Hindenburg Report on Adani
Perhaps like everyone else in the Indian business world, we’ve been discussing the Hindenburg Research’s scathing report on Adani, followed by the dramatic fall in its share value, withdrawal of its $2.5bn FPO and then the bonds.
While we were typing our own observations and explanations, we came across this well explained video, and felt it’s better to post it directly!
Those who’d like to dig a little deeper, here’s a post by Aswath Damodaran (NY Stern prof, considered by many as the guru of Valuations).
His summarized comments on the Adani valuation:
“With every pricing metric, the surge in the last two years is striking. The PE ratio for the stock has gone from a modest 15 times earnings in the 2016-21 time period to 214 times earnings in the most recent two years, and the enterprise value has jumped from about 12 times EBITDA during 2016-21 to 53 times EBITDA in the most recent two years. ”
“I don’t think that there is much doubt that the market was over stretched when it valued the Adani companies collectively at $220 billion and Adani Enterprises at $53 billion. In fact, a valuation of Adani Enterprises with upbeat assumptions on revenue growth and operating margins, and without factoring any of the Hindenburg accusations of fraud and malfeasance, yields a value of just about ₹945 per share”.
So far the price has corrected from ₹4k to ₹1.5k, while the FPO was priced at ₹3k.
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