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Adani and Esyasoft’s Smart Meter JV Explained for Investors

Adani and Esyasoft’s Smart Meter JV Explained for Investors

Introduction

In a recent development, Adani Energy Solutions, the renewable energy unit of India’s Adani Group’s energy arm, Adani Power, has taken a significant step by signing an agreement with UAE-based technology firm Esyasoft Holdings (EHL) to establish a joint venture company. This joint venture is poised to make a significant impact on the smart metering business in India and beyond. In this analysis, we will explore the implications of this partnership for investors and various industries.

Adani and Esyasoft's Smart Meter JV Explained for Investors

Understanding the Joint Venture

The joint venture between Adani Transmission Step-Four Limited (ATSFL), a subsidiary of Adani Power, and Esyasoft Holdings aims to leverage Esyasoft’s intellectual property and software products for advanced smart metering systems and industrial internet-of-things (IoT) solutions. These technologies will be adapted and implemented for the Indian and global markets.

Smart meters, the focal point of this venture, are the next-generation electric meters that are internet-enabled and capable of two-way communication with utilities. They enable remote reading, outage reporting, rate changes, and more without the need for in-person visits. Adani’s objective is to utilize Esyasoft’s software and technical expertise to upgrade traditional analog meters and facilitate large-scale smart meter deployments, aligning with India’s grid modernization efforts. Initially, Adani will hold a 49% stake in the joint venture, while Esyasoft will have a 51% stake.

Impact on Retail Investors

For retail investors, this venture opens up opportunities in Adani Transmission and Adani Green Energy stocks. The move into the smart metering space aligns with India’s ambitious goal of installing 250 million smart meters by 2025. This represents a significant revenue stream and offers visibility for Adani’s future earnings. The integration of smart infrastructure will also benefit Adani’s renewable energy and electricity distribution arms by enhancing grid stability and providing better visibility over energy flows.

Investors should keep a close watch on management commentary regarding the smart metering plans when these companies announce their quarterly results. It’s worth noting that stocks of competitors in meter manufacturing, such as Genus Power, and software providers like Intellismart, may face challenges if Adani aggressively targets market share gains with Esyasoft’s technical expertise. Furthermore, since Adani Transmission is part of the benchmark Nifty50 index, its weight in the index may increase as its smart metering business contributes to incremental growth. Therefore, investors with exchange-traded funds linked to the Nifty50 should also monitor this development closely.

Impact on Industries

The global smart meter industry, estimated at $20 billion annually, is set for potential disruption with Adani and Esyasoft’s joint venture. In India, the conventional meter manufacturing industry has been shielded from competition by protective import duties. However, Adani’s entry into this space with Esyasoft’s capabilities may intensify competitive pressures. The availability of high-quality and affordable smart meters could expedite the deployment plans of electricity distribution companies as the Internet of Things (IoT) ecosystem evolves through partnerships with network and cloud providers like Jio.

Beyond the electricity sector, the oil and gas industry stands to benefit from wider smart meter adoption, which enhances energy demand visibility and aids supply planning and infrastructure development. India’s smart cities program will also receive a boost, as essential utilities like water and gas pipelines can be remotely metered. Overall, the rapid adoption of smart metering for homes and industries through Adani’s joint venture will contribute to the realization of the connected living vision.

Long-Term Benefits & Negatives

Over the long term, the widespread deployment of smart meters in homes, offices, and factories, combined with advanced analytics, promises several advantages. Utilities will have the ability to identify anomalies, prevent theft, and enhance grid resilience through detailed consumption data analytics. Consumers will benefit from the ability to choose lower tariffs during off-peak hours and analyze usage patterns to reduce their bills. The elimination of traditional meter readers also improves spectrum efficiency.

Additionally, smart meters facilitate the integration of solar power and electric vehicles by relaying insights to distribution companies. As a critical mass of smart meter data accumulates, third-party service providers can offer value-added services, such as insurance based on consumption patterns. However, data security and the vulnerability of meters to hacking are risks that must be addressed. To mitigate these risks, Adani and Esyasoft must establish adequate safeguards and ensure compliance with standards through certification programs.

Short-Term Benefits & Negatives

In the short term, Adani Energy Solutions’ entry into the smart metering space may appear beneficial, but it introduces uncertainty for industry incumbents. For end consumers, smart meters promise improved billing accuracy compared to traditional meters, as remote reading eliminates manual inefficiencies. Utilities benefit from significant reductions in their field workforce requirements through automation, enabling the redeployment of employees and operational cost savings.

However, the disruption caused by an influential new player with strong financial backing may temporarily undermine the outlook for meter manufacturers like Genus Power, which may face margin pressures to remain competitive. Similarly, smaller software players may experience revenue cannibalization unless Adani maintains channel partnerships.

The oil and gas pipeline sector also requires clarity regarding the pace at which next-generation metering systems can be retrofitted. While modernization is positive, Adani must ensure collaboration with legacy industry players to maintain short-term business stability and prevent uncontrolled disruption.

Citation:

ET Bureau, “Adani Energy Arm to Form JV with Esyasoft for Smart Metering Biz,” Economic Times, December 28, 2023, The Economic Times.

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