The stock of Adani Power is down 7 per cent today. This came about after the power producer widened its consolidated net loss to ₹816 crore for the year-ended March 2015, up from ₹291 crore in the year-ago period.

This was despite the company making a profit of ₹548 crore on sale of its transmission business in the March quarter after it divested its stake in Adani Transmission (India) to Adani Transmission, a subsidiary of Adani Enterprises. The sale was preceded by a restructuring of the Adani Group’s businesses, which span power generation, transmission, ports and mining.

That apart, the significantly leveraged Adani Power has seen its consolidated debt-to-equity ratio worsen further to 7 times as on March 2015, from 6 times as on March 2014.

Adani Power, which operates a power generation capacity of 10,440 MW, has in fact been incurring losses at the net level over the last four financial years. Helped by an increase in power generation capacity, the company has been growing revenue (inclusive of the compensatory tariff amounts) over the last few years. But, rising fuel expenses and finance costs have eaten into its profit.

About 44 per cent of the company’s generation capacity is accounted for by the 4,620 MW Mundra plant, which is fed by imported coal. The company petitioned for higher tariffs after its imported coal costs increased subsequent to a change in Indonesian laws in 2011. The company was awarded a compensatory tariff by the Central Electricity Regulatory Commission but the decision was appealed against by the affected state distribution utilities. While the company has been recognising revenues based on higher tariffs since 2013-14 (apart from the lumpsum compensation for the period until March 2013), the matter is far from settled.

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