It's a pretty longish and thorough scan of the business model and financial metrics of the Adani group.
What's most extraordinary is the sort of exponential growth in the market capitalisation of the group with the PE ratio simply rocketing through the roof - in the very recent past -- catapulting Gautam Adani to the position of number (2 or) 3 richest globally, and that too when except for the Adani Wilmar, it's engaged in businesses with high investment, long gestation period and low profit margin. That, in itself, is a very obvious clue -- which has been largely ignored, till Hindenburg burst onto the stage, on January 24th. Even massive illegitimate (and legitimate) state patronage to obtain bank loans and acquire businesses -- on the cheap -- is a very inadequate answer. It calls for skulduggery of an yet different order. <<I broke the 20-year history into three sub-periods, the 2022-2015 time period, where the company grew its revenues steadily and reported solid, albeit low, profitability, the 2016-2021 time period after a major restructuring in 2015 that spun off Adani Ports Adani Power and Adani Transmission, as separate companies, and the most recent year and a half (from March 2021 to September 2022), where the company reported a quantum leap in revenues. During that most recent period, the Adanis acquired a stake in the cement business, another capital-intensive and low profitability business, when they bought Hochim's stake in ACC and Ambuja Cements. While the revenue part of the story is one of almost unstoppable growth, it is worth noting that through its entire operating history, the Adani Group has had low operating margins, with the trend lines in the wrong direction. While some of the decline can be attributed to the revving up of reinvestment in new businesses, it is also worth emphasizing that even when these investments start paying off, they will remain low-margin businesses. ... 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. You see similar movements in the price to book, where the stock has gone from trading under book value to 6.7 times book value, and the enterprise value, which was less than revenue in 2016-21 to 2.71 times revenues in the most recent two years.>> (Excerpted from: < https://aswathdamodaran.blogspot.com/2023/02/control-and-complexity-deconstructing.html >.) -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to greenyouth+unsubscr...@googlegroups.com. To view this discussion on the web, visit https://groups.google.com/d/msgid/greenyouth/CACEsOZgPUeA-sJfTxCANzjwjGqfSQ9GLmJWcEzBhUhBH7Ld2tA%40mail.gmail.com.
