Adani Ports is expected to record a 12.4% YoY increase in net profit for the December 2023 quarter, coming in at Rs. 1,661.90 crores as opposed to Rs. 1,478.80 crores during the corresponding period in 2022. The Adani Ports & SEZ (Special Economic Zone) stock saw a 46% increase in value from its 52-week low of Rs. 394.95 on 3rd February 2023 to a high of Rs. 596.75 in trading on 7th February 2023.
Despite the uproar claiming that the Adani shares overleveraged, Adani Ports is anticipated to release respectable quarterly earnings. This is among the three Adani Group entities that have released pledged shares and prepaid loans. Several brokerages, including Credit Suisse, have stated that the Adani Group stock, which analysts monitor, appears appealing following the recent downturn. In addition, the business provided a positive January business update.
The company then stated that there was no such intention, despite a media article speculating that it may announce a share buyback.
Prepayment, release of pledged shares
Adani Group promoters have declared a $1,114 million prepayment ($1.11 billion, or around 9,203 crores, using the present exchange rate). Shares in Adani Green Energy (A.G.E.L.), Adani Transmission (A.T.L.), and Adani Ports and Special Economic Zone (A.P.S.E.Z.)—all owned by the Adani Group—will be released. Given the recent volatility in the market and in keeping with their pledge to lower the total amount of promoter leverage backed by shares of the Adani listed business, the Adani Group announced that promoters had deposited the sums necessary to prepay $1,114 million before the loan’s September 2024 maturity.
A.P.S.E.Z. will release 168.27 million shares (about 12% of the promoters’ stake), A.G.E.L. will release 27.56 million shares (approximately 3%), and A.T.L. will release 11.77 million shares (1.4%). Promoters owned 65.13 % of A.P.S.E.Z. shares as of December 2022; 243.58 million shares, or 17.31 %, were pledged. At this point, it will drop to 5.31 %. of the 60.75 % promoter ownership in A.G.E.L., 4.36 % (41.96 million shares) were pledged.
This means that 1.36% will not remain at that level. Regarding A.T.L., out of the 74.19% total promoter holding, 66.22% (54.83 million shares) were pledged; this will come down to 5.22%.
Attractive values despite the Adani shares overleveraged controversy
Credit Suisse upgraded Adani Ports from Neutral to Outperform after the collapse in the company’s shares following the release of the Hindenburg report, highlighting the company’s attractive values. On 31st January 2023, the brokerage stated that growth in the core business demonstrates support against downside risks. In response to the controversy over the Adani shares overleveraged on 6th February 2023, B&K Securities stated that there is no significant stress on the company based on its brief liability study of Adani Ports.
The Adani Group keeps a buy rating on the shares, representing a 40% increase from current levels, with an unchanged target price of Rs. 920. At the lower end of the historical range of 17–24 times, the company is currently trading at FY24 PE of 17 times. It stated that other businesses are valued at an E.V./E.B.I.T.D.A. of 12 to 14 times, but the Ports business is valued at an E.V./E.B.I.T.D.A. of 15 times.
“Adani shares overleveraged controversy is just to hamper our reputation” – Gautam Adani
On July 18, 2023, billionaire Gautam Adani stated that the Hindenburg report, which was made public in January 2023, was a compilation of specific misinformation meant to harm the reputation of the Adani Group by igniting a dispute concerning Adani shares overleveraged. He said the report aimed to lower the conglomerate’s stock price, harm its reputation, and make money.
During the Group’s 2023 Annual General Meeting, Adani stated that the research published shortly before the follow-on public offer by US-based short seller Hindenburg Research was an intentional attempt to harm the company’s reputation. The Hindenburg report was a dishonest attempt to damage Adani’s and the Group’s reputation. To safeguard investors’ interests, they subsequently chose to return the funds to them, even though the FPO was fully subscribed, according to Adani. As a result, Adani Group equities saw a sharp decline that, at its lowest, erased over $145 billion from the conglomerate’s market worth.
Conclusion
Despite recent controversies stating that Adani shares overleveraged, Adani Ports & SEZ remains a promising investment opportunity with solid fundamentals and attractive valuations. Analysts believe the company’s core business growth can offset potential downside risks. The recent prepayment of loans and release of pledged shares demonstrate the Adani Group’s commitment to reducing debt and improving financial strength. Furthermore, Adani Ports & SEZ has a proven track record of profitability and is well-positioned to benefit from India’s growing infrastructure needs.
