Snowcap Research publishes critical report on Adani Green: What it said

Snowcap Research said ambitious generation predictions and concealed accounting add-backs likely inflated Adani Green's crucial Run-rate EBITDA metric.

Activist investment firm Snowcap Research published a report on Adani Green Energy Ltd focussing on findings related to operational performance, project returns, funding concerns, run-rate EBITDA and related party merchant power sales. The advisory firm said in its analysis that ambitious generation predictions and concealed accounting add-backs likely inflated Adani Green's crucial Run-rate EBITDA metric.

The logo of the Adani Group seen on the facade of its Corporate House on the outskirts of Ahmedabad. (Reuters)

This was also concealed from investors, the report said, claiming, “This includes interest earned on loans, one-off late payment surcharge, and non-cash accounting gains. Not only is this seemingly inconsistent with Adani Green’s reporting of its headline EBITDA number, we believe it is nonsense to include one-off items and non-cash accounting gains in a “run-rate" metric".

As per Snowcap Research, Adani Green's projects have yielded an average unlevered return of just 11–12% over the last three years while the firm said that it could generate up to 17% in attractive returns on its projects which will be more than its competitors.

"Adjusting for accounting gimmicks, we estimate that Adani Green has achieved an average ~11-12% Return on Capital on projects completed in the past 3 years. For context, Adani Green's cost of debt is 9.5%," Snowcap Research noted.

The research said that Adani Green's high debt payment load and declining project returns resulted in minimal free cash flow in recent months, adding, “By our own modelling, we estimate Adani Green can meet just 50% of its 50GW target funding requirement by 2030 – even with the announced equity injection from promoters."