the biggest of the two, with a market capitalisation of Rs 2 trillion. Meanwhile, Tata Power’s market capitalisation is Rs 1.1 trillion.

However, Tata overpowers Adani when it comes to renewable portfolios, although Adani has the highest installed or managed energy capacity.

Despite all these differences, as the future of the power sector is more likely to be driven by renewable energy stocks, Tata Power shares have an edge over Adani.

Adani Power Versus Tata Power

To decipher which power stocks are better, we have provided you with a comprehensive report based on their profitability, operational efficiency, financial efficiency, dividends and valuations.

The reports are based on the last five-year median, including 2024 of all the parameters.

Profitability

Overall, Adani Power shows better profitability than Tata Power. However, on minute scrutiny, it can be seen that Tata Power has shown consistency, whereas Adani Power has seen instances of losses. Adani Power has managed to keep its costs lower than its net sales since 2021.

As of the financial year 2023, the other income of Adani Power boosts the total income by approximately 10%, whereas Tata Power contributes around 3%. Additionally, Adani has outpaced Tata Power by a huge margin in terms of PAT.

Operational Efficiency

Despite the higher generation, Adani Power lost to Tata Power in net sales growth. Tata Powers’ net sales jumped almost twice in the last five years. Meanwhile, Adani Powers’ net sales rose around 1.6 times. Due to its renewable energy, Tata Power has been a clear winner in this sector.

However, Adani Power beats Tata Power in the gross profit margin as an outcome of better generation and distribution expenses management.

Financial Efficiency

By conducting this check, it enables us to understand whether the company is properly allocating the capital. In this sector, both companies have reduced considerably the amount of their previous debt. In this regard, Adani Power outshines Tata Power with a lower debt-to-equity ratio. It is the same story regarding the return of capital employed.

However, Tata Power’s operating cash flows are better than those of Adani Power, as Adani’s cash flows dropped due to increased negative working capital changes. For a detailed self-analysis, check the Tata Power share price.

Dividends

While exploring dividends, we have found that Tata Power has a history (since 2027) of offering dividends, whereas Adani has not offered any dividends to date. Although Tata Power has improved its dividend payout from financial year 2019 to year 2023, it cannot be generalised that all dividend companies are good and non-dividend paying companies are bad.

As the studies concluded, Adani Power gave better returns than Tata Power, although it is a non-dividend paying company. Therefore, thoroughly studying the company’s fundamentals is essential rather than getting excited about higher dividend yields.

Valuations

Evaluating the valuations of a company helps us purchase the stocks at a fair price. This is what we do while purchasing green groceries- looking out for a good bargain.

Adani Power has a lower P/E but looks expensive compared to the P/B lens. Not only this, but it is also expensive when we check out the EV/EBITDA ratios and market-to-sales. On the contrary, Tata Power is expensive in terms of all valuation metrics.

In overall comparison, Tata Power takes the lead when it comes to valuation.

So, Which Stock is Better?

After comparing the various aspects, it can be concluded that Adani Power overshadows Tata Power. Although we have stated this, the conclusion must be accepted with a pinch of salt as these parameters will change in the future.

By understanding the company’s growth plan and keeping track of its progress, a trader can gain some insights into the future. With an attractively valued Adani Power share price, the steadily reducing debt creates a positive indicator of its financial health.

Even Tata Power targets to expand its business by the calendar year 2027 to 40 million consumers.

Adani focuses on increasing its existing capacity to cater to the rising demands, whereas Tata emphasises creating a greener environment by reducing its carbon footprints. With the Government’s support, as their goals coincide, Tata can become a top player.

Check out Research 360 to draw a detailed comparison between both companies. Its graphical representation and user-friendly dashboard allow you to keep up with the latest trends.

Bottom Line

Deciding on which multi-bagger stock to buy must be your choice. By carefully assessing the overall situation, it would be prudent to wait for a market correction before splurging on an impulsive investment for any particular stock. Therefore, we advise traders to discuss their decisions with certified experts before embarking on a new investment.