Gautam Adani into Debt Trap?

In the last 3 year, adani Group has seen a 500- 500% Jump, But curren,tly Adani Group’s stocks are down by 5% and are expected to see even more fall according to the Finch rating‘s credit Sight Report which mentioned that Adani Group is "DeeplyOverleveraged. We can also say this Adani Group is unsustainably high against its equity.

Total Debt on Adani Group is 2.2 lakh crores as of Mar 31, 2022. It is a result of Adani's aggressive expansion which is majorly depended on debt and has put enormous pressure on the credit metrics and flow of the company.

Adani Group is also venturing into new and unrelated businesses which are capital incentives and may not generate profits initially which can spiral the company into a debt trap.

Adani Group‘s Expansion

The Adani Group Journey started with the Adani Export in the 1980s. Adani Group diversified its business from Ports to Airports defence, mining, cement, and media. And recently Adani also acquired Holcim’s India Unit consisting of ACC and Ambuja for 10.5 Billion and they also acquired a 29.28% stake in NDTV.

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Massive Rise of Adani

Last Year Gautam Adani added 49 Billion Dollar to his net worth making him the world

Adani Group is Overleveraged

Although Adani Group is rapidly growing and the expansion of Adani Group is majorly Fueled by the debt. The total estimated debt of Adani Group is 21 Billion dollars and a gross Debt of Rs. 2,309 Billion as of FY22.

If you go by a report from Business Standard, the Revenue of Adani Group is 4.5 Billion Dollars excluding Adani Wilmar, but the combined profit of Adani Group is 1.14 Billion dollars.

Adani Group Total Debt 2022

Company

Total Debt (in crores)

Adani Enterprises

41,024

Adani Power

48,796

Adani Wilmar

2,568

Adani Green

52,188

Adani Ports & SEZ

45,453

Adani Transmission

29,815

Adani Total Gas

995

Adani Share Price Bubble

The current share price of Adani Group is 519 which is very much higher. The high p/e Ratio indicates that a stock price is overvalued and may fall in the future.

Adani Group Companies P/E ratio

Company

P/E Ratio

Adani Green Energy

765

Adani Transmission

436

Adani Enterprises

357

Adani Total Gas

751

Adani Wilmar

111

Adani Power

16

Adani Ports

36

The Adani Group has been expanding most of its operations through debt, which has strained its balance sheet. Having too much debt is not good for any company. As most of the expansion of the Adani Group is fueled by debt it has put too much pressure on the balance sheet as too much debt is not good for any company.

Company

Current Price

Jan 2020

Returns

Adani Enterprises

Rs.2,927

Rs.208

14x

Adani Green

Rs.2,347

Rs.197

12x

Adani Ports

Rs.806

Rs.383

2x

Adani Power

Rs.411

Rs.63

6x

Adani Wilmar

Rs.688

Rs.381

2x

Adani Total Gas

Rs.3,239

Rs.360

9x

Adani Transmission

Rs.3,318

Rs.347

10x

Adani group have given mutifold returns in last 2 year especially Adani Enterprises and Adani Green. It means that investors are heavily investing in these stocks despite them being highly over-leveraged.

Adani Group is consider too big to fail because of its shinning industry and its strong ties with the government and bank

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Finch Report mentions that in worst cases Adani Group could fall and even declare a default. Because of the high debt-to-equity ratio of the group and such a high valuation of the group it could be risky the invest in the Adani Stocks.

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