Explained: Why Adani Group Stocks Rallied 20% Following SC Hearing

Adani Enterprises Ltd (AEL), the flagship company of the diversified Adani group, will complete 30 years of being listed next year in November 2024. It is the oldest Adani Group firm on the bourses.

However, the group's expansive influence extends beyond the flagship firm, encompassing a constellation of listed firms - Adani Green Energy, Adani Total Gas, Adani Energy Solutions, Adani Ports and Special Economic Zone, Adani Power, Adani Wilmar, and the recently acquired Ambuja Cements and ACC.

This conglomerate, through its diverse entities, has woven success, solidifying its position as one of India's largest and most dynamic business conglomerates.

Amid this journey, the year 2023 has etched an indelible chapter in the annals of Adani's stock market saga.

Each passing day has brought forth a narrative of volatility, uncertainty, and resilience, with Adani stocks consistently making headlines, creating a rollercoaster ride for investors and market observers alike.

Today, Adani Group stocks have once again seized the spotlight by rallying up to 20%!

Why Adani Group Stocks are Rising in November 2023

Adani Group shares gained strongly on Tuesday, 28 November 2023.

During the morning trading session, shares of flagship entity Adani Enterprises gained 10%. Other Adani Group firms also displayed positive momentum, with gains ranging from 3% to 20%.

Adani Group Stocks' Performance on Tuesday

Company	Change (%)
Adani Total Gas	20
Adani Energy Solutions	20
Adani Green Energy	13
Adani Power	12
NDTV	11
Adani Enterprises	10
Adani Wilmar	19
Adani Ports & SEZ	5
Ambuja Cement	4
ACC	3

Source: Equitymaster

This can be attributed to the latest developments in the Adani-Hindenburg case hearing in the Supreme Court on 24 November 2023.

The Supreme Court, in its hearing, reserved its verdict on a batch of Public Interest Litigations (PILs) seeking a Court-monitored investigation into allegations made by US-based short-selling firm Hindenburg Research against the Adani group regarding violations of stock market regulations.

Meanwhile, the Securities and Exchange Board of India (Sebi) informed the Supreme Court on Friday that it does not require additional time to complete its investigation into the Adani-Hindenburg matter.

Out of the 24 cases related to the Hindenburg issue, 22 have already been resolved by SEBI, and the remaining aspects of the probe depend on data from foreign regulatory bodies.

The Supreme Court's three-judge panel, led by Chief Justice of India DY Chandrachud, has concluded hearings on several petitions seeking an inquiry into the Adani-Hindenburg matter and requested written submissions.

Further, the Adani group recently cleared the air and said it has no direct or indirect involvement in the construction of Uttarakhand's Silkyara tunnel, where 41 construction workers have been trapped since it collapsed more than two weeks back.

The construction workers have been trapped 260 meters inside the Silkyara-Barkot tunnel since November 12 when a part of the under-construction tunnel collapsed following a landslide.

The Silkyara tunnel, which is part of the Char Dham all-weather accessibility project, is being built by Hyderabad-based Navayuga Engineering Company.

The Timeline of Adani-Hindenburg Saga

In January 2023, Hindenburg Research released a report, 'How The World's 3rd Richest Man Is Pulling The Largest Con In Corporate History,' questioning Adani Group's financial practices, leading to a substantial crash in the stocks of all nine companies.

In the next few days, the group's market value plummeted by Rs 1 trillion (tn) as stocks saw a freefall.

Despite this setback, the group was looking to proceed with a Rs 200 billion (bn) follow-on public offer (FPO) on 31 January, fully subscribed but abruptly cancelled on 2 February, citing unprecedented situations and market volatility.

The fallout resulted in Gautam Adani's global ranking plummeting from #2 to #21 in early February 2023.

To address concerns, the group recalibrated its strategy in late February, halting the Mundra petchem project worth Rs 349 bn and abandoning the Rs 70.2 bn acquisition of DB Power. Adani Green Energy also reviewed its Rs 100 bn capex plans.

March 2023 saw GQG Partners injecting Rs 154.5 bn into four Adani group companies, signalling confidence. Legal battles ensued, with the Supreme Court consolidating PILs and appointing a committee to investigate regulatory lapses.

In May 2023, the SC committee found no evidence of market regulation violations by the Adani group, but SEBI received an extension to submit its report.

Meanwhile, GQG Partners doubled down on its Adani investment, increasing its stake by 10%, aiming to become one of the largest investors within five years.

Company	CMP (Rs)	Since Hindenburg Report	Past 1 Month
Adani Energy Solutions Ltd.	729.2	-74%	-5%
Adani Enterprises Ltd.	2,230.4	-35%	-1%
Adani Green Energy Ltd.	937.4	-51%	8%
Adani Ports and Special Economic Zone Ltd.	796.4	5%	2%
Adani Power Ltd.	396.9	44%	12%
Adani Total Gas Ltd.	536.8	-86%	-4%
Adani Wilmar Ltd.	316.9	-45%	-4%

Data Source: Ace Equity

Since the tumultuous report, Adani stocks have experienced fluctuations, resembling as falling knives.

However, the group has actively worked to reduce its debt burden, pre-paying a substantial US$ 4.9 bn in 2023 alone. Notable prepayments include US$ 1.1 bn in April, US$ 1.5 bn in May, and US$ 2.3 bn in November.

These efforts underscore the group's commitment to financial resilience and have contributed to improved performance in the past month.

What Next for Adani Group Stocks?

# Adani Enterprises

Going forward, Adani plans to invest US$ 50 bn in the next ten years in developing a green hydrogen ecosystem.

It also plans to bring down the cost of green hydrogen to US$ 2 per kg, which is currently in the range of US$ 3-6 per kg.

The mega investment will lay the foundation for Adani to become one of the largest green hydrogen producers in the world. It will make India the cheapest hydrogen producer in the world.

# Adani Power

Adani Power aspires to enhance its thermal generation capacity to 21,110 MW by FY29, including a strategic inorganic addition of 1,100 MW.

While anticipating an increase in net senior debt to Rs 266.9 bn in FY24, the company expects a decline in the net senior debt to EBITDA ratio from 1.7x to 1.6x during the same period.

# Adani Total Gas

The energy giant is set to inject Rs 180-200 bn in the next 8-10 years to fortify its gas distribution infrastructure.

Additionally, Adani Total Gas plans to establish over 3,000 EV charging points across India and commission one of the nation's largest biomass plants at Barsana in Uttar Pradesh with an initial capacity of 600 tons per day.

# Adani Green Energy

Adani Green Energy aims to invest US$ 3 bn in backward integration, intending to more than double its solar manufacturing capacity to 10GW by 2027.

This strategic move involves a significant investment over the next 5-7 years, incorporating backward integration through the electronic manufacturing cluster at Mundra, spanning 700 acres.

# Adani Energy Solutions

Adani Energy Solutions (AESL) is gearing up to raise US$ 360 million (approximately Rs 30 bn) through private placement bonds.

# NDTV

Looking ahead, NDTV plans to diversify its channel offerings, expanding its customer base and incorporating additional languages into its repertoire.

# Adani Wilmar

Adani Group is actively exploring the potential sale of its entire 43.9% stake in Adani Wilmar. Concurrently, Adani Wilmar is strategically focusing on enhancing retail penetration and sales productivity, with a special emphasis on extending coverage to more rural towns.

# Adani Ports & SEZ

Adani Ports and Special Economic Zone has set a capital expenditure target of Rs 45-50 bn for financial year 2024.

It also targets to lower its net debt-to-EBITDA ratio from 3.1 times in the financial year 2023 to 2.5 times during the current financial year.

The company plans to expand its warehousing capacity by 37.5 times, its rail track distance by 3 times, and its grain silo capacity by 2 times.

# ACC & Ambuja Cement

The ACC-Ambuja Cement alliance is set to double its capacity to 140 million tonnes (MT) by FY28, with a combined capex of around Rs 460 bn. The investment distribution is approximately equal between the two companies, charting an ambitious growth trajectory.

In Conclusion

Adani Group's future trajectory unfolds as a testament to visionary planning and strategic diversification.

From pioneering investments in a green hydrogen ecosystem to expanding energy capacities and embracing sustainable practices, the conglomerate is poised for transformative growth.

Adani's commitment to positioning India as a global leader in green hydrogen production reflects a forward-thinking approach.

The ambitious plans to reduce the cost of green hydrogen underscore the group's dedication to fostering sustainability on a grand scale.

The robust financial performance of Adani Group's listed portfolio in the second quarter further reinforces its trajectory of success.

The group has set an ambitious aim to achieve an EBITDA of Rs 900 bn within the next 2-3 years.

For more, you could quickly refer to both fundamentals and valuations of Adani group stocks on Equitymaster's Indian stock screener.

Happy Investing!

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