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Gujarat Power Supply and Tariffs Shift
Adani Power has adjusted its electricity supply to Gujarat, a move driven by changing fuel costs and contract terms. This strategic shift also comes as the company expands its national power capacity and the sector navigates evolving demand and regulations.
Changes in Gujarat Supply and Pricing
Adani Power supplied 15% less electricity to Gujarat in 2025, delivering 13,203 million units (MUs) compared to 15,491 MUs previously. State consumption rose slightly to 1,28,218 MUs from 1,26,968 MUs, meaning more power was used within Gujarat. As a result, the state's surplus power sales dropped by nearly 60% to 115 MUs. These changes align with higher tariffs under new Power Purchase Agreements (PPAs). Older PPAs from 2007 had low tariffs (₹2.35-₹2.89 per unit), but PPAs revised in 2022 link tariffs to fuel and logistics costs, leading to current prices between ₹4.73 and ₹6.86 per unit. Adani Power also received a ₹617.5 crore refund for ocean freight charges adjusted from bills between January 2023 and June 2025. The government noted that tariffs are affected by regulatory changes.
National Expansion and Sector Trends
Adani Power's focus in Gujarat differs from its large-scale national expansion. The company plans to increase its thermal power capacity to 41.9 GW by FY32, backed by long-term Power Purchase Agreements (PPAs). Over 95% of its current capacity and more than 55% of future capacity are covered by 25-year PPAs. Recently, Adani Power secured a 1,600 MW deal with MSEDCL in Maharashtra, starting in FY31. This national growth happens as India's power sector faces mixed demand. Demand growth slowed to about 1% by February 2026 due to rain, but analysts expect a recovery fueled by data centers and electric vehicles. Coal remains key for thermal power generation, though renewable energy is growing fast. This market setup supports established thermal power providers.
Valuation Concerns and Regulatory Hurdles
Despite positive news, Adani Power's valuation is under scrutiny. Some analysts view the stock as expensive, with a price-to-earnings (P/E) ratio around 22.5 to 26.25 in early 2026. For comparison, NTPC trades at a P/E of 14.43 to 23.34, while JSW Energy is around 39. Adani Power's net profit fell 19.4% year-on-year in the December 2025 quarter. In the past, Adani Power and Tata Power struggled to pass on higher fuel costs after a 2017 Supreme Court decision. While newer PPAs offer some help, relying on state electricity distributors and past tariff disputes create regulatory risks. Adani Power's earnings have also fluctuated; the average cost of electricity Gujarat bought from the company more than doubled between 2021 and 2022.
Analyst Outlook Remains Positive
Most analysts maintain a positive view, with an average target price of ₹187 and a 'Buy' consensus. JM Financial began coverage with a 'Buy' rating and ₹178 target, highlighting the company's capacity expansion and India's rising thermal power demand. Antique Stock Broking also reiterated its 'Buy' rating and ₹187 target, focusing on long-term growth and better PPA coverage. Securing long-term PPAs for its growing capacity should improve earnings clarity and reduce swings, allowing Adani Power to benefit from expected demand increases, even with recent earnings pressures.