Adani Group Overcomes June 4 Results Shock; Makes a Post-Hindenburg Style Comeback

Adani stocks were among the major movers on the bourses last week when the markets experienced extreme volatility, largely driven by exit poll predictions and post-election results. On June 3, nearly all Adani group entities touched their 52-week high levels, following exit poll results that predicted a massive victory for BJP.

However, the euphoria was temporary as broader markets witnessed a bloodbath on the D-street on June 4, when all the predictions made by Exit Polls were washed off by results. BJP, alone, was not able to cross the majority mark and was dependent on regional NDA allies.

The flagship company of the conglomerate, Adani Enterprises, fell by nearly 10 per cent, hitting its lower circuit just a day after it surged by almost 7 per cent and touched a new peak.

The two crown jewels of the Adani group on the exchanges, namely Adani Power and Adani ports and SEZ (Special Economic Zone) followed a similar trail.

While shares of Adani Power witnessed a rise of more than 15 per cent on June 3 before falling almost 18 per cent on the election result day, Adani Port and SEZ's share price rose by more than 10 per cent before plunging by a double-digit fall.

All the group companies combined lost around Rs 3 lakh crore in market capitalization in just one single day, June 4.

However, it is worth noting that as election jitters faded post-results and markets steadily gained momentum, all Adani group companies made a comeback on the bourses again.

This, perhaps, reminded many investors of last year's Hindenburg episode where the latter's report brought down the share price of every single Adani entity in the red territory. The shares of the group reached their lowest levels during February last year.

Down, up and up again

Nearly a year and a half ago, when all Adani firms took a sharp plunge on the bourses, everybody thought it would be the endgame for one of the biggest Indian conglomerates. The Hindenburg report had pushed the shares of all Adani firms into the red territory, which was later followed by the cancellation of its flagship firm's Rs 20,000 crore FPO (follow-on public offer).

Despite the matter going to the apex court and a continuous regulatory radar by the market watchdog, Sebi, nearly all the listed entities under the group rebounded and rose above their lowest levels.

The sharp resurgence was largely driven by the group's strong positioning in the market and improving fundamentals.

On the debt side, while the figures almost doubled over the past five years since FY19, Adani Group's ability to repay the same has improved. International brokerage firm Jefferies recently stated that Indian banks' exposure to the Adani Group is within "manageable limits." CSLA also made similar comments, stating that Adani Group's debt does not pose a "significant" risk to Indian banks.

Meanwhile, Adani's renewable energy arm launched a $409 million bond offer in March which was oversubscribed nearly seven times by overseas investors.

For now, the market's trust in the Adani Group appears robust, notwithstanding the political uncertainty playing out within the new central government. From the conglomerate's perspective, the recent election episode was only a brief replay of the Hindenburg rout last year. But just like then, the Gautam Adani-helmed group seems well on track to regain its growth momentum on the bourses, aided by strong financial performances of the group companies.