Should I buy Adani enterprise and Adani transmission?

Ans: Hello Manoj,

First of all we need to understand the questions being asked by Hindenberg and try to evaluate whether the allegation made by them makes any sense. If anyone goes through the Hindenberg report than the allegations and questions asked can be bifurcated into below broad categories:

1) Violations of Exchange and listed rules
2) Dubious Intra- Party Transactions
3) Use of Shell companies outside india ( Mauritius) to manuipulate the stock price
4) Money laundering through private Adani companies in listed companies of Adani inorder to look Balance sheet good.
5) Inexperienced Chartered accountants to audit the companies.
6) Using stocks as collateral for debt.

Looking at this points and also the allegations done by Hindenberg, i am fine to believe that there few acts which they taken for granted and manipulate the exchange and listing rules but calling Adani company as CON or Fraud is not what i would call this company. Companies margin are very low as compared to their cost of capital but being an infrastructure led company its takes long gestation period to realise the cash flows. Adani is playing important role in building infrasturcture in India with ports, power, airports etc and even though company is highly levered to build the assets and cash flow, the company has good physical assets in the balance sheet. Even though it may not a investible company for a retail invstor with the sort of volatility and margins they are earning.

Valuations are very much stretch with last 2 years price going to the roof. As a retail investor, one should avoid this company due to many uncertainties going forward.


Disclaimer: This is just for educational purpose and this should not be taken as advise for buy or sell.

Ans: Hello Banibrata,

First of all we need to understand the questions being asked by Hindenberg and try to evaluate whether the allegation made by them makes any sense. If anyone goes through the Hindenberg report than the allegations and questions asked can be bifurcated into below broad categories:

1) Violations of Exchange and listed rules
2) Dubious Intra- Party Transactions
3) Use of Shell companies outside india ( Mauritius) to manuipulate the stock price
4) Money laundering through private Adani companies in listed companies of Adani inorder to look Balance sheet good.
5) Inexperienced Chartered accountants to audit the companies.
6) Using stocks as collateral for debt.

Looking at this points and also the allegations done by Hindenberg, i am fine to believe that there few acts which they taken for granted and manipulate the exchange and listing rules but calling Adani company as CON or Fraud is not what i would call this company. Companies margin are very low as compared to their cost of capital but being an infrastructure led company its takes long gestation period to realise the cash flows. Adani is playing important role in building infrasturcture in India with ports, power, airports etc and even though company is highly levered to build the assets and cash flow, the company has good physical assets in the balance sheet. Even though it may not a investible company for a retail invstor with the sort of volatility and margins they are earning.

Valuations are very much stretch with last 2 years price going to the roof. As a retail investor, one should avoid this company due to many uncertainties going forward.


Disclaimer: This is just for educational purpose and this should not be taken as advise for buy or sell.

Ans: Dear Santosh,

Thank you for reaching out for financial advice. I understand that you are considering purchasing Adani Transmission shares, and you would like a personal opinion on whether it is a good investment.

Firstly, it is important to keep in mind that investments in the stock market always carry a certain degree of risk, and one should make decisions based on their individual financial goals, risk tolerance, and investment horizon.

Adani Transmission has demonstrated a strong growth over the past five years, with a CAGR of 31% in sales and 23% in profit. This is a positive sign and indicates that the company has been growing its business consistently. However, the stock is currently trading at a high trailing PE of 108, compared to the median PE of 12% in the industry. This suggests that the stock might be overvalued at its current price.

The company's Return on Capital Employed (ROCE) stands at 10.7%, which is a moderate figure. A higher ROCE typically indicates efficient capital allocation and a better ability to generate returns on investment. It is important to compare the ROCE with industry peers to get a better understanding of the company's performance.

In conclusion, Adani Transmission has shown good growth in the past, but its current valuation seems high. As a financial advisor, I would recommend you to further research the company, its competitors, and the overall industry trends before making a decision. Also, consider diversifying your investments and consult a professional financial advisor to tailor an investment plan that suits your personal financial goals and risk appetite.

I hope this helps.

Best regards,