Billionaire Gautam Adani's ports-to-energy conglomerate has become India's third group to cross USD 100 billion in market capitalisation with shares of all the six companies listed on the exchanged more than doubling investors’ wealth in the last year, data from AceEquity showed.
All the six stocks under the group have given multibagger returns and at least four of them are trading at record highs. Experts, which Moneycontrol spoke to, recommend investors who have been sitting on hefty gains to book profits while the long-term outlook still remains intact. Hence, they could become a good buy on dips stocks.
The total market cap of Adani Group's six listed companies at the close of trading on Tuesday was Rs 7.84 lakh crore or USD 106.8 billion, according to stock exchange data.
“The group has been able to add/acquire large assets and report strong near-term financial performance. This coupled with the scarcity of stock; given very high promoter holding, is the key reason why Adani group company stocks are on fire,” Dipan Mehta, Director at Elixir Capital Ltd told Moneycontrol.
Adani Group is the third Indian conglomerate to cross the USD 100 billion market cap mark after Tata Group and Reliance Industries Ltd. Tata Group's current market cap is around USD 242 billion while RIL m-cap is at USD 171 billion
Also Read: Adani Group becomes 3rd Indian conglomerate to cross $100 billion in m-cap
Gautam Adani has in over two decades built an empire that now spans from mines, ports, and power plants to airports, data centre, city gas, and defence.
Market veterans have shunned it because the Adani group companies operate in capital-intensive areas which have turned wealth destructors in the recent past. But, the group has been able to add as well as acquire large assets in the recent past along with strong near-term financial performance which puts them on the buyers list.
“Adani group has been a clear winner during the pandemic mainly because all their business proved to be resilient to market cycles. This feature coupled with investor excitement aided the stocks to transcend the $100 billion market value,” Anuj Jain, Co-founder & Research Head, Green Portfolio Services told Moneycontrol.
“Since then, Adani expanded without boundaries by adding new ports and airports, data centres, and coal mines. Essentially becoming an integral part of India’s infrastructural developments. The group witnessed excellent traction in the renewables space, especially on the solar front,” he said.
Jain further added that large order wins in the infra space assured investors with what they were looking for – revenue visibility and momentum along with favourable government policies. These are some of the factors that helped improve business prospects and helped the group transcend the $100 billion mark.
The recent rise in some of the group stock could be largely on account of infrastructure plans laid out by the government to fuel growth and kickstart the investment cycle.
"The rise in the share price of Adani group stocks can be attributed to the special emphasis laid by the central government on infrastructure development. The government has already announced National Infrastructure Policy which is expected to have an outlay of Rs 1.10 lakh crore and covers 7,400 projects," Vinit Bolinjkar, Head of Research, Ventura Securities Ltd told Moneycontrol.
"Further, the group has been expanding its presence to newer business areas like airports, renewable energy, city gas distribution, data centres etc. along with entering into partnerships with International players and thereby benefitting from their extensive global experience," he said.
What should investors do?
From a fundamental perspective there is more upside left in all Adani Group stocks while from a technical point of view, experts feel that investors who are sitting on profit may book some.
The vertical rise seen in equity markets in 2020 or in FY21 is unlikely to get repeated in 2021. The current calendar year will be a year of consolidations. Hence, some profit-taking cannot be ruled out.
Many Midcap and Small-cap stocks gave an unprecedented return of 10X, 20X or maybe more in a very short span of time. Few of them moved on a theme of digital India while few moved on the hope of reforms and privatisation.
Anuj Jain, Co-founder & Research Head, Green Portfolio Services decodes rationale behind rise in Adani Group stocks in recent past –
Throughout the year, the solar installations have been jumping. As per the latest Q3FY21 quarter, volumes were up by an astonishing 36 percent compared to the previous quarter. If you look at the EBITDA margins, it doubled.
But according to us, all these factors along with a volume spike of 20 percent during FY22, have been priced in. Yes, the Green energy space across India will grow so will Adani Green, but the stock is overvalued and it indicates upcoming selling pressure.
Adani Total Gas & Adani Transmission
Both the companies have excellent business and clear future growth is evident. However, at these valuations, we are sceptical.
It is clearly battling the onerous PPA signed for its UMPP. Besides, the nation is no more interested in thermal power generation. Hence, we do not recommend Adani Power at this stage.
This is one company that has still some room to grow. They have a robust order book of road projects. They have already captured a sizable market in the civil aviation space after the acquisition of Mumbai Airport. Now they own 7 operational airports in India.
In the near future, some businesses may be demerged from Adani Enterprises and thus unlock more value for shareholders.
Mehul Kothari, AVP – Technical Research at AnandRathi
In the past year, the overall market cap of the entire group surged by around 500%. Stock like Adani Enterprises, Adani Green, Adani Gas surged between 600% to 1200% from the lows of March 2020.
Now psychologically in the past few weeks, we have been witnessing FOMO among the participants with regards to this group of stocks. The left-out players have started getting into the same at whatever rate they can.
Technically at this juncture, almost all of them are in serious overbought zones in every possible time frame. Thus we feel that this is a high time one should stay away from these names.
Stocks like Adani Enterprises, Adani Transmission, Adani Ports all seem to be preparing for a meaningful correction. However, this does not rule out a possibility of the further upside of 10% to 15% from here on but the risk-reward is extremely unfavorable.
There are a couple of stocks like Adani Power and Adani Gas which have some more upside left but apart from that, the rest should be avoided. Investors holding the same with a considerable profit should book half at the current level. While those willing for a fresh entry should wait for a dip of 20% to 30% which might make the trade more sensible.
Ashish Chaturmohta, Head of Derivatives and Technical Analysis, Sanctum Wealth Management.
Adani Green Energy
After a long rally, this stock has been consolidating at an all-time high level between Rs 1100-1300. Investors can enter with a stop loss of Rs 1100 for 1300 for Rs 1500 levels. However, below Rs 1100 levels correction can be seen towards Rs 900.
The stock has a resistance of around Rs 105 levels which needs to be cleared for the stock to rally further. Above Rs 105, it can move towards Rs 135 levels.
However, if the stock trades below Rs 105, then it is likely to consolidate between Rs 105-80 levels. Hence, the stock can be entered on a breakout above Rs 105 or dips to Rs 80 with a stop loss of 7-8%.
The stock has seen a profit booking from Rs 1250 levels. It has immediate support at Rs 1090 levels which can be kept as a stop loss for current holdings. A break below could result in a deeper correction to Rs 975.
On the upside Rs 1250 is acting as resistance which needs to be taken out for further rally.
Adani Total Gas
After hitting a high of Rs 1250, the stock has seen correction to Rs 1085 levels. Sustaining below Rs 1100, the stock can see a deeper correction towards Rs 1025 levels where investors can look to enter with a stop loss of Rs 960.
On the upside, the stock is likely to face resistance at Rs 1250 which needs to take out for further rally.
The stock is seeing profit booking after hitting a high of Rs 1144 and is now trading at Rs 1055 levels. It is likely to see a further correction towards Rs 980 and then Rs 930.
At lower levels, investors can look to enter with a stop loss of Rs 850. On the upside, Rs 1120-1145 zone will act as resistance.
This stock had given breakout above Rs 765 levels to touch a high of Rs 885 and then saw profit booking which pulled it back to Rs 815.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.