Shares of Adani Power Ltd rose 5% to ₹640 apiece on Monday after the company announced a joint venture (JV) with Bhutan’s state-owned utility Druk Green Power Corp. to build a 570 MW hydroelectric project at Wangchhu in Bhutan. Adani will hold a 49% stake in the JV, which will see an initial investment of ₹6,000 crore. Since its holding is below 50%, the JV’s financials will not be consolidated line by line but would reflect in Adani’s net profit as share in JV.
The project’s initial plant capacity may appear modest compared with Adani’s 18.1 GW thermal capacity, the largest among private players in India. But the JV is significant as Adani’s first hydro power venture, and aligned with its goal of setting up 5,000 MW of hydro power capacity in Bhutan.
Also, the profitability of hydro power is generally considered superior to that of thermal power, since it relies on water as the primary source of energy rather than non-renewable fuels required for thermal generation. In addition, hydro is regarded as a more stable and predictable form of electricity production when compared with renewable sources such as solar and wind.
On the flipside, hydro power projects tend to have marginally lower internal rate of return (IRR) due to their high gestation period.
The hydro power generated from the project is proposed to be utilized to meet Bhutan’s peak power demand in winter and exported to India in summer. This makes it likely that the project is not going to involve any fixed rate of return on regulated equity.
The Street views hydro power companies more favourably than thermal power firms. Based on ICICI Securities’ FY26 estimates, NHPC Ltd and Adani Power’s trade at an EV/Ebitda of 14x and 12x, respectively. Thus, Adani’s diversification away from thermal power to green hydro power could well be seen as a positive move in the long run even as the impact on financials will likely be limited in the short term.
For now, the bigger driver for Adani Power stock will be the terms of the new power purchase agreements (PPAs) that are likely to be signed in the near future. Adani’s spot sales, also called merchant power sales, were about 22% of the current operational thermal capacity of 18.1 GW in Q1FY26. If Adani maintains spot sales at the same level, it will need to secure long-term power purchase agreements for about 12.5 GW of capacity currently under construction, scheduled to come online between FY28 and FY30.
Adani has already signed a PPA for 5 GW of the capacity under construction. To tie up the remaining 7.5 GW capacity with PPA, Adani will have to achieve about 50% success rate in the upcoming PPA tenders for 14 GW from various states such as Rajasthan, Bihar, Assam, Madhya Pradesh, and Uttarakhand. This will be a critical milestone to achieve.
Adani Power’s rapid strides in expanding capacity and tying up PPAs for under construction capacities have likely helped the stock outperform other pure play thermal power generation stocks in 2025 so far. Shares have gained by 20% so far, compared to flat and negative returns of NTPC Ltd and JSW Energy Ltd, respectively.
Risks remain, though. Execution challenges and fuel-availability issues could weigh on future thermal capacity expansion, despite Adani’s strong track record. In addition, aggressive bidding by both private and public sector players in upcoming PPA tenders could pressure margins on Adani Power’s ongoing projects.
