Are days of bulls in Adani stocks numbered? Here’s what experts say

On Wednesday, Adani Enterprises stock dipped by nearly 6%, while Adani Ports and Adani Power plunged around 2% each. And Adani Wilmar froze at a 5% lower circuit, while Adani Green Energy dived by half a percent. The Group’s cement business such as Ambuja Cements and ACC stock also tumbled by 1.25% and 2.2% respectively.

On the other hand, Adani Total Gas, Adani Transmission, and media business NDTV were the only three stocks in green by locking at a 5% lower circuit each.

In 5 trading sessions, Adani Enterprises stock surged 30.12% on BSE. Other stocks such as — Adani Power were up 9.5%, Adani Total Gas was up 18%, Adani Transmission was higher by 17%, Adani Green Energy surging 12.3%, and Adani Ports up by 5%. Further, NDTV stock climbed 18%, Ambuja Cements advanced nearly 4% and ACC stock up over 1%.

The reason behind the strong upside in Adani shares is due to the Supreme Court panel’s report in regard to the Group and Hindenburg case.

Deepak Jasani, Head of Retail Research, HDFC Securities said, “The latest reprieve from the Supreme Court to the Adani group in the Hindenburg issue has settled some grey areas raised against the group. This has led to better acceptance of the group stocks among investors- both foreign and local. This will also help the to raise funds through QIP in two companies.”

SC panel’s report stated that at this stage it is not possible to conclude that there was a regulatory failure on the price manipulation allegation. Also, the panel’s report stated that it was difficult to arrive at a finding of a regulatory failure of the legislative side.

Mayhem erupted in Adani stocks after the US-based short seller Hindenburg dropped a bombshell research report on January 24, making some serious accusations against Gautam Adani’s port-to-energy empire such as of stock manipulation among other frauds. This led to a market rout of $140 billion to $150 billion in Adani stocks, even toppling Gautam Adani’s net worth from the top five richest list in Bloomberg Billionaire Index.

Owing to stubborn selling in Adani listed stocks after the D-day, the Group came under the radar of the Supreme Court in March.

Further, the panel’s report revealed that empirical data showed retail investors’ exposure in Adani listed stocks increased after January 24. 

By the end of May 24, Adani Group’s market cap together stood at nearly ₹10 lakh crore — recovering almost 50% of market value that was lost after the Hindenburg report. Prior to January 24, the Group’s market value was at ₹19.2 lakh crore.

Will bulls continue in Adani stocks ahead?

Vinit Bolinjkar, Head of Research, at Ventura Securities said, “We are confident that the recovery in Adani Group stocks is likely to be sustained. The underlying companies are fundamentally strong, and their day-to-day operations were not affected by the Hindenburg report. The impact of the report was only reflected in the stock prices of the group’s companies.”

Ventura Securities expert listed out key factors to boost Adani stocks. Bolinjkar said:

– A significant number of Adani Group companies operate in core sectors of the Indian economy, including coal, defense, green energy, natural gas, logistics/ports, power generation, power T&D, etc. Additionally, the group is venturing into new-age sectors such as data centers, solar modules, green hydrogen, and unmanned aerial vehicles (UAVs).

– Companies like Ambuja/ACC, Adani Ports & SEZ, Adani Green, Adani Total Gas, and Adani Transmission have stable businesses with long-term revenue visibility. Of these, Adani Transmission and Adani Total Gas stand out due to their contract-based revenue models and critical assets.

– Adani Enterprises serves as an incubator, expanding its presence in the airport and data center businesses while also focusing on green hydrogen. The company will require additional capital for these new projects. However, unlike its earlier strategy of relying on debt for growth, the management is opting for equity financing to maintain a healthy balance sheet.

However, not every expert has similar opinions.

Manisha Chowdhury Head of Research Stoxbox said, “We believe that the near-term outlook for Adani Group stocks is still cautious as market participants would wait for the outcome of the ongoing SEBI investigation before giving it a clean chit. Moreover, barring a handful of stocks, valuation comfort is still missing in most of the Group companies.”

While according to Jasani, the recent rise in stock prices seem to be a positive knee-jerk reaction to the Judgement and may not continue for long in the near term. Going by the latest results and the valuations post the recent rise, the group will have to do a lot on improving the earnings trajectory, leverage levels, transparency, and capital allocation.

Also, Nirav Karkera, Research Head at Fisdom said, ” Developments on the judicial front has been reassuring and has, to an extent, offered reasonable relief to concerned investors. However, the group is not completely out of the woods yet. Investigation into a number of allegations remain underway and is yet to be formally and completely concluded. Exercises around critical fundraising at various levels of the group continue to hang in the balance. Investor response has been exuberant and probably presumptive to a certain extent through the last couple of sessions. Share prices still remain highly sensitive to news flow and developments.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.