The market capitalisation of the seven listed Adani group stocks collectively fell by ₹49,043 crore in Monday's trade with all ending in the red zone.
Adani Enterprises Ltd lost about ₹16,056 crore in market value and ended 7% lower, while Adani Total Gas Ltd (lost ₹6,796 crore), Adani Transmission Ltd (lost ₹6,484 crore), Adani Wilmar Ltd (lost ₹2,812 crore), Adani Ports & Special Economic Zone Ltd (lost ₹8,122 crore), Adani Green Energy Ltd (lost ₹5,616 crore), and Adani Power Ltd (lost ₹3,157) closed 5% lower.
According to Avinash Gorakshakar, Head Research of Profitmart Securities, it might take another six months for all of the Adani Group companies to recover from the recent price correction. The group is currently trying to reassure the investors by lowering its debt levels and removing pledges, but anytime a price trend is broken, it usually takes at least four to six months for the price to recover.
Recently, Adani Transmission Ltd, Adani Green Energy, and Adani Ports and Special Economic Zone pledged shares to SBICAP Trustee Company, a division of India's largest lender, SBI.
"However, all of the equities will be under pressure since no institution, at least as of now, feels comfortable. Forget about equity issues; even debt funding will be challenging for the group," said Gorakshakar.
In reaction to US-based short-seller Hindenburg Research report, Moody's Investor Services on Friday, February 10, changed the rating outlook for four Adani Group firms (Adani Green Energy Ltd, Adani Green Energy Restricted Group, Adani Transmission Step-One Ltd and Adani Electricity Mumbai Ltd ) from 'stable' to 'negative' after a sharp and quick decrease in market value.
Further, the Adani Group has cut its growth target and plans to hold capital expenditure (capex) in post-Hindenburg repair moves. During the Adani Port & Special Economic Zone Ltd conference call, the management said very clearly that it wanted to tone down the growth, and repay ₹5,000 crore of debt in the current year.
"People were happy that this group encouraged growth, but without funds, growth will undoubtedly be hindered and will proceed much more slowly than it did previously," added Gorakshakar.
According to Gorakshakar, secondly, the market values all of these companies at exorbitant prices. For example, the price to earnings (PE) multiples for Adani Total Gas, Adani Green Energy, and Adani Transmission are extremely high, it said. It is more than 100 times in the cases of Adani Transmission and Adani Total Gas.
The PE multiples are therefore not realistic, and the market will always offer you a gradual process of re-rating when there is uncertainty and a lot of problems are anticipated, said Gorakshakar.
“Therefore, in my opinion, only high-risk investors should consider investing in Adani Ports or Adani Wilmar. Because these businesses have a business plan that is similar to a monopolistic model among the group as a whole," he said.
"Since all of the Adani companies are high beta equities and this is an election year, there will also be market volatility. In my opinion, nothing is going to change immediately, and management is doing everything they can to pacify the investors," added Gorakshakar.
Since the release of the Hindenburg Research report on January 24, the stock price of Adani Enterprises has fallen 50.44%, Adani Total Gas has slumped 69.29%, Adani Transmission has slipped 59.12%, Adani Wilmar and Adani Ports & Special Economic Zone have fallen over 27%, Adani Green Energy has slumped 64.10%, and Adani Power has lost 43.20%.