Adani Group lost over ₹5.56 lakh crore in three trading sessions which translates into 28 times the planned ₹20,000 crore FPO
Investors unsure of the controversy-laden Adani Group shed stocks on Monday, leading to the group companies collectively losing ₹1.38 lakh crore Market cap. Adani Group has lost over ₹5.56 lakh crore market cap in just three trading sessions since the report was made public.
On Monday, four group companies — Adani Wilmar, Adani Power, Adani Green Energy and Adani Total Gas – were locked in the lower circuit. The fifth company Adani Transmission, though in the lower circuit for most of the trading session, managed to come out of the lower circuit before the close of trading on Monday. Two other group companies Adani Enterprises and Adani Port gained during the day, ending trading in the green since the last close.
The market cap of Adani Group at the end of December 2022 was ₹19.63 lakh crore (including Ambuja and ACC Cement) but by Monday’s end of the day (3:30 p.m.), the market cap of the group came down to ₹13.61 lakh crore, a fall of 30.68% within a month. Between 2021 and 2022, Adani group doubled its market cap from ₹10.78 lakh crore to ₹19.63 lakh crore.
Adani Group tried to contain the damage by pre-empting the Monday trading by issuing a 413-page rebuttal to Hindenburg Research report a day before. Throughout the day, its group CFO Jugeshinder Singh tried to persuade the investor community that all is well with the group and that the Hindenburg report is baseless and devoid of facts. But the effort could not prevent the stock crash.
Last week, Adani Enterprises, the flagship company of the group, announced it will raise ₹20,000 crore through the FPO route. Ironically, the loss in market cap is over 28 times the planned FPO that was billed as the largest-ever FPO in the Indian capital markets history.
Meanwhile, institutional investors intensified the scrutiny of the debt of Adani Group companies after the release of the Hindenburg report. Bloomberg has reported the conglomerate has at least $289 million dollar note coupon payments due in 2023.
As per Bloomberg, in the next two months, Adani Group will face an interest payment of $90.75 million. By March 2023, Adani Port will face an interest payment of $40.45 million while Adani Transmission, Adani Electricity Mumbai, Adani Green and Adani International Container will have to shell out $10 million, $19.7 million, $16.4 million and $4.2 million, respectively.
At the time of writing the report, shares of Adani Enterprises quoted at ₹2,893, much below the price band of the FPO. The price band for the offer is ₹3,112 to ₹3,276. A dip in spot price below the price band is a bad omen, which will discourage retail investors from subscribing to the FPO.
The Hindenburg report was published on Wednesday and within a day, the group lost ₹96,580 crore in market cap. On Friday, the group cumulatively lost another ₹3.21 lakh crore in market cap.
SKY HIGH VALUATION OF ADANI GROUP
The Hindenburg report alleged Gautam Adani, chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through alleged stock price manipulation in the group’s seven key listed companies, which have spiked an average of 819% in that period.
“Even if you ignore the findings of our investigation and take the financials of Adani Group at Face Value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations,” the report states. Fortune India did a quick valuation check for the Adani group companies with its market peers.
Adani Total Gas that locked in a lower circuit of 20% on Monday commands a market cap of ₹2.58 lakh crore. But government-owned gas distribution company Indraprastha Gas (IGL) sports a market cap of ₹29,000 crore, almost 89% less than Adani’s Total Gas market cap. IGL supplies gas to 21 cities while Adani Total has a presence in just 11 cities. Similarly, another PSU Mahanagar Gas commands just ₹8,500 crore market cap.
Adani Transmission, another group company commands a market cap of a mammoth ₹1.9 lakh crore while PSU giant Power Grid Corporation sports a market cap of ₹1.48 lakh crore, almost 22% less than Adani Transmission. In FY22, Power Grid registered a net profit of ₹16,745 crore, while Adani Transmission’s net profit stood at ₹1,235 crore.
NTPC with approx 72,000 MW power production capacity is 427% above Adani Power’s generation capacity of 13,650 MW. But the government company’s market cap of 1.6 lakh crore was just 44.67% above Adani Power’s market cap of ₹91,000 crore. In FY 22, NTPC posted a net profit of ₹15,940 crore, while Adani Power’s profit stood at ₹4,911 crore.
The peer-to-peer comparison provides a reality check on Adani Group stocks, which are experiencing a massive fall since the Hindenburg report was published.
– RAJIV RANJAN SINGH