Shares of Adani group companies slid for the eight straight session on Monday with the conglomerate’s combined market capitalisation seeing a drop of over Rs 9.3 trillion since January 24.
Flagship Adani Enterprises slid 2.1% to Rs 1,554 on Monday. Ambuja Cements, ACC and Adani Ports & SEZ ended in the green, gaining 0.9%, 1.9%, and 8.6%, respectively.
Other stocks, however, continued to hit their lower limits. Adani Transmission was down 10% while Adani Green Energy, Adani Total Gas, Adani Power and Adani Wilmar were down 5% each.
Brokers who have funded clients against shares of these companies are staring at naked positions, with the shares prices falling below the amount lent to clients, resulting in losses for brokers. Trading has stopped in these shares for the most part and brokers are unable to offload shares in the market as there are no buyers.
Margin against shares is a lending facility that is offered by brokers to traders wanting to take leveraged bets.
The broker takes the stocks as collateral and lends funds to trade on a short-term basis.
The group said on Monday its promoters had posted the amounts to prepay $1.1 billion ahead of its maturity of September 2024. With the repayment of such amount, pledged shares of Adani Ports & Special Economic Zone (168.27 million shares representing 12% of the promoters’ holding), Adani Green Energy (27.56 million shares, representing 3% of promoters’ holding) and Adani Transmission (11.77 million shares, representing 1.4% of promoters’ holding) will be released in due course.
Adani Transmission on Monday reported a 73% year-on-year increase in consolidated net profit to Rs 478.1 crore for the quarter ended December 31. The company had reported a net profit of Rs 283.7 crore in the same quarter the previous fiscal.
Valuation expert Aswath Damodaran in his blog of Saturday said the share price of Adani Enterprises was still not cheap despite the fall of 60% in the last one month.
He reckons that the fair price of Adani Enterprises, with upbeat assumptions on revenue growth and operating margins, and without factoring any of the Hindenburg accusations of fraud and malfeasance, should be just about Rs 945 per share.
“Investors in family group companies, no matter how honourable the family, are buying into cross holdings, opacity and the possibility of wealth transfers across family group companies. Those risks increase, if the family group companies are built around political connections, where you are one political election loss away your biggest competitive advantage,” said Damodaran.
Having said that, he would be willing to expose himself to those risks, but it would require a significant discount on intrinsic value. We are not even to close to that point yet, he said.