Hindenburg selloff & now: 4 likely reasons why Adani stocks fared better this time
Bernstein said there has been a dramatic drop in pledge across Adani companies. It fell to 1 per cent from 25 per cent for Adani Power and nil from 17 per cent for Adani Ports.
- Dec 3, 2024,
- Updated Dec 3, 2024 3:22 PM IST
Bernstein in its latest note said the selloff in Adani group shares following the US indictment news was not as severe as the selloff seen two years ago, when the US-based short seller Hindenbug Research came out with a scathing report targeting the group. In fact, the foreign brokerage noted that some of the Adani group stocks are trading above the level they were at pre-US SEC developments. The risks today seems lower than earlier.
Share pledge Share pledge was a key concern during the Hindenburg Research report-led selloff. There was a fear it could lead to a domino effect. Bernstein said the evolution of share pledges for the group has been such that there has been a dramatic drop in pledge across companies - this is one area where group has taken significant action over the last 1.5 year, it said.
It fell to 1 per cent from 25 per cent for Adani Power, nil from 17 per cent for Adani Ports. "Promoter holding is also up across the group (except Adani Energy Solutions due to QIP), especially Ambuja Cements seeing promoter holding go from 63 per cent to 68 per cent due to the warrants," Bernstein said.
Leverage Bernstein said the overall debt for the group decreased post the short seller event to Rs 2,38,500 crore in September 2023 from Rs 2,41,000 crore in March 2023. While the debt has risen again now to Rs 2,79,300 crore primarily driven by a rise in Adani Enterprises (including their lease liabilities), the net debt to Ebitda number for the group has fallen sharply with rise in Ebitda as assets got operational across the group (e.g. Adani Green) and even profitability improved (solar PV at Adani Enterprises).
"Further the group is sitting on a cash of Rs 39,000 crore as of September 2024 as against a cash reserve of Rs 22,300 crore in March 2023. In terms of the source of funds, over the years the group has shifted away from banks to bonds. Since March 2023 however, we have seen the share of dollar bonds decrease and that of NBFCs increase in the source of funds- which we expect was due to favorable rates in Indian markets vs. dollar bonds," it said.
Debt repayment and tricky bonds Last time, Adani Green had a significant part of its debt up for repayment in calendar 2024, including a $750 million holdco bond which is tricky to refinance.
"This time, the repayment schedule is more balanced, however our discussions with fixed income investors suggest the concern is around a dollar revolving facility Adani Green has taken of Rs 17,700 crore of which Rs 8900 crore is due in March 2025. But then again, considering the company is sitting on Rs 5,900 crore of cash, it seems lesser of a concern this time," Bernstein said.
Valuations
Bernstein said within its coverage, Adani Ports continues to trade below JSW Infra and Concor. Adani Green, which does not have a close peer is in line with private sector peers such as JSW Energy and Tata Power. Ambuja Cements also trades broadly in line with large cement names, it noted.
This brokerage has an 'Underperform' rating on Adani Green Energy, 'Outperform' recommendation for Adani Ports and 'Market-Perform' on Ambuja Cements. The brokerage said it has not changed its ratings post the US SEC event as it awaits further clarity on developments in India related to it.
The brokerage suggested a target price of Rs 800 for Adani Green Energy, Rs 1,616 for Adani Ports and Rs 572 on Ambuja Cements.
Adani stocks since Jan 2023 Bernstein said Adani group stocks have been volatile since the beginning of 2023, starting with the short-seller report which came on January 24, 2023, just before Adani Enterprises Ltd was doing a fund raise. Post the event, the groups stock prices crashed and bond yields shot up.
"Over time the group stocks rebounded but most did not get back to earlier levels (e.g. Adani Green). However, after the news from US SEC on 21 Nov’24, stock and bond prices plummeted again. But this time the drop wasn’t as severe as the previous one, and the prices began to recover shortly thereafter. In fact some group stocks are trading above the level they were at pre-US SEC developments," it said.
Bernstein in its latest note said the selloff in Adani group shares following the US indictment news was not as severe as the selloff seen two years ago, when the US-based short seller Hindenbug Research came out with a scathing report targeting the group. In fact, the foreign brokerage noted that some of the Adani group stocks are trading above the level they were at pre-US SEC developments. The risks today seems lower than earlier.
Share pledge Share pledge was a key concern during the Hindenburg Research report-led selloff. There was a fear it could lead to a domino effect. Bernstein said the evolution of share pledges for the group has been such that there has been a dramatic drop in pledge across companies - this is one area where group has taken significant action over the last 1.5 year, it said.
It fell to 1 per cent from 25 per cent for Adani Power, nil from 17 per cent for Adani Ports. "Promoter holding is also up across the group (except Adani Energy Solutions due to QIP), especially Ambuja Cements seeing promoter holding go from 63 per cent to 68 per cent due to the warrants," Bernstein said.
Leverage Bernstein said the overall debt for the group decreased post the short seller event to Rs 2,38,500 crore in September 2023 from Rs 2,41,000 crore in March 2023. While the debt has risen again now to Rs 2,79,300 crore primarily driven by a rise in Adani Enterprises (including their lease liabilities), the net debt to Ebitda number for the group has fallen sharply with rise in Ebitda as assets got operational across the group (e.g. Adani Green) and even profitability improved (solar PV at Adani Enterprises).
"Further the group is sitting on a cash of Rs 39,000 crore as of September 2024 as against a cash reserve of Rs 22,300 crore in March 2023. In terms of the source of funds, over the years the group has shifted away from banks to bonds. Since March 2023 however, we have seen the share of dollar bonds decrease and that of NBFCs increase in the source of funds- which we expect was due to favorable rates in Indian markets vs. dollar bonds," it said.
Debt repayment and tricky bonds Last time, Adani Green had a significant part of its debt up for repayment in calendar 2024, including a $750 million holdco bond which is tricky to refinance.
"This time, the repayment schedule is more balanced, however our discussions with fixed income investors suggest the concern is around a dollar revolving facility Adani Green has taken of Rs 17,700 crore of which Rs 8900 crore is due in March 2025. But then again, considering the company is sitting on Rs 5,900 crore of cash, it seems lesser of a concern this time," Bernstein said.
Valuations
Bernstein said within its coverage, Adani Ports continues to trade below JSW Infra and Concor. Adani Green, which does not have a close peer is in line with private sector peers such as JSW Energy and Tata Power. Ambuja Cements also trades broadly in line with large cement names, it noted.
This brokerage has an 'Underperform' rating on Adani Green Energy, 'Outperform' recommendation for Adani Ports and 'Market-Perform' on Ambuja Cements. The brokerage said it has not changed its ratings post the US SEC event as it awaits further clarity on developments in India related to it.
The brokerage suggested a target price of Rs 800 for Adani Green Energy, Rs 1,616 for Adani Ports and Rs 572 on Ambuja Cements.
Adani stocks since Jan 2023 Bernstein said Adani group stocks have been volatile since the beginning of 2023, starting with the short-seller report which came on January 24, 2023, just before Adani Enterprises Ltd was doing a fund raise. Post the event, the groups stock prices crashed and bond yields shot up.
"Over time the group stocks rebounded but most did not get back to earlier levels (e.g. Adani Green). However, after the news from US SEC on 21 Nov’24, stock and bond prices plummeted again. But this time the drop wasn’t as severe as the previous one, and the prices began to recover shortly thereafter. In fact some group stocks are trading above the level they were at pre-US SEC developments," it said.