A rally in the stocks of companies controlled by Indian billionaire Gautam Adani has added almost $43 billion to his wealth this year, catapulting him to the spot of the second-richest person in Asia. Some analysts say the gains are fraught with risk.
Adani’s net worth of $76.7 billion got a boost from a 330% jump in Adani Total Gas Ltd., a 235% rise in his conglomerate’s flagship Adani Enterprises Ltd. and a 263% increase in Adani Transmission Ltd. this year. Adani group stocks, especially these three, “look extended,” Bloomberg Intelligence analysts Gaurav Patankar and Nitin Chanduka wrote in a June 10 note after analysing technical indicators.
“Among the biggest foreign investors are a few Mauritius-based funds holding over 95% of assets in these companies,” the analysts wrote. “Such concentrated positions, along with negligible onshore ownership, create asymmetric risk-reward as large investors conspicuously avoid Adani.” The analysis underscores the vulnerability of the rapid wealth surge Adani has seen in 2021, beating the gains for Warren Buffett and his compatriot Mukesh Ambani. A representative for Adani Group declined to comment immediately.
The overseas funds hold a large chunk of shares, effectively reducing the public float and leaving the stocks prone to volatility, the analysts wrote. Elara India Opportunities Fund, Apms Investment Fund, Cresta Fund, Albula Investment Fund, Lts Investment and Asia Investment Corp. have put more than 95% of their assets in Adani group firms, according to data compiled by Bloomberg Intelligence. The ports-to-power conglomerate also got a boost after MSCI Inc. included three more Adani firms to its India benchmark index last month, taking the group’s total footprint to five. This leads to mandated buying by investors that track this index.
“Adani stocks trade 150%-200% above 200-day moving averages, and statistically look extended,” Bloomberg Intelligence analysts wrote. “Tesla was 126% above the 200-day when it peaked this year.” The Adani Group is now reportedly planning to list two more of its businesses on the Indian stock exchanges after the market capitalisation of its six listed companies surged by over 5 times in the last year.
According to media reports, the airport and food businesses of the Adani Group could go public in the near future. The airports business is owned by Adani Enterprises as Adani Airports Holdings, while Adani Wilmar is a joint venture between the Adani Group and Singapore-based Wilmar International.
Currently, the Adani Group has six listed companies with a combined market capitalisation of over ₹8.5 lakh crore, skyrocketing from a little over ₹1.6 lakh crore last year. If listed, these two companies could help Gautam Adani beat Mukesh Ambani as the richest Indian. According to Forbes’ real-time billionaire’s list, Ambani is the richest in India with $85 billion wealth, while Adani is second with $75.4 billion wealth.
The Adani Group is also reportedly working on listing its food business, run under the name Adani Wilmar, a joint venture between the Adani Group and Singapore-based Wilmar International. According to a Money Control report, the Adani Group is planning to raise $1 billion (approx. ₹7,000 crores to ₹7,300 crores) through the IPO.
Adani Wilmar owns the popular edible oil brand ‘Fortune’, and currently sells several other groceries like rice, wheat flour (atta), semolina (rawa), pulses among other things. Quoting unnamed sources, the report added that the Adani Wilmar valuation could touch $8 billion to $9 billion. It says that the draft red herring prospectus (DRHP) could be filed as early as June or July.
In an exchange filing earlier in March this year, Adani Enterprises said, “We would like to submit and clarify that the Company regularly evaluates all opportunities across its various businesses with the objective of enhancing shareholder value and this may involve discussions with various parties and stakeholders at different points in time.”
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