On Tuesday, shares of four of the six publicly traded Adani group companies soared to a record. Adani Enterprises Ltd surged 8% to ₹1,240.45; Adani Total Gas Ltd rose 6% to ₹1,248; Adani Transmission Ltd jumped 5% to ₹1,147; and Adani Ports and Special Economic Zone Ltd soared 14% to ₹852.
The group has established a commanding presence in the country’s infrastructure sector, an area that the central government led by Prime Minister Narendra Modi has laid special emphasis on to stimulate growth.
Over the past few years, it has made major investments across airports, data centres, natural gas infrastructure, ports and renewable energy.
On Tuesday, the total market value of the six listed Adani Group companies stood at more than $107 billion, according to BSE data.
Only two other Indian groups—the Tata group and Mukesh Ambani led-Reliance Industries Ltd—have achieved this milestone. The Tata group’s current market value stands at $242 billion, while Reliance Industries’ market capitalization is at $190 billion.
Analysts say that the recent surge in stock prices of Adani group was on account of rapid expansion by many group companies that led to earnings visibility in the future.
“Adani group stocks have had a strong run over the last year, mainly due to strong traction in renewables and large order wins. However, considering the sharp run-up, the valuations look stretched now. We would thus recommend waiting for a correction before making any fresh investment,” said Ajit Mishra, vice-president of research, Religare Broking.
A total of five companies in the Adani group currently have a market cap of over ₹1 trillion, with only Adani Power Ltd failing to make the cut. Still, the money-losing Adani Power has tripled its market value in the past year to ₹38,000 crore.
Adani Total Gas, the group’s city gas distribution venture, saw its market cap jump more than 13-fold in the past year to ₹1.32 trillion.
Throughout the pandemic, the Adani group has aggressively expanded its presence across Indian infrastructure through a mix of organic growth and acquisitions.
Group flagship Adani Enterprises Ltd ventured into the airports sector in 2019 and now controls seven airports in India and a quarter of the country’s air traffic.
It acquired a controlling stake in the Mumbai International Airport, India’s second-busiest, in the middle of the pandemic.
Adani Ports and Special Economic Zone Ltd has acquired three big ports with a combined value of ₹18,000 crore over the past six months, including the Krishnapatnam Port Ltd, Gangavaram Port Ltd and Dighi Port.
The group’s gas infrastructure business, Adani Total Gas, an equal joint venture with France’s Total Gas, is developing city gas distribution networks to supply piped natural gas (PNG) to industrial, commercial, domestic (residential) customers and compressed natural gas (CNG) to the transport sector.
Adani’s road transport subsidiary has also won eight contracts from the National Highways Authority of India across the country.
Despite the head-spinning returns in the past year, five of its group companies—Adani Enterprises Ltd, Adani Green Energy Ltd, Adani Transmission Ltd, Adani Power Ltd and Adani Total Gas Ltd—are not covered by analysts.
The sole exception, Adani Ports and Special Economic Zone Ltd, has 21 ‘buy’, four ‘hold’ and one ‘sell’ ratings, according to Bloomberg.
The current valuations of the Adani group’s listed companies are so high that it seems to have priced in all future business growth, which limits further upside, said Vinit Bolinjkar, head of research at Ventura Securities.
“Most of the Adani group stocks have very high debt on their balance sheets and promoters have also pledged their shares, which makes the stocks too risky to initiate coverage. That’s why most analysts prefer to stay away from Adani group companies”, Bolinjkar said.
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