Adani Power's profit leap rests on Gujarat back payments, now finished, and a one-off tax credit

Adani Power's consolidated profit after tax rose 141% to ₹7,019 crore for the September 2026 quarter, from ₹2,906 crore a year earlier. Most of that leap did not come from selling more electricity at better margins. On the company's continuing measure, which leaves out back-dated income, EBITDA (earnings before interest, tax, depreciation and amortisation) grew 18.5%, calculated from the continuing figures the company reported.

The difference is mostly a back-dated rate revision in the company's Gujarat power contracts, helped by a one-off tax credit. Revenue last quarter included ₹2,422 crore of prior-period income, after the starting energy charge in its Gujarat power purchase agreements was revised and the revision applied backwards. A tax credit, from reversing provisions made before subsidiaries were merged into the company, lifted the bottom line further. Management said the back payments are now finished. "There is no past period recovery remaining in case of the Gujarat DISCOM as of now," said Nishit Dave, head of investor relations. Not all of the benefit disappears: the revised rate is also in the tariff the company bills from here on.

The ordinary business was squeezed at the same time. The fuel bill grew faster than continuing revenue, on higher volumes and much dearer imported coal. Continuing EBITDA margin was 36.1% last quarter against 38.9% the quarter before, both calculated from the company's continuing revenue and EBITDA. Chief executive Shersingh Khyalia said the Gujarat tariff is linked to a coal index, and that the higher imported-coal cost would reach it only after more than six months. Part of the squeeze is therefore timing: Khyalia said the higher cost would probably reach the Gujarat tariff in the third quarter after it was incurred.

The Gujarat money also did a second job, on the balance sheet. Between March and September, gross debt rose while net debt, which subtracts cash, barely moved. Chief financial officer Dilip Jha credited roughly ₹6,000 crore received from the Gujarat state power buyer for adding to internal cash, and said some money borrowed near the end of the quarter was still sitting as cash. The back payments themselves are complete, Dave said; on the call Jha did not say how much of that sum was back pay, against ₹3,809 crore of prior-period revenue booked over the half, calculated from the company's reported and continuing revenue.

That matters because the building programme is getting larger. In July the company guided expansion spending rising each year to more than ₹35,000 crore after the next financial year, and capital work in progress on the filed balance sheet more than doubled in six months. Asked how high debt would go, Jha answered: "Peak debt, we are expecting that it will be around INR 1 lakh crores..." and placed the peak around FY30-31; Dave agreed that was nearly double today's level. Neither said whether that meant gross or net debt.

Management's case is that earnings grow into the borrowing. In April Khyalia set an EBITDA target of ₹50,000 crore by FY31, which he called conservative, and in July the company said its ratio of net debt to EBITDA would not go above 3. On those figures the peak debt fits inside the ceiling, provided the new plants arrive on time and earn as planned.

The first of them is running a little behind. In April Khyalia said the first Korba unit would start in the quarter just reported; it has now been synchronised with the grid, with commercial operation expected shortly. The long-term contract that will buy Korba's power, with the Uttarakhand state utility, starts only after four years, so until then the output will be sold under medium-term deals or on the spot market. That exposes the first new capacity to power prices for longer than a fixed-tariff contract would.

The quarter was not booked aggressively across the board. The company reversed revenue on a disputed coal-cost claim against a Haryana state utility, on its auditors' advice, even though it has been paid. What a holder can carry forward is the tariff uplift built into ongoing bills; the 18.5% continuing growth came in a quarter when weak hydro lifted plant load to 70%, above the roughly 65% management calls normal. The back-dated Gujarat income has run its course.