Adani Enterprises has emerged as an incubator by investing, maturing and eventually demerging various diversified businesses. Since inception, it has incubated six businesses and successfully listed them. 
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Adani Enterprises has emerged as an incubator by investing, maturing and eventually demerging various diversified businesses. Since inception, it has incubated six businesses and successfully listed them. Adani Enterprises will announce its December quarter results today. Shares of this Adani group firm have erased half of market value following the Hindenburg Research's scathing report that made several allegations on the group including stock manipulations, money laundering and accounting frauds. This has made Street take note and try to find the fair value of Adani Enterprises shares. Valuation guru Aswath Damodaran finds the stock worth Rs 945. On the other hand, Devina Mehra of First Global sees the stock at Rs 645. The scrip closed at Rs 1,717.55 on Monday.
Adani Enterprises' December quarter results would, thus, be closely monitored. A healthy set of numbers may instil confidence among investors or vice versa. For now, no brokerage estimates are available for the December quarter results.
CARE Ratings, earlier this month, noted that substantial capex has been undertaken by Adani group and that diverse areas expose Adani group to inherent project execution risk. "It noted that the company management conveyed its flexibility to moderate the pace of undertaking capex, given substantial portion of such capex is discretionary in nature. Going forward, significant increase in the external debt/PBILDT due to large debt funded capex shall be critical rating monitorable for Adani group of companies," Care said.
All eyes would be on commentary, if any, on capex.
Adani Enterprises has emerged as an incubator by investing, maturing and eventually demerging various diversified businesses. Since inception, it has incubated six decacorn businesses and successfully listed them, including by way of demergers, as Adani Ports and Special Economic Zone, Adani Power, Adani Transmission, Adani Green Energy, Adani Total Gas and Adani Wilmar.
Adani Enterprises businesses
Adani Enterprises current business portfolio includes energy and utility, transport and logistics, consumer and primary industries. In the energy and utility portfolio, it is developing data centers with an aim to retain and drive India’s internet-derived data in India. It is also developing infrastructure projects that enhance water treatment and use efficiency.
The transport and logistics portfolio is a part of airports business. Adani Enterprises is currently developing, operating and managing seven operational airports across the cities of Mumbai, Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram, and one greenfield airport in Navi Mumbai. It is also engaged into developing infrastructure projects such as roads in India.
As of September 30, 2022, Adani Enterprises had 14 road assets in India of which three assets has started commercial operations.
In the case of consumer business, Adani Enterprises manufactures, markets and brands food FMCG products. Additionally, it is developing a super-app, “Adani One”, as part of its digital business to complement Adani group’s consumer serving businesses, HDFC Securities said in a recent note.
In the primary industry portfolio, Adani Enterprises offers mining services which involves contract mining, development, production-related services and other related services to mining customers primarily in the coal and iron ore industries.
Adani Enterprises’ past performance
Adani Enterprises' revenue from operations have grown at CAGR of 16.9 per cent from Rs 43,402.56 crore in FY20 to Rs 69,420.18 crore in FY22. Revenue stood at Rs 79,019.48 crore in the six months ended September 30, 2022.
Ebitda for Adani Enterprises has grown at a CAGR of 16.8 per cent to Rs 4,725.71 crore in FY22 from Rs 2,967.96 crore in FY20. Ebitda stood at Rs 4,100.15 crore in the six months ended September 30, 2022. Profit margin has declined to 1.1 per cent in FY22 from 2.6 per cent in FY20.
Adani Enterprises’ fair value
Recently, valuation guru Aswath Damodaran said the company is priced too high, given its fundamentals that includes cash flows, growth expectations and risks involved.
In his value estimation, Damodaran did not factor in the damage that might have been done to the company's reputation and long-term value by the Hindenburg episode. Damodaran’s share price estimate for Adani Enterprises, he said, were based on upbeat assumptions on revenue growth and operating margins. Devina Mehra, Chairman and MD at First Global, on the other hand felt the fair value of Adani group firm was at Rs 645.
In a series of tweets, Mehra said Damodaran himself mentioned an equity risk premium over risk-free rate of 4.5 per cent. She said if one considers the cost of capital (risk free rate plus risk premium) at 12 per cent, factoring in a logical risk free yield of 7.3 per cent in India, the Adani Enterprises stock's valuation should drop to Rs 645.
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