Adani stocks had a heavy deterioration in value after the Hidenburg Short position over Accounting Fraud & Manipulation in the stock. LINK
Lot of people are happy about it – as they missed the past-bull-rally in Adani stocks! 🙂
Let us come with an accurate view on the events:
- Adani stocks are Not typical Value Investing kind of stocks as:
- Highly debt driven
- High PE Ratio
- High Book Value Ratio
- Low CAGR Growth
- Current Ratio < 1
- Zero Intrinsic Value Discount
- Adani stocks looks Momentum or New-based price-movers which could have hyped the high valuation.
Some of the Over-valuation samples of Adani stocks before the crash are:
- Adani Green Energy – PE 600, BVR 50, DER 7.7, ICR 1.25, CAGR 20%, Pledging 4%, Intrinsic Value Discount Nil
- Adani Enterprises PE 400, BVR 20, DER 1.3, ICR 1.53, CAGR 20%, Pledging 2.6%, Intrinsic Value Discount Nil
- Adani Transmission PE 350, BVR 25, DER, 3.5, IVR 1.4, CAGR 15%, Pledging 6.5^, Intrinsic Value Dicount Nil
So the common trouble we see are Very high debt equity & Low interest coverage – which on an economic downturn can cause Interest payment issues & cause the stock to go down further along with the banks.
The question is: Can Adani group survive to payoff the debts loaded?
Answer: Not in near future. To clear the debts it may take 10+ year with a 30% CAGR growth which will be difficult to attain.
Yesterday SBI came with a clarification on the debt exposure. LINK
The next question: Can Adani clarify on the Shell Companies allegation by Hindenburg? LINK
Difficult to say currently. If Adani can prove NOT guilty they can charge back on Hindenburg for the losses including stock price – but only upto capital balance of the small firm Hindenburg.
Why adani stocks now?
Our experience says that unless 90% correction is there we should not enter into the falling knife.
Contra to Adani stocks, we can see Reliance (Mukesh Ambani) stocks have good funamentals, growth & low debts which may come under Value investing guidelines.
Ask the Opposition: Now ask any Adani Investor about their justification – they cannot give any Rationale – Not even about the alleged frauds by Hidenberg. They are Not rational investors but Emotional investors.
Can I buy Adani stocks now?
Wait for more clarity on allegations & price stability.
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