Understanding Gautam Adani’s rise: a story on how to generate wealth via hope, equity and of course debit.

 

• Gautam Adani, the richest person in India, went from being a college dropout to building a nearly $200 billion empire.
• The Adani Group’s business consists of dirty energy like coal mining and natural gas distribution, to the hope of the future, renewable energy.
• In between these, the group also dabbles in ports, food and now cement and media businesses.
• But what is propelling the Adani Group to the top of the echelon of business houses in India? We try to understand this phenomenon.

 

Gautam Adani’s meteoric rise to the top has been nothing but surreal. Two years ago, his total wealth stood at a meagre $10 billion – in comparison to today as he is now worth nearly $105 billion.

From being just another billionaire to pipping Mukesh Ambani to the top in under two years must be a record of some sort. At his recent peak, the gap between Adani and Ambani stood at $27 billion. As of May 26, this has narrowed to nearly $10 billion.

Chasing dreams over education

Like Mukesh Ambani, Gautam Adani too is a college dropout – he was in his second year of graduation when he decided to chase his entrepreneurial dreams.

His first stab was at the lucrative diamond industry in Mumbai, but he soon moved back to his home state of Gujarat to help his brother in his plastics business. 

 He finally set up his own company – Adani Enterprises – in 1988. It would go on to become the flagship group company with its fingers in various sectors, from cement to media.

Did you know: Gautam Adani was kidnapped in 1997 for a $1.5 million ransom. He was also at the iconic Taj hotel in Mumbai when terrorists attacked it on the night of November 26, 2008.

Hope and aligning with the government’s vision – the driver behind Adani’s meteoric rise

It’s hard to pinpoint the primary driver behind the success of Gautam Adani until you look at the valuations of his group companies

 

Company	Share price	Market capitalisation (in crore)	Revenue (in crore)	Profit (in crore)	PE Ratio
Adani Green	₹2,164	₹3,42,784	₹5,133	₹422	702.43
Adani Total Gas	₹2,391	₹2,63,003	₹3,037	₹504	521.15
Adani Enterprises	₹2,046	₹2,33,289	₹69,420	₹475	502.53
Adani Transmission	₹2,148	₹2,39,618	₹11,214	₹1,235	198.92
Adani Wilmar	₹698	₹90,724	₹52,361	₹807	117.16
Adani Ports	₹701	₹1,48,182	₹15,934	₹4,602	31.34
Adani Power	₹314	₹1,21,223	₹27,711	₹4,911	24.68
Total		₹14,38,823	₹1,84,810	₹12,956

Source: NSE, as on May 26, 2022

PE ratio explains how much money investors are willing to pay for every ₹1 that the company earns per share. For instance, a PE Ratio of 10 means that investors are willing to pay ₹10 for every ₹1 earned per share.

Consider the PE ratios of Adani Green and Adani Total Gas, for instance. While Adani Green’s PE ratio stands at 702, the sector it operates in, which is power, has an average PE ratio of 12.79.

Adani Total Gas’ PE ratio of 521 compares similarly with its sector PE ratio of 23.48. Likewise, other Adani Group companies are also overvalued compared to their respective sectors – the only difference is the degree of overvaluation.

So why are investors ready to pay such exorbitant prices for companies like Adani Green?

Hope and FOMO.

 “The market is having FOMO syndrome when it comes to Adani stocks. Its businesses are aligned to the current central-government vision. Therefore, the road ahead is smooth for this conglomerate for at least five to six years,” IIFL Securities’ Sanjiv Bhasin told The Quint two years ago.

Beyond FOMO, Adani is also selling hope. Adani Green, for instance, focuses on renewable energy and has an ambitious target to add 25 gigawatt of renewable energy in its portfolio by 2025.

The company currently claims to have 20.3 gigawatt in its portfolio, but on scratching the surface, nearly 15 gigawatt of it is still under construction.

Leveraged rapid diversification of business could hamper future growth

Gautam Adani has been on a rapid diversification spree over the past few months. From bagging ACC and Ambuja Cement from Holcim for $10.5 billion (approx. ₹80,800 crore) to a foray into the media business with AMG Media Networks, Gautam Adani has been busy.

 

Much of these diversification endeavours have been financed by debt. Here’s a snapshot of the Adani Group’s key financial metrics.

Particulars	Amount (in crore)
Revenue	₹1,84,810
Profit	₹12,956
Debt	₹2,18,271

Note: As of March, 2022

With the Indian central bank finally hiking interest rates, financing this mammoth debt could become an issue in the future if the Adani Group companies don’t improve their profitability.

 

 

 

New Delhi: Droupadi Murmu scripted history on Thursday by becoming India's first tribal President in the one-sided contest, defeating Opposition candidate Yashwant Sinha. Murmu, 64, won by an overwhelming margin against Sinha after receiving over 64 per cent valid votes in a day-long counting of ballots of MPs and MLAs, comprising the electoral college, to succeed Ram Nath Kovind to become the country's 15th President. After the end of the counting process that continued for more than 10 hours, returning officer PC Mody declared Murmu as the winner and said that she got 6,76,803 votes against Sinha's 3,80,177 votes. She will be the first President to be born after Independence and the youngest to occupy the top post. She is also the second woman to become the President after Pratibha Patil. Also Read: Presidential Election Result: Droupadi Murmu makes history, becomes India's first tribal President Although the pledged support was enough to help Murmu sail through, cross-voting from the Opposition camp further fortified her win. Here is how the key states voted: Punjab Yashwant Sinha won from Punjab, largely because the ruling Aam Aadmi Party (AAP) had thrown its weight behind the Opposition candidate. Murmu got 8 of the 114 votes cast while Sinha received 101. Uttar Pradesh Set to be India's first tribal and also the youngest President, Murmu received maximum votes from Uttar Pradesh. Of the 401 votes cast, Murmu got 287, while Sinha got 111 votes. Maharashtra Murmu received her second-largest share of votes from Maharashtra Assembly. Of the 283 votes cast, Murmu got 181 while Sinha got 98. Madhya Pradesh Around 14 to 18 MLAs in the Madhya Pradesh Assembly are likely to have cross-voted to support Murmu while she already had the support of the ruling BJP. She got the support of 146 out of the 230 MLAs that cast their votes. 79 MLAs have supported Sinha. Assam Around 22 MLAs in Assam seem to have cross-voted. Murmu, who was backed by NDA allies in the state, received 104 out of 124 votes. Sinha received just 20 votes. Jharkhand Murmu's tribal background appeared to have drawn support from Opposition MLAs from Jharkhand too, where the ruling Jharkhand Mukti Morcha (JMM) had already announced support to her. She got 70 out of the 80 valid votes, Sinha only got 9. Here is how some of the other states voted.

https://www.news9live.com/india/national-herald-case-ed-defers-sonia-gandhis-summons-to-july-26-184451?infinitescroll=1

The reason for the change of date could not be ascertained immediately. Gandhi, 75, was questioned for over two hours during her first day of questioning in the case on Thursday. The probe relates to alleged financial irregularities in the Congress-promoted Young Indian Private Limited, which owns the National Herald newspaper.

https://www.news9live.com/india/national-herald-case-ed-defers-sonia-gandhis-summons-to-july-26-184451?infinitescroll=1

The reason for the change of date could not be ascertained immediately. Gandhi, 75, was questioned for over two hours during her first day of questioning in the case on Thursday. The probe relates to alleged financial irregularities in the Congress-promoted Young Indian Private Limited, which owns the National Herald newspaper.

https://www.news9live.com/india/national-herald-case-ed-defers-sonia-gandhis-summons-to-july-26-184451?infinitescroll=1

The reason for the change of date could not be ascertained immediately. Gandhi, 75, was questioned for over two hours during her first day of questioning in the case on Thursday. The probe relates to alleged financial irregularities in the Congress-promoted Young Indian Private Limited, which owns the National Herald newspaper.

https://www.news9live.com/india/national-herald-case-ed-defers-sonia-gandhis-summons-to-july-26-184451?infinitescroll=1

The reason for the change of date could not be ascertained immediately. Gandhi, 75, was questioned for over two hours during her first day of questioning in the case on Thursday. The probe relates to alleged financial irregularities in the Congress-promoted Young Indian Private Limited, which owns the National Herald newspaper.

https://www.news9live.com/india/national-herald-case-ed-defers-sonia-gandhis-summons-to-july-26-184451?infinitescroll=1

The reason for the change of date could not be ascertained immediately. Gandhi, 75, was questioned for over two hours during her first day of questioning in the case on Thursday. The probe relates to alleged financial irregularities in the Congress-promoted Young Indian Private Limited, which owns the National Herald newspaper.

https://www.news9live.com/india/national-herald-case-ed-defers-sonia-gandhis-summons-to-july-26-184451?infinitescroll=1