Morgan Stanley has initiated coverage of Adani Green Energy with a bullish stance, estimating that the Adani Group company's earnings can compound at 49%. Adani Green is one of India's largest renewable energy producers, operating a portfolio of solar and wind projects, and its expansion is closely tied to India's national goal of reaching 500 GW of non-fossil fuel installed capacity by 2030. Alongside the positive outlook, the brokerage has highlighted three key risks that could impact its investment thesis.

The risks identified by Morgan Stanley are:

1. Slower data centre building, which would consequently result in slower commercial and industrial (C&I) contracting. Data centre construction in India has been accelerating on cloud and AI-driven demand, and these power-intensive facilities have become a growing source of C&I renewable contracts, so a build-out slowdown would feed into contracting volumes.
2. Slippages in renewable energy / storage build-out and Khavda evacuation delays. Khavda, in Gujarat, is the site of one of the world's largest planned renewable energy parks, and moving its power to demand centres depends on transmission infrastructure being commissioned on schedule.
3. Reduced access to low-cost capital. Renewable energy projects are capital-intensive and heavily debt-funded, making financing costs a key determinant of project returns. Adani Group companies have previously faced funding-cost scrutiny following a January 2023 short-seller report, allegations the group denied.

Source: CNBC-TV18