A short-seller report is drawing attention to the multifold gains of the Adani Group of stocks - a potential blow to the empire of Asia's richest man and personal wealth he has amassed.
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The conglomerate's stocks scan among the most expensive names in Asia by several measures, including earnings multiples and price-to- book value. That is after Adani Enterprises Ltd. has jumped by about 2,500% in the last five years, trumping even the likes of Elon Musk's Tesla Inc.
Hindenburg Research said it was shorting the conglomerate's stocks and that it sees 85% downside purely on a fundamental basis owing to sky-high valuations. Adani Enterprises is the most expensive stock on India's NSE Nifty 50 Index, trading at 90 times forward earnings.
Adani Power Ltd. Adani Green Energy Ltd. Adani Transmission Ltd. Adani Ports Special Economic Zone Ltd. Adani Total Gas Ltd. and Adani Wilmar Ltd. are few other stocks under Gautam Adani's growing business empire. Adani Green and Adani Transmission trade at 200-300 times forward earnings and are among the 10 most pricey stocks out of the nearly 1,500 constituents in the MSCI Asia Pacific Index.
The US short-selling firm Nate Anderson made wide-ranging allegations of purported corporate malpractice in an almost 100-page report on the Adani Group. The Indian group's shares fell Wednesday after that. Hindenburg said it is shorting Adani securities via derivatives and US bonds. Adani Group rejected the accusations as baseless and selective misinformation. Kamil Dimmich, partner at North of South Capital, said that India's Emerging Market Equity Manager is exemplified by the Adani group of companies. He said that they have no exposure to India as valuations will have to normalize before it makes sense to enter the market. Here are three charts that show Adani's meteoric stock market rise and expensive valuations:
Adani's companies trade at high premiums compared to Indian stock markets - Adani Enterprises is nearly five times more than the Nifty 50 Index.
Here are some core valuation methods where Adani Enterprises scans as expensive:
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