First Global’s Devina Mehra says Adani Enterprises shares may fall to Rs 645

Devina Mehra, WHO Also the wife of veteran investor Shankar Sharma, she shared her views on the Adani Enterprises share price from her official Twitter handle, which said, “By now we all know that Prof @Aswath Damodaran has given a per share for Adani Enterprises. The share is calculated to have a ‘fair value’ of Rs 948. Here’s what happens if you change the assumptions. If the cost of capital rises from 10% to 12% (arguably the risk-free yield in India 7.3%), the value drops to 645.

Justifying his assumption on the cost of capital, the IIM-Ahmedabad pass out said, “Prof. Damodaran himself mentions the equity risk premium at the risk-free rate of 4.5%. So 12% seems logical even without the fact that infrastructure projects have greater uncertainty and generally a higher risk premium. Cost of capital = risk-free rate + risk premium.”

Check Out Devina Mehra’s Tweet Below:

Sharing various assumptions and terminal growth rate, DCF value expert believes Adani Enterprises If the cost of capital goes north then the share price may go further down. In her DCF calculation, First Global’s Devina Mehra says that if the cost of capital is raised to 12.50 per cent, Adani Enterprises’ share price could fall to Rs 584 per share. He further said that if the cost of capital is assumed to be 13 per cent, the share price of Adani Enterprises could fall further to Rs 529 per share.

Devina Mehra further told that the share price of Adani Enterprises will fall down 500 level and can be hit 478 each level, if the cost of capital goes up to 13.50 per cent. However, assuming the cost of capital at 14 per cent, the Adani Enterprises share price may further fall to the level of Rs 430 per share.

“Of course, you can look at those values ​​as well if you want to visualize higher growth rates. The elephant in the room and the reason why I stopped giving much importance to DCF calculations in general? Almost all The DCF model assumes that a company grows every year in perpetuity,” said Devina. However, the investment expert said that in real life, even 10% of companies do not meet this criterion.

“Also, as you see, DCF calculations are highly sensitive to terminal term growth and cost of capital projections—essentially this means you can justify virtually any value.”

Amid the Adani-Hindenburg Research saga, Adani Enterprises share price has declined from 3,442 1,853 each in the last 12 seasons.

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.