Adani Group shares rose in intraday trading on Monday as investors eagerly await their quarterly earnings reports. Analysts expect the Indian conglomerate’s performance to show continued strength despite the impact of the ongoing pandemic. The company has reported strong results in the past few quarters, with net profit increasing by almost 50% year-on-year in the December quarter. Adani Group is also expanding its operations in the renewable energy sector, which could further boost its financial performance.
(Bloomberg) – Most shares in Adani Group rose, continuing their rebound from the defeat triggered by US short seller Hindenburg Research’s report as the indebted Indian conglomerate takes steps to allay investor concerns about leverage.
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Eight of the group’s 10 stocks rose Wednesday morning, with flagship Adani Enterprises Ltd. Gained more than 13% after posting its sharpest rise since 2020 the previous day. Adani Ports & Special Economic Zone Ltd. increased by up to 8%.
The sell-off, which at one point wiped $117 billion off the value of billionaire Gautam Adani’s businesses, has eased as the tycoon and his family prepaid some loans and the port entity pledged to improve its debt ratio. Focus will shift to Adani Power Ltd. results. and Adani Wilmar Ltd. due on Wednesday, after five other group companies released results earlier this week.
“Debt reduction is likely to be the group’s immediate focus for at least the next year or so,” said Abhay Agarwal, fund manager at Piper Serica Advisors Pvt. “Recent earnings commentary also supports this view. They may slow down on inorganic growth as large acquisitions require new borrowing and lenders may not offer the same comforts as in the past.”
The net profit of Ambuja Cements Ltd. beat estimates while Adani Ports’ missed forecasts. Adani Transmission Ltd. posted 78% profit growth in the third quarter.
“Adani Ports results are good given the current concerns,” said Deven Choksey, Managing Director of KRChoksey Holdings. “Margins are a bit weak, but revenue and outlook remain strong.”
Adani Wilmar, Adani Power and Adani Transmission shares were each up about 5% on Wednesday.
“It’s a mix of short covering and fresh buying,” Choksey said. “Technically, the cash margins used have halted the free fall. Short selling has been discontinued.”
Dollar-denominated bonds issued by Adani Group companies also rallied on Wednesday, according to data compiled by Bloomberg. Adani Green Energy Ltd. bond, which matures in September 2024, led the rise of 3.2 cents to 76.9 cents as of 11:39 am in Mumbai. The July 2024 Adani Ports bond rose 0.7 cents to 90.1 cents.
The recent slump in Adani Group’s assets has attracted buyers, with companies including Oaktree Capital Management and Davidson Kempner Capital Management taking on debt related to the conglomerate in recent weeks, according to people familiar with the matter.
But investors are likely to remain wary of the risk of another defeat as concerns remain over the group’s access to funding. The fallout has spread beyond Indian financial markets as protests have flared up amid questions over Gautam Adani’s ties to Prime Minister Narendra Modi.
In the report released last month, Hindenburg Research said the group inflated earnings and the share price — allegations the conglomerate has repeatedly denied.
Market participants are also awaiting the outcome of MSCI Inc.’s quarterly review of its gauges on February 9. The index provider announced last month that it was soliciting feedback from market participants on the Adani Group’s situation and is closely monitoring any information that would prevent the conglomerate’s securities from being eligible for its gauges.
“Regulatory assessment and rebalancing will be critical from now on,” said Sameer Kalra, Founder of Target Investing in Mumbai. “The value has yet to be created, the upswing comes after extreme slumps. More solutions will be needed to solve Adani’s problems.”
–Assisted by Harry Suhartono.
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