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We reiterate our positive stance on AGEL, as core RE capacity addition outlook is steady at >5GW pa, with the company being firmly on track to achieve 50GW by CY30. Additionally, 3.5GWh of BESS has been already deployed in Khavda, with the aim to reach 10GWh by FY27-end and 50GWh by CY30. The first 500MW PSP at Chitravathi would also have SCoD in FY27. 1QFY27 results were steady, with >30% yoy EBITDA growth, as capacity crossed 20GW. AGEL has derisked its merchant exposure by contracting RE/BESS capacities with AESL for 25/15 years, respectively, at arm’s-length pricing (solar/wind/BESS spread benchmarks at Rs2.6-2.8/3.6-3.8/4.5-5.0 per kWh) to focus on execution. We believe predictability on merchant rates has been low; hence, fixing these around benchmarks for a ‘project and execution’ company like AGEL is a rational move. We estimate PSP-BESS spread of Rs4-5/kWh to yield 15-20% steadystate ROE at EBITDA of Rs1.3-2.7mn/MWh. We incorporate BESS in our model, raising FY27/28/29E EBITDA by 4%/12%/12% with revised capex of ~Rs420/450/450bn, respectively. The AESL contract does not change our realization assumptions. We roll forward our valuation to Jun-27E and raise our TP by 10% to Rs1,650 (from Rs1,500); retain BUY.

BESS to scale up rapidly with ~10GWh addition pa till CY30; returns attractive

AGEL commissioned ~1.9GWh of BESS in 1Q and is on track to meet 10GWh by FY27- end, while targeting ~50GWh by FY30. The management expects normalized EBITDA of Rs2.5-3.0mn/MWh, with full impact of installed ~3.5GWh expected in remaining 9MFY27. Economics remain attractive, supported by energy arbitrage between daytime and evening power prices, where historical spreads have been Rs4-5/kWh. We believe AGEL can achieve a Rs5-5.5/kWh spread, resulting in Rs2.7mn/MWh EBITDA, which at Rs15mn/MWh unit capex should yield 12% ROCE/16% ROE at a 3-hour, 1.5-cycle format

Merchant exposure shift to AESL a strategic move toward predictable returns

The merchant/C&I capacities would be routed through Adani Energy Solutions (AESL), while AGEL will retain execution, operations, and PPA-linked contracts, thus eliminating long-term merchant price volatility from its earnings profile. Solar realizations remain benchmarked at Rs2.6-2.8/kWh and wind at Rs3.6-3.8/kWh. BESS tariffs are derived using long-term IEX price trends and targeted project returns (IRR hurdle of 15-16%). The contracts follow SECI-like PPA structures, with Rs4.5-5.0/kWh of BESS spreads.

Core RE business steady; first PSP to be commissioned in FY27

AGEL is on track to achieve its CY30 target of 50GW, adding 5-6GWpa for the next 4-5 years. While curtailment remains within expectations, it does impact EBITDA by 5-7% (2-3GW impact). However, the management expects curtailment challenges to recede by CY30-end, at least at Khavda with 7GW getting added. The maiden PSP at Chitravathi would be commissioned in FY27; Assam and UP projects would commence subsequently.

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