Adani Saga explained through charts & graphs | FPO, Credit Suisse, SBI | Pavan Sathiraju
193Please find the link to the Management Consulting Program that I personally lead at Blue Chapter! You receive personal feedback every week & work on an international live strategy project. This is not a mock project & our students proudly speak about this live experience in their interviews:)
https://bluechapter.com/consulting-experience-program-gen/
If you are applying for fall 2023/2024 MBA programs, check out the global MBA fellowship program:
https://bluechapter.com/global-mba-fellow/
****
Adani Hindenburg saga has taken many twists and turns lately. Adani FPO call-off is the latest update in this regard. But how did we get here? Adani share news has been a total bloodbath for investors. Hindenburg Research has done great damage to the reputation of Adani shares among retail investors. In this video, I’ve tried to explain the Adani group crash with respect to all the developments since the publishing of the Hindenburg research report on Adani Enterprises.
The first and most serious allegation by Hindenburg Research against Adani Group is that of Stock Manipulation. Did Adani Group manipulate stocks? If we look into the rationale and proofs shared in Hindenburg Report then we have to look at 3 charts. The first chart shows how the entire round-tripping of the money takes place. It shows how the profits from Adani companies end up with Adani Family and then ultimately in offshore shell entities based out of Mauritius.
Then it comes back as an investment in the Adani businesses. Since SEBI allows a public listed company’s promoter to only own up to 75% of the total shares, the Adani group is able to gain control of more than 75% indirectly through these shell companies as the allegation suggests. Total holding is suspected to be around 85%. This is just an allegation. But chart 3 shows that the value of Adani Enterprises stocks has increased by 1398% and Adani Total gas price has increased by 2121% in the last 5 years. This is a common phenomenon across all the group companies. Their shares have increased rapidly.
Because of the first 3 charts and the subsequent research report the total retail trust in Adani Group has come down. This is shown by the chart of Adani Group’s market cap falling from $240 Billion to $140 Billion which means a drop of 40%. The other indication of reduced retailer trust is the final FPO result. FPO was a way for the Adani group to raise money through equities. While it was subscribed to 100%, only 11% was subscribed to by retail investors. The retail trust in Adani Enterprises has come down.
Massive debt owned by Adani translating into great leverage is worrying. Adani Enterprises' debt to equity ratio is 10.2x and for Adani Green, it is 14x. This means the debt-to-equity ratio is 14 times. In the case of ports and transmission, their debt rates are very high. In the case of Adani Group being unable to generate enough cash to pay back these massive loans, it would problematic for their business and also for the lenders. Because of low retail investor trust and high leverage, the Credit Suess Bank has stopped accepting Adani Bonds as collateral against loans. The next chart shows the drop in bond prices. The Adani Bonds which were priced around $100 before have now come down to $60.
Because of this, the Adani bonds are going into a distressed zone. That’s why investing in Adani Bond is no longer a safe option. This leads to the SBI chairman and other lenders coming ahead to explain their position and justify exposure to the Adani Group. SBI chairman has said that all the exposure that SBI has to Adani group is secured against cash-generating assets. This means if these guys default, SBI can take over and sell the cash generating assets of Adani Group to recover its loan.
If the Adani Group defaults on loans or approaches bankruptcy then only the cash-generating assets will remain functional post this bloodbath. One such cash-generating asset is Adani Ports. Other companies might go down completely. Hope you liked the storytelling through charts and graphs. Tell me if there is a better way for me to narrate these stories.
About Me
I publish meaningful and valuable content on this channel. My aim is to make business news more accessible and easy to grasp. If you find my videos informative and insightful then make sure to subscribe and leave a comment. I’ll see you in the next video
*****
Chapters
0:00 - Intro
0:18 - Video Pointers
0:58 - Chart #1
1:54 - Chart #2
2:32 - Chart #3
3:08 - Chart #4
3:30 - Chart #5
4:13 - Chart #6
5:05 - Chart #7
5:54 - Chart #8
7:06 - Chart #9
8:32 - Outro