What's Fueling the Rally in Adani Transmission Shares - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Views On News
  • May 22, 2021 - What's Fueling the Rally in Adani Transmission Shares

What's Fueling the Rally in Adani Transmission Shares

May 22, 2021

Continuing the momentum seen throughout the year, shares of Adani Transmission zoomed 5% on Friday to a record high of Rs 1,455.

Shares of the company ended higher for the fifth consecutive trading session yesterday.

Adani Transmission Surpasses Adani Ports

Adani Transmission surpassed Adani Ports to become the second most valuable company of the Gautam Adani-led Adani group companies.

With Rs 1.60 trillion market cap, Adani Transmission replaced Adani Ports which has a market-cap of Rs 1.57 trillion.

Adani Green Energy tops the list of most valuable Adani Group company with market-cap of Rs 2.01 trillion.

What's Behind the Rally?

Earlier this month, global index services provider Morgan Stanley Capital International (MSCI) announced multiple changes to its MSCI India index.

Three Adani group stocks were included in this review - Adani Transmission, Adani Enterprises, and Adani Total Gas.

Gautam Adani-controlled Adani Green Energy and Adani Ports were already part of the index.

--- Advertisement ---
Replay Available: The Great Indian Wealth Project

Watch Tanushree Banerjee reveal the details of first stock to potentially accumulate Rs 7 crore long-term wealth.



Watch Now
------------------------------

As per reports, inflows worth Rs 20.9 bn are expected in the stock of Adani Transmission. This could be one reason why the stock is on an up move.

Another reason could be the company's stellar March quarter earnings, in which it reported a four-fold jump in profits.

Adani Transmission's consolidated net profit grew 333% YoY to Rs 2.6 bn for the fourth quarter compared to Rs 590 m in the same period a year ago.

The company also reported a healthy growth of 82% in its consolidated net profit at Rs 12.9 bn for the fiscal year ended March 2021.

Investors might be willing to bet on the company attributing to company's growth in profits.

The company is also planning to invest Rs 30 bn in its transmission business and Rs 15 bn in the Mumbai electricity distribution business in 2021-22, as it aims to continue its expansion plan.

Recently, the company signed definitive agreements with Essel Infraprojects for acquisition of Warora-Kurnool Transmission (WKLT). As per the agreement, WKTL will develop, operate, and maintain transmission lines aggregating to 1,750 ckt km.

Adani Transmission has also acquired Reliance Infrastructure's Mumbai assets.

Based on this, one could conclude that the company has strong business prospects.

On the other hand, the Adani group is among one of the country's most indebted groups.

Watch the Replay: The Smallcap Revival Summit

As per a report, the group's total borrowings were up 14.3% YoY in the first half of FY21 to Rs 1.25 trillion, while all financial liabilities were up 18% to Rs 1.41 trillion. This translated into gross debt to equity ratio of 1.8x for the group, up from 1.7x at the end of September 2019 (or H1FY20).

Apart from this, the company has a robust under-construction pipeline worth Rs 150 bn, which includes Mumbai-HVDC project.

In an investor presentation, the company had said:

  • "Adani Transmission has strong growth potential through TBCB (tariff based competitive bidding) transmission projects. The acquisition, new license, franchise and public private partnership (PPP) opportunities in transmission and distribution (T&D) space."

Stock Continues Uptrend Despite Re-rating

Earlier this month, CLSA dropped coverage on Adani Transmission saying that the stock is driven by speculative interest and lack of 'real' effective liquidity', keeping valuation at a stratospheric 16 times premium to the sector.

The brokerage firm said that the stock has doubled in the last three months on limited free float and inclusion in FTSE and MSCI indices which led to passive buying.

It added that promoters own 75% stake in the company, and of the balance, 81% is owned by closely-held foreign investors-which are common across the Adani Group and hardly liquid. This effectively leaves a free float of just 5%.

Note that the foreign brokerage has also dropped coverage on Adani Power as it has gained shareholder approval to delist.

--- Advertisement ---
Detect Anomaly in Stock Prices Before Anyone

Stock prices rise slowly but the crashes are always fast and deep.

A sudden fall in your stocks can wipe out your gains instantly.

Watch this video to learn how to use Wyckoff Distribution system to be ahead of crowd and sell your stocks before major sell-offs.
------------------------------

Gautam Adani Closing in on Mukesh Ambani

This week, Gautam Adani edged past Chinese tycoon Zhong Shanshan to become the second-richest Asian, according to the Bloomberg Billionaire Index, as the stock prices of his listed companies soared.

The spectacular rise in Adani's wealth has come on the back of the rise in the share prices of Adani companies.

Gautam Adani, who started as a commodity trader, today owns companies across ports, airports, energy, resources, logistics, agribusiness, real estate, financial services, gas distribution and defence, among others.

Once a medium-sized group based out of Ahmedabad, Adani's companies now have the third-biggest market capitalisation among family-owned businesses in India after Tatas and Reliance Industries.

Adani Transmission's Stellar Run Over the Past Year

Shares of Adani Transmission have been on an up move in the past one year and have rallied 714%.

About Adani Transmission

Adani Transmission is the transmission and distribution business arm of the Adani group, one of India's largest business conglomerates.

ADAT is the country's largest private transmission company with a cumulative transmission network of 17,200 ckt km, out of which 12,350 ckt km is operational and 4,850 ckt km is at various stages of construction.

The company also operates a distribution business serving about 3 m plus customers in Mumbai.

With India's energy requirement set to quadruple in coming years, the company is fully geared to create a strong and reliable power transmission network and work actively towards serving retail customers and achieving 'Power for All' by 2022.

For more details about the power sector, you can have a look at the power sector report on our website.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Equitymaster requests your view! Post a comment on "What's Fueling the Rally in Adani Transmission Shares". Click here!

  

More Views on News

ADANI TRANSMISSION 2020-21 Annual Report Analysis (Annual Result Update)

Jul 8, 2021 | Updated on Jul 8, 2021

Here's an analysis of the annual report of ADANI TRANSMISSION for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of ADANI TRANSMISSION. Also includes updates on the valuation of ADANI TRANSMISSION.

Adani Transmission Q4 Update: Net Profit Jumps Four-Fold Despite Dip in Revenue (Views On News)

May 7, 2021

The company's share price touched its 52-week high of Rs 1,187.6 today after posting Q4 results.

The Future is Green! Here Are India's Top Renewable Energy Companies (Views On News)

Jul 17, 2021

You need to pay immediate attention to this exciting sector.

NTPC in Focus as Net Profit Zooms 258% (Views On News)

Jun 21, 2021

Shares of NTPC surged over 4% today after the company declared its March quarter results.

Power Grid Delivers Results for March Quarter. Board Approves Bonus Issue (Views On News)

Jun 18, 2021

Shares of Power Grid fall 3% after posting quarter four results.

More Views on News

Most Popular

These Are the Best Stocks to Own (Fast Profits Daily)

Jul 22, 2021

Find out what I think are the best kind on stocks to own in the market.

Cash the Crash in Gas Prices (Fast Profits Daily)

Jul 21, 2021

Get ready to profit from the coming crash in the price of natural gas.

Electric 2-Wheelers: The Megatrend has Begun (Profit Hunter)

Jul 20, 2021

The shift to electric 2-wheelers will be faster than expected.

A Trading Hack to Multiply Profits (Fast Profits Daily)

Jul 23, 2021

Use this trading hack and get a big boost in your trading profits.

OPEC & Our Next Crude Oil Trade (Fast Profits Daily)

Jul 20, 2021

This is why we are on the correct side of the crude oil trade.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2021
Get our special report Multibagger Stocks Guide (2021 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ADANI TRANSMISSION SHARE PRICE


Jul 30, 2021 (Close)

TRACK ADANI TRANSMISSION

  • Track your investment in ADANI TRANSMISSION with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON ADANI TRANSMISSION

ADANI TRANSMISSION - GAUTAM EXIM COMPARISON

COMPARE ADANI TRANSMISSION WITH

MARKET STATS