Adani group is one of the most prominent conglomerate groups in India. Other huge conglomerate groups producing a significant amount of output for India include the Tata Group, the Aditya Birla Group, Reliance Industries, Mahindra Group, Bajaj Group, and L&T Group.
Gautam Adani, the current chairman, launched Adani in 1988 as a commodity trading enterprise. In 1999, the firm began selling coal and moved into edible oil under the Fortune brand. Since then, the Adani group has created a diversified portfolio of companies in the logistics, energy, resources, agribusiness, real estate, financial services, defense, and aerospace sectors.
Adani group has excelled in a myriad of sectors in India; it continues to scale at an exceedingly high rate and is particularly suited to help India attain double-digit growth levels in the years to come. The trust of investors in Adani Group is visible by looking at the price movement of all the six publicly listed companies of the Adani Group in the recent past.
This blog will analyze the six publicly listed companies of Adani Group- Adani Enterprises, Adani Green Energy, Adani Ports & SEZ, Adani Power, Adani Total Gas, and Adani Transmission.
Adani Group Subdivisions
A critical fundamental metric used in the blog is the P/E ratio. The P/E ratio, or the Price/Earnings ratio, is calculated by dividing the share price by the company’s earnings per share.
The P/E ratio helps investors understand the justification of a particular price relative to the underlying earnings of the share. It is considered one of the essential fundamental metrics and is usually regarded as justifiable if it is in the 15-20 range.
Note: The stock price, market capitalization, and P/E ratio of the six stocks mentioned below are taken from the screener on the website on 6th June 2021.
Stock Price: Rs. 1,701
Market Capitalization: Rs. 187,072 Cr
P/E Ratio: 173
Adani Enterprises Limited (AEL) is the holding company of Adani Group, and it serves as the incubator for Adani Group’s new business ventures. On a standalone basis, Adani Enterprises is involved in the mining and trading coal and iron ore. The three principal subsidiaries of Adani Group are:
Adani Wilmar sells a vast range of products, including edible oils, flour, rice, pulses, sugar, soya nuggets, etc. It uses its publicly-trusted “Fortune” brand name to sell these products in India.
In Mumbai, it is a majority owner of Mumbai International Airport Limited (MIAL) (which owns the Chhatrapati Shivaji Maharaj International Airport, the 2nd largest airport in India). In addition, it has a 50-year lease on airports in Ahmedabad, Guwahati, Jaipur, Lucknow, Mangalore, and Thiruvananthapuram.
Adani Green Energy
Stock Price: Rs. 1,277
Market Capitalization: Rs. 199,764 Cr
P/E Ratio: 951
Adani Green Energy Limited (AGEL) is a holding company of several subsidiaries carrying a renewable power generation business within the Group. The Company is primarily involved in renewable power generation, Solar Power, Wind Power, and Hybrid Power in particular.
It has a portfolio of 15,390 MW (megawatt) of renewable energy across 87 locations and 11 states with 4,373 million units generated and 4 million tonnes equivalent CO2 saved so far.
It operates with the vision of harnessing the power of the sun and the wind’s strength to create a cleaner and greener India. It is the most significant player in the renewable energy sector in India. It has many facilities under construction in the hope of much more rapid growth in the renewable energy sector in the future.
Adani Ports & SEZ
Stock Price: Rs. 834
Market Capitalization: Rs. 170,251 Cr
P/E Ratio: 34.1
Adani Ports & SEZ (APSEZ) represents an extensive network of ports with India's largest SEZ at Mundra. Although SEZ or Special Economic Zone is an area that is subject to different economic regulations than other areas, they are primarily focussed on attracting Foreign Direct Investment (FDI). There are 378 SEZs in India, out of which 265 are operational.
APSEZ primarily operates in the logistics industry. It can manage more than 400 MMTPA (Million Metric Tonnes Per Annum) of oil and gas, contains 12 ports and terminals, 15000 HA (Hectare) of industrial land, 4 Lac Sq. Ft. of warehousing, and three logistics parks, as provided at the official website of adaniports.com
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Stock Price: Rs. 106
Market Capitalization: Rs. 40,787 Cr
P/E Ratio: 32.1
Adani Power Limited is India’s largest private power company, powering over 35 million households in India. The second-largest private power company in India is Tata Power.
Adani Power has a power generation capacity of 12,450 MW (megawatt) and employs more than 2400 Indians across its seven operational power plants in Gujarat, Maharashtra, Rajasthan, Karnataka, and Chattisgarh, according to the statistics at adanipower.com.
Adani Total Gas
Stock Price: Rs. 1,638
Market Capitalization: Rs. 180,094 Cr
P/E Ratio: 373
Adani Total Gas Limited (ATGL) is a developer of City Gas Distribution (CGD) networks to supply the Piped Natural Gas (PNG) to the Industrial, Commercial, Domestic (residential), and Compressed Natural Gas (CNG) to the transport sector. It is a joint venture between Adani Group and the French oil and gas company Total SE.
The company has set up city gas distribution networks in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana, and Khurja in Uttar Pradesh. In addition, the development of Allahabad, Chandigarh, Ernakulam, Panipat, Daman, Dharwad, and Udhamsingh Nagar gas distribution is awarded to a consortium of Adani Total Gas Ltd and Indian Oil Corporation Ltd.
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Stock Price: Rs. 1,602
Market Capitalization: Rs. 176,195 Cr
P/E Ratio: 144
Adani Transmission Limited is one of India’s largest power transmission companies.
It has laid out more than 17,200 Ckm of power transmission length, more than 30,000 MVA transformation capacity, with more than 30 lakh power connections across 12 states in India, as described at adanitransmission.com.
The develops, owns, and operates transmission lines across Gujarat, Rajasthan, Bihar, Jharkhand, Uttar Pradesh, Maharashtra, Haryana, Chhattisgarh, Madhya Pradesh, etc. Adani transmission also deals in various agro commodities.
The Adani Group serves as an essential fundamental pillar of the Indian economy, as can be realized by looking at the myriad of essential services provided by the six pillars of Adani Group in India.
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However, the stock prices of the six pillars of Adani Group do not seem to follow any fundamental analysis in the recent past. As a result, they seem to have entered a bubble category as per a lot of analysts and critics. On the other hand, all of the stocks in the list above have multi-folded in the recent past and continue to severely outperform the markets.
Adani Total Gas has provided a one-year return of more than 1100% so far, Adani Ports- more than 1000%, and Adani Transmission- more than 250%, and such surges in prices are visible in the P/E ratios of these stocks now.
A lot of the people believe this to be the Modi effect and attribute all sorts of valuations based on the long-lived close relationship between the prime minister, Narendra Modi, and Gautam Adani, the chairman of Adani Group.
The stock market is considered forward-looking; this means that it prices in the future growth possibilities of a company way before it happens. It is, therefore, possible that the growth anticipated by an investor might already have been accounted for by the markets, and therefore, the intrinsic value, as calculated by the investor is way off.
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Even though Adani Group has contributed positively to the Indian economy so far and has sound management, an investor should be cautious while buying the costly stocks as presented by the Adani Group. Because after all, the market is supreme