How the Adani Group cracked the Market Value code in FY21
The bull rally in FY21 has benefited the large caps and mid-cap stocks in good measure. But the one group that has really created tremendous market value accretion in FY21 is the Adani Group.
FY21 was the Adani story
If you treat market cap as a benchmark of wealth creation, then Adani group put up a stellar performance in FY21. Look at some of the numbers. At the start of FY21, not a single Adani group company had a market cap of Rs.50,000 crore. By the end of FY21, 5 Adani companies have a market of more than Rs.1 trillion with Adani Green closing on Rs.2 trillion. The Adani group, which had a market cap of Rs.154,819 crore at the start of FY21, closed with a group market cap of Rs.678,992 crore, very close to the $100 billion mark. But story of specific Adani group stocks is a lot more interesting.
Take the biggest wealth creator, Adani Total Gas. Its market cap went up from Rs.8,435 crore to Rs.116,387 crore in FY21, a growth of 13.79X. Adani Green Energy rallied from Rs.17,626 crore to Rs.181,347 crore, rallying 10.28X. The new business driver, Adani Enterprises saw its market cap grow from Rs.12,785 crore to Rs.121,782 crore a 9.5X growth while Adani Transmission grew from Rs.18,388 crore to Rs.109,887 crore, again a 6X bounce. Adani Ports was the most modest performer with 3.1X value accretion in FY21. The group created more than $75 billion of value in FY21.
Combining the old and the new
The group has, in a way, combined the old-world hard assets focus with a fleet-footed approach and an eye on the future. The group invested $10 billion in tying up coal supply from Queensland but is also betting big on green power. The group now controls some of the biggest gateways to India’s global trade and commerce including some of the biggest ports as well as most of the airports. It has also made big forays into the agricultural business, Agri-infra, gas distribution, defence & aerospace, solar manufacturing etc. But it has also been quick to exit businesses that don’t work like retail business, which they exited.
Now for the numbers challenge
From a small trading company in 1988, the Adani group has come a long way. The big challenge now is that on a $15 billion revenue base, they have a market value of $100 billion. Among the group companies, Adani Ports SEZ is the only company that makes some real serious profits. Secondly, there is the challenge of managing an incredibly diversified business stretching right down to the coal mines of Australia and Kalimantan. But the biggest challenge would be financial. Adani group is heavily levered and debt servicing needs profits to grow rapidly. Also, expansion of this order needs a continuous flow of resources. But these challenges cannot take away the shine of value accretion in FY21!