Hindenburg Report wipes out over $47 billion from Adani Group market cap in 2 days

On the back of the Hindenburg report, Adani Group has lost ₹3.86 lakh crore ($47.3 billion) in market cap in just two trading sessions. Last week, Adani Enterprises, the flagship company of the group, announced raising ₹20,000 crore through the FPO route. Ironically, the loss in market cap is more than seventeen times the planned FPO, the largest ever FPO in Indian capital markets history.

The market cap of the Adani Group at the end of December 2022 was ₹18.13 lakh crore but by Friday closing, the group market cap had fallen to ₹13.89 lakh crore, a drop of 23.42% within a month. Between 2021 and 2022, Adani Group doubled its market cap from ₹9.62 lakh crore to ₹18.13 lakh crore.

At the time of closing of the market, shares of Adani Enterprises quoted at ₹2,762, much below the price band of the FPO. The price band for the offer is ₹3,112 to ₹3,276. The dip in spot price below the price band is a bad omen and retail investors might avoid subscribing to the FPO.

The Hindenburg report was published on Wednesday and within a day the group lost ₹85,760 crore in market cap. Till Friday closing, the group cumulatively lost another ₹3 lakh crore in market cap. The massive loss of over ₹3.5 lakh crore within two trading sessions by the Adani Group has also dented the overall sentiment for Indian equities. Nifty 50 Index till Friday closing lost 287.6 points, while in the last two days the loss is over 513 points. Apart from Adani Group shares, the biggest loser in Friday’s trade was Bank Nifty, which shed over 1,302 points by the closing session.

Sky-high valuation of Adani Group

The Hindenburg report alleged that Gautam Adani, chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group’s seven key listed companies, which have spiked an average of 819% in that period.

“Even if you ignore the findings of our investigation and take the financials of Adani Group at Face Value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations,” the report states.

Fortune India did a quick valuation check for Adani Group companies with its market peers.

Adani Total Gas that locked in a lower circuit of 20% till Friday’s closing session commands a market cap of ₹3.22 lakh crore. In comparison, government-owned gas distribution company Indraprastha Gas (IGL) sports a market cap of ₹29,000 crore, almost 90% less than Adani Total Gas market cap. IGL supplies gas to 21 cities, while Adani Total has a presence in just 11 cities. Similarly, another PSU Mahanagar Gas commands just ₹8,500 crore market cap.

Adani Transmission, another group company, that was locked at the lower circuit of 20% has a market cap of ₹2.25 lakh crore, while PSU giant Power Grid Corporation sports a valuation of ₹1.52 lakh crore, almost 48% less than Adani Transmission. To be sure, in FY 22 Power Grid registered a net profit of ₹16,745 crore, while Adani Transmission net profit stood at ₹1,235 crore.

NTPC, with approx 72,000 MW power production capacity, is 427% above Adani Power’s generation capacity of 13,650 MW. But the government company’s market cap of ₹1.6 lakh crore was just 68% above Adani Power’s market cap of ₹95,000 crore. In FY 22, NTPC posted a net profit of ₹15,940 crore, while Adani Power profit stood at ₹4,911 crore.

The peer-to-peer comparison provides a reality check on Adani Group stocks, which are experiencing a massive fall since the Hindenburg report was published.

This article is republished from Fortune India. Read the original article here.

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