An Independent agency CreditSights report on the Adani Group that called it ‘deeply over-leveraged’ sent panic waves amongst investors.
CreditSights, which is a Fitch group company said “Adani group’s overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, in the worst case scenario, “in its report.
After exposure of this report the stocks of all Adani group companies were in the red today with Adani Green shedding the most value.
After report all the seven Adani group companies were hammered on the stock exchanges on monday after a CreditSights report outlined that it is ‘deeply over-leveraged’, sparking panic amongst investors.
In the first half of trading today, Adani Group companies lost over ₹94,000 crore in value, with the top loser being Adani Green.
Company Day’s low Mcap change
Adani Enterprises ₹2,927 -₹14,159 crore
Adani Green ₹2,347 -₹27,364 crore
Adani Ports ₹806. -₹7,214 crore
Adani Power ₹411. -₹8,331 crore
Adani Wilmar ₹688. -₹4,705 crore
Adani Total Gas ₹3,239. -₹13,748 crore
Adani Trans ₹3,318. -₹18,824 crore
Total loss -₹94,344 crore
Gautam Adani’s spectacular rise to the top of India, and Asia’s richest man, is fueled by debt, the report said.
Two years ago, his total wealth stood at a meagre $10 billion in comparison to today when he is now worth $136 billion, according to Bloomberg Billionaires Index.
CreditSights also said that it took ‘comfort’ from the group’s strong access to diverse funding channels, and relatively stable recurring-revenue generating infrastructure assets.
A cursory look of the returns during the last 2 year period where covid 19 affected globally but inspite the seven Adani Group companies since the beginning of 2020 exhibits interesting tales
Company Current price Jan, 2020 Returns
Adani Enterprises ₹2,927. ₹208 14x
Adani Green ₹2,347. ₹197 12x
Adani Ports ₹806. ₹383. 2x
Adani Power ₹411. ₹63. 6x
Adani Wilmar* ₹688 ₹381 2x
Adani Total Gas* ₹3,239. ₹360 9x
Adani Trans ₹3,318. ₹347 10x
Salient features of report :
The report said that most of Gautam Adani’s fortunes constitute ‘paper wealth’. His spot in the top richest men list is fuelled by the value of his stock holdings. Currently debt that could unravel Adani’s sprawling business empire, according to the report.
“In the worst-case scenario, overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, and possibly culminate into a distressed situation or default of one or more group companies,” the CreditSights report warns .
While this might sound gloomy, the report maintained its ‘market perform’ rating on two Adani group companies track Adani Green and Adani Ports & SEZ.
The report went on to point out that the group’s competition with Reliance Industries, low equity infusion as risks, while maintaining that the Adani group can gain from the Indian government’s massive infrastructure spends.
The government has a National Infrastructure Pipeline programme worth ₹111 lakh crore sanctioned initially, expected to be spent between 2020-25.
Amongst the group’s biggest acquisitions by Adani group is the ACC and Ambuja Cements takeover from Holcim in a deal valued at $10.5 billion (approx. ₹83,000 crore).
Every ₹1 lakh invested in Adani Group in 2020 is now worth over ₹7 lakh
While today’s rout in the Adani Group companies is big, investors who put their money in the Adani empire in 2020 have seen huge returns – every ₹1 lakh invested in the Adani Group in 2020 is now worth over ₹7 lakh, even after today’s rout.