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Adani Group: Biggest comeback in Corporate History after a short-seller attack and how!

Adani Group: Biggest comeback in Corporate History after a short-seller attack and how!


In the chronicles of corporate history, both within India and globally, few instances stand as testament to the remarkable resilience exhibited by a corporate entity in the face of adversity.  Adani’s comeback in less than a year, after a barrage of allegations related to fraud and mis-governance has only exposed one thing—Adani’s ‘Shock-proof Portfolio’, and the exceptional quality of its assets and the resilience of its cashflows. Its H1 FY24 performance validates this. The group’s portfolio delivered a record half-yearly performance, lowered its debt, all while continuing to make strategic investments.

But such strong performance would not have been possible, without the group’s remarkable ability to not only insulate the businesses from the external crisis and market volatilities, but also in its ability to restore stakeholders’ confidence and reclaiming its reputation and position. If bonds and equity markets are any barometers of these sentiments, then Adani has clearly made a comeback, that too a strong one.

All its listed bonds are now trading at pre-short seller event levels, and leading group stocks including Adani Ports and Adani Power have gained 49% and 82% respectively in the year, hugely outperforming benchmark index Nifty and other heavy-weight stocks including TCS, HDFC Bank, Reliance, Infosys, ICICI Bank and Kotak Bank.

This conceptual framework outlines the broad sequence of these events and how the Adani Group navigated and ultimately prevailed over this challenging year:

  • In January 2023, on the eve of our Republic Day, a US-based short-seller Hindenburg issued a report making several old, discredited allegations against our Group. This was ahead of the launch of the largest FPO in India’s history by Adani Enterprises.
  • The report was a combination of selective misinformation and old discredited allegations aimed at damaging our reputation and making profits by forcing a drive-down of our stock prices.
  • Several entities created short positions and squared off their positions after the price crashed upon the publication of the Hindenburg Report on Jan 24, 2023. Subsequent findings of the SC appointed Expert committee and ED report also substantiate this.
  • Despite a fully subscribed FPO, AEL returned the money to the investors. The decision was taken keeping in mind the volatility in the stock prices post Hindenburg report, which had the potential to cause a loss to the retail investors.
  • Post this report, several other anti-India and anti-Adani interests and internal entities led by opposition parties, so-called activists and journalists made fabricated allegations to damage the Group’s reputation. (A twitter graphic image that showed the links may be referred to for this purpose).
  • The Expert Committee set up by the Supreme Court gave a clean chit to the Group in May 2023. It confirmed the quality of disclosures and governance processes and did not find any instance of regulatory failure.
  • The Report not only observed that the mitigating measures undertaken by the Adani Group helped rebuild confidence (such as paring down of the debt and infusion of fresh investments) but also cited that there were credible charges of concerted destabilization of the Indian markets.
  • This was followed by a strong rebound in the stock prices of Adani portfolio of companies. Investors like GQG etc. invested billions of dollars.
  • In the last Supreme Court hearing, it also became clear that vested interests were feeding OCCRPs of the world with fabricated information to prejudice the minds of the stakeholders of the Adani Group.
  • The Adani Group got a further boost when in December a clean chit was given by the US Government, showing trust in the Adani portfolio through its investment.
  • These back-to-back favorable developments resulted in Adani portfolio’s market capitalization surging over INR 3 lakh crore in a week, crossing INR 14 trillion.

2 The Adani Portfolio: A Model of Strategic Robustness

The Adani Group’s narrative post-Hindenburg report is one of resilience and strategic mastery. The Group’s successful navigation through the crisis is a testament to its solid foundation, transparent practices, and strategic foresight. Adani Group’s proactive approach in the face of adversity, marked by transparency, efficient planning, and financial agility, underscores the importance of a strong and holistic response to the situation.

The approach has enabled the Group to leverage its core strengths to drive substantial growth and cash flow. The Adani Group stands as a paragon of a well-grounded, well-funded, and strategically adept organisation, showcasing its capability to not just survive but thrive and expand. Strong strategic resources, foundational transparency, and inherent strengths can effectively turn challenges into opportunities for growth and consolidation, and the Adani Group has proven that.

The group rebuilt its fortunes , reclaimed its position through strong execution and a sharp focus on infrastructure, even in the wake of the challenging Hindenburg short seller report. The report initially saw the market capitalisation of the 10 Adani stocks plummet to Rs 6.8 lakh crore in end-February 2023.

The group successfully navigated these challenges, demonstrating remarkable resilience. The conglomerate not only weathered the storm but also emerged stronger, underlining the strong foundations and resilient growth platform the group has built over the last three decades. It has seen the group bounce back with its total market capitalisation more than doubling towards the end of the year to about Rs 14 lakh crore.

The recovery and financial strength displayed in the face of adversity have not only reassured investors but also highlighted the group’s ability to withstand and overcome market fluctuations and external pressures. Adani promoters’ strategic decision of raising over INR 40,000 crore and brining in marquee global investors such as GQG, Qatar Investment Authority among other,  in just a few months after the event, not only restored market stabilitiy but also restored the investor confidence.The large cash buffer generated was to ensure there is no refinancing risk.

Over the last year, group’s assets have grown to a total of Rs 4.48 lakh crore which is more than 2.4 times its net debt. In dollar terms, the platform has a strong asset base of USD 54 bn which has been built over three decades, and one that supports critical infrastructure and guarantees best-in-class asset performance over the entire life cycle. In March, Adani Group’s assets stood at Rs 4.23 lakh crore.

The Adani Portfolio’s gross assets to net debts ratio has in fact improved significantly coming in at 2.48 times as against 2.26 times in FY2023.

Unfazed by the Hindenburg allegations, the Adani Group also demonstrated a high level of execution and operational efficiency in the first half of FY24. At the group level, there has been a notable increase of 47.33% in portfolio EBITDA from Rs 29,654 crore in H1 FY23 to Rs 43,688 crores in H1 FY24. The jump highlights the group’s strength across its diversified sectors, particularly in utilities, transport, infrastructure, and in cement, where it has bought in tremendous operational improvements.

 Some facts and figures:

  • The Adani Group posted an EBITDA of Rs 71,253 crore in the trailing 12-month period, up 25.36%
  • Overall portfolio EBITDA jumped 47% y-o-y in H1FY24
  • Infrastructure and cement businesses recorded impressive growth in its EBITDA
  • Portfolio companies like AGEL crossed key milestone of $1 billion EBITDA in September 2023 TTM
  • Further, through a series of strategic initiatives, Adani Group’s liquidity position increased with a highest ever cash balance of INR 45,895 crore, demonstrating a significant surge from the FY23 figure of INR 40,451 crore
  • For the first time in a decade, the portfolio’s net debt to EBITDA ratio stands at 2.5 times, signifying enhanced financial stability
  • Despite initial headwinds, the Adani Group continued with its promise to make significant strides in ESG with five group companies committing $100 billion for net zero goal

Furthermore, the run-rate EBITDA also shows a positive trend. It increased from Rs 66,566 crores (USD 8.02 billion) in March 2023 to INR 72,235 crores (USD 8.70 billion) in September 2023. The uptrend shows that the portfolio is not only maintaining its financial health but is also likely to continue this positive trajectory in the near future.

The ability to generate strong EBITDA and sweat its assets reinforces the group’s status as a sound and well-managed business entity with a clear trajectory for economic expansion.

Additionally, the group has high liquidity with a cash balance of RS 45,895 crore. The group’s cash balances exceed long term debt repayments for next 18 months Portfolio level cash balances @ USD 5.53 bn, which is a significant cover and will enable the group to keep its obligations.

Moreover, the Adani Group has sustained a robust credit profile even amidst the numerous negative reports that encircled the group for much of last year. The fact that almost all credit rating agencies have largely reaffirmed their credit ratings for the group’s companies reflects the financial prudence and highly strong and effective financial management.

In fact, 85% of the group’s debt holds a credit rating of A- or above, or its equivalent on the international stage. This high proportion of favourably rated debt underscores the group’s robust financial position and the strong confidence placed in its creditworthiness by rating agencies. The ratings reflect the group’s effective debt management strategies and its commitment to maintaining a healthy financial profile, further enhancing its reputation in the global financial markets.

The group also does not face any material refinancing risk and has minimal near-term liquidity requirements, owing to the absence of significant debt maturities in the near future.

  1. Contrasting Fortunes: The Varied Aftermath for Companies Post-Hindenburg

After the Hindenburg report that was released in early 2023, accused the Adani Group of financial malpractices, leading to a sharp plummet in its market cap to Rs 6.8 lakh crore. However, unlike many corporations crippled by such allegations, Adani Group’s response was swift and robust. The conglomerate initiated a series of strategic measures aimed at restoring investor confidence. These included significant fundraising efforts, stake sales in key ventures, and streamlining of operations.

In contrast to Adani Group, companies like Nikola, Icahn Enterprises, Genius Brands, and Tingo Group faced similar accusations but have continued to be down and under.

The Group’s agility and strong business fundamentals were further demonstrated by its impressive financial standing. From March onwards, promoters were able to raise more than Rs 40,000 crore through various initiatives, attracting notable investors like GQG Capital Partners, Qatar Investment Authority, and Bain Capital. The Group’s assets grew to Rs 4.48 lakh crore as on September 2023, more than 2.4 times its net debt.

Moreover, the Group exhibited high operational efficiency, with a notable increase in portfolio EBITDA. Over 86% of its EBITDA was generated from core infrastructure businesses, indicating a stable and reliable cash flow generation. This financial strength, coupled with a robust credit profile and favourable credit ratings illustrates the Group’s adeptness at navigating financial complexities and securing its position as a resilient and trusted entity in the global landscape.

As a result of these concerted efforts, the Group witnessed a remarkable turnaround. From the low of Rs 6.8 lakh crore, Adani Group’s market cap soared to a staggering Rs 14 lakh crore.

In the wake of the Hindenburg Research reports, the corporate world witnessed a spectrum of outcomes, with some companies like the Adani Group showing remarkable resilience, while others have faced a more arduous journey.

  1. Sharp contrast with Hindenburg’s other targets: Some examples
  • Nikola Corporation, a pioneer in electric truck manufacturing, faced a formidable challenge in September 2020 when Hindenburg Research released its report. The allegations, questioning the integrity of the company’s operations and technology, led to a catastrophic drop in stock price from about $35 to a mere $0.82. Despite Nikola’s concerted efforts to refute these claims and reassure stakeholders, the recovery has been elusive. The latest market data paints a grim picture of a company struggling to regain its footing, with market capitalisation and investor confidence still significantly impaired.
  • Icahn Enterprises following the Hindenburg report in May 2023 is another illustration of investor apprehension in the face of controversy. The report resulted in a sharp 50% decline in stock value, plummeting from around $31.46 to $15.73. Despite efforts to allay the concerns raised by the report, Icahn Enterprises has only witnessed a marginal recovery. The lingering scepticism among investors highlights the challenges companies face in restoring confidence.
  • For Genius Brands, a company in children’s entertainment, the Hindenburg report of June 2020 was a significant setback. With allegations casting doubts on the company’s business model and prospects, its stock price took a nosedive from around $4.52 to approximately $1.47. This drastic reduction is not just a reflection of market reaction but also signifies the uphill battle Genius Brands faces in rebuilding its market reputation and value.
  • Tingo Group, operating in the African agri-fintech sector, encountered its crisis in June 2023 with the release of Hindenburg’s report. The aftermath saw the company’s stock price fall sharply from $2.55 to $0.69. Despite various initiatives to regain trust, these efforts have not translated into tangible recovery in stock value. Tingo Group’s CEO has stepped down after US SEC charged the company alleging a fraud.

The influence of short seller reports like those from Hindenburg Research on the corporate world cannot be understated. The extent of the impact, however, varies significantly depending on several factors, including the company’s response, its transparency in addressing the allegations, and the strength of its strategic foundations. These elements play a crucial role in determining whether corporates continue to struggle under the weight, or recover, stabilise, and continue to chalk a path of growth and development.

  1. Seamless operations across Adani portfolio companies

Despite facing significant headwinds such as the Hindenburg short seller report, Adani Group has not only weathered the storm but has exceeded its execution expectations across its diverse portfolio. Across all its portfolio companies Adani Group has either added capacities or improved operational activities as seen from its latest half yearly activity report.

  • The Adani Renewables portfolio increased its operational capacity by 24% year-over-year (YoY) to 8,316 MW. Adani portfolio added diverse energy sources, including 1,150 MW of solar-wind hybrid, 212 MW of solar, and 230 MW of wind power plants. The company’s solar portfolio’s capacity utilisation factor (CUF) jumped by 90 basis points YoY to 25.2%, the Wind portfolio by 360 basis points to 40.2%, and the hybrid portfolio by 880 basis points to 45.4%.
  • Adani Energy Solutions has also shown commendable performance, maintaining system availability above 99.7%. This high level of operational efficiency is complemented by the addition of 769 circuit kilometers (kms) to its operational network during the quarter.
  • The company also received Letter of Award (LOA) for seven smart metering projects, alongside the operationalisation of Karur and WKTL lines and charging of the Kharghar Vikhroli line, which totals 1840 ckms.
  • In natural gas, Adani Gas added 6 new CNG stations to bring the total to 483. The company has not only expanded its physical infrastructure but also its customer base, with PNG connections now reaching 7.59 lakh households. The completion of 11,448 inch km of steel pipeline and installation of 221 EV points across strategic locations mark Adani Gas’s commitment to broadening its energy footprint.
  • Adani Power has also reported a remarkable 30% increase in H1FY24 sales, reaching 35.6 Billion Units (BU). This is coupled with an achieved consolidated Plant Load Factor (PLF) of 59.2% in H1 FY24, reflecting the company’s operational efficiency and capacity utilization.
  • The group’s major arm in port and logistics, Adani Ports achieved the milestone of achieving a 200 million metric tonnes (MMT) mark within a six-month period. Domestic cargo volumes in H1FY24 expanded at nearly twice the rate of India’s overall cargo volume growth. Mundra Port, in particular, handled 3.6 Million TEUs in H1 FY24, outpacing its closest competitor by 15%.
  • Adani’s cement portfolio also saw positive growth. The company reported a 9.5% increase in revenue YoY and an impressive 123.4% increase in EBITDA YoY. This expansion is attributed to the sales volume for H1FY24 reaching 28.5 MMT, a 6% increase YoY, driven by targeted efficiency initiatives.
  • The group’s incubating businesses are not far behind in showcasing growth. Adani Airports witnessed a 29% increase in passenger movements YoY, reaching 42.7 million.
  • The roads division constructed 92.3 Lane-KM, while the Data Centre in Chennai became fully operational with a capacity of 17 MW.
  • ANIL’s Modules volume saw a significant jump of 132% to 1244 MW, and Mining Services’ production volume stood at 12.62 MMT.
  • Adani Wilmar crossed 2.9 MMT volumes during H1 FY24, marking an 18% YoY growth. This growth is especially notable in the Food & FMCG segment, which recorded revenues of INR 2380 Crore, a 27% YoY growth, and an exponential 100%+ growth over two years.

Overall, Adani’s portfolio companies, predominantly operating in the utility and infrastructure sectors, generated approximately 86% of their H1FY24 EBITDA from core infrastructure businesses. This has ensured a stable and consistent cash flow generation for the group.



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