TeaThat operative question is, what happens after the great fall? Even though the Adani firms lost more than $120 billion from their market value (about two-thirds of that loss went to Gautam Adani himself), the fact remains that the group is still valued at more than $100 billion. Mr. Adani therefore deserves at least two-thirds.
These numbers have to be estimated because of the fast-evolving landscape, and because it is difficult to adjust for cross-holding, pledging of promoter shares and the like. But even though Mr. Adani is no longer No. 1 or No. 2 or No. 20 in the world in terms of wealth, he remains a very wealthy man and the group is still a huge entity.
so what next? Hindenburg Research said the group was 85 percent more valuable. Since this estimate was released 10 days ago, the share price correction has averaged about 60 percent. But even now, the valuations of the group companies are very high. For example, Adani Power is valued at more than 14 times book value, as is Adani Transmission, while Adani Green Energy is valued at 56 times book value!
More common multiples of book value exist for a recently acquired entity like Ambuja Cement, which has a price to book ratio of 2.1. By the standards of general evaluation, many Adani The shares still have a long way to go in the downside.
Companies neither live nor die by their market capitalization, although they can leverage it to raise new capital. But capital has to be serviced, especially debt, for which you need profit and cash flow. Financial data of the seven major listed units of the Adani Group shows a pre-tax profit of around Rs 17,000 crore last March – not much different from NTPC!
The group’s foreign debt is now discounted to the level of a crisis in the market, and the credit rating could be downgraded. So any new bonds will be on expensive terms. New bank loans will require brave bank managers. And after the failure of Adani Enterprises, the equity market will look very hard on any new equity offering.
The short point is that the group’s focus will now necessarily shift to meeting its existing debt-service obligations in order to maintain financial credibility. Funding should hold off on ambitious new projects until finances stabilise.
With limited cash flows, and market capitalization cut by more than half, the Adani group will have to cut its cloaks from whatever is left. The big difference with Mukesh Ambani, who (if such things matter) is now much wealthier than Mr. Adani, is that he has already repaid his debt and therefore has nothing to spend on investing. Have cash to do.
That’s why we may hear less about Mr. Adani than ever before as the largest producer of green hydrogen and the largest producer of green hydrogen, with major projects in solar power, defense and semi-conductors, apart from expanding existing port, airport and other businesses. has become a major power producer. ,
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TeaThe danger of going on the slow growth track is that it also puts current, post-decline market valuations at risk. Just as a smart trader can create a positive growth loop by tossing several balls in the air, he too can get caught in a negative spiral when obstacles start closing in on options.
This column said last week that Mr. Adani has a fight ahead. This is not a fight to the death, so it is not the end of Gautam Adani by any means. After all, he has friends in the right places, he is the second richest person in the country, and his corporate conglomerate is the largest.
But Mr Adani must have re-evaluated his position after an initial bravado, when he announced that he would neither expand nor reduce the price of his public offering.
More seriously, the fight could have spillover effects on those who have financed Mr Adani, on the projects he has undertaken, and on the government’s manufacturing and infrastructure ambitions – to some extent as a national champion to deliver Built on the abilities of the people selected in.
By special arrangement with Business Standard
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