Adani Group's Q1 Performance: A Triumph Amidst Market Challenges

Gautam Adani

Adani Group, led by billionaire Gautam Adani, has displayed a significant financial growth in the first quarter ending June 30th. Notably, there has been a robust 69.71 percent year-on-year surge in the combined net profit of the group's companies, reaching Rs 12,116 crore in Q1FY24 compared to Rs 7,139.55 crore in the same period last year. Moreover, the operating profit also witnessed a strong 44.46 percent year-on-year increase, amounting to Rs 21,800 crore during the corresponding time frame.

Market experts have shown bullish sentiments toward certain Adani stocks following the Q1 results. The listed entities of the Group are currently perched on combined cash reserves of around Rs 77,889. The current gross debt is around Rs 2.27 lakh crore against an asset base of Rs 4.22 lakh crore. In terms of leverage, the net debt to EBITDA ratio has gone down from 3.8x in 2021-22 to 3.3x in 2022-23.

Adani Group's strategy is to accumulate enough cash, both from reserves and the cash generated from regular operations in the infrastructure business, so that it can cover any debts that are due in the future.

An independent market analyst based in Mumbai highlighted that while most of the group companies reported favourable Q1 results, exceptions like Adani Wilmar exist. The infusion of investments from prestigious institutions has injected positivity within the group, leading to increased liquidity flows and renewed interest in Adani Group stocks.

The stocks of various Adani Group companies have experienced substantial rallies, rebounding up to 143 percent from their respective 52-week lows earlier this year, thus showcasing a robust recovery from the impact of the Hindenburg report.

Looking at individual companies, Adani Power displayed remarkable profit growth with an 83.26 percent year-on-year increase in net profit, reaching Rs 8,759.42 crore in Q1. Following suit, Adani Ports and Special Economic Zone reported an 80 percent YoY growth, reaching Rs 2119 crore, while Adani Green Energy posted a 50.47 percent rise, reaching Rs 322 crore. Adani Green Energy Limited is constructing the world's largest hybrid renewable energy park in Gujarat, producing 20 GW of green energy upon completion, showcasing the Group's sustainable energy commitment.

Market observers are placing considerable importance on Adani Ports' role within the sector, forecasting sustainable growth over the upcoming decade. However, they advise caution regarding valuation levels. Adani Ports, already a profitable global port operator, plans to handle one billion tonnes of cargo annually by 2030, aiming for carbon neutrality and tripled EBIDTA. The commissioning of India's largest transshipment hub and a port in Colombo showcased the Group's expansion vision.

Adani Enterprises and Adani Total Gas also reported respectable year-on-year net profit increases of 43.55 percent and 7.00 percent, respectively.

Adani Energy Solutions witnessed an increase of 8.00 percent in its YoY consolidated net profit, amounting to Rs 182 crore. In a stark contrast, Adani Wilmar faced a loss of Rs 78.92 crore as opposed to a profit of Rs 193.59 crore in the same quarter last year. It's notable that Adani Wilmar's weak earnings have raised considerations of potential divestment within the group, potentially offering growth potential for investors. According to a Bloomberg report, Adani Enterprises is reportedly exploring the possibility of selling its 44 percent stake in Adani Wilmar, potentially valuing it at $2.7 billion.

Recent acquisitions, ACC and Ambuja Cements, recorded significant net profit growth of 105 percent and 29 percent year-on-year, reaching Rs 466.10 crore and Rs 645 crore (standalone) respectively, in the April-June period.

On the other hand, NDTV posted a loss of Rs 8.13 crore compared to a profit of Rs 23.23 crore during the same period.

Overall, market confidence in Adani Group firms appears to be on the rise, with both institutional and retail interest increasing. Investors are closely awaiting the forthcoming SEBI report, which is expected to provide further insight into the trajectory of the group's stocks.

During the 2023 Annual General Meeting held last month, Gautam Adani presented a forward-looking vision centred on strategic projects and urban renewal. He expressed unwavering confidence in India's growth trajectory, projecting the nation to evolve into a $25-30 trillion economy by 2050, positioning it as the second-largest global economy.

Adani's address commenced with an emphasis on the Group's robust financial standing, highlighting the continuous fortification of the balance sheet, assets, revenues, and operating cash flows.

In March 2023, the Adani family sold shares in four of its companies—Adani Enterprises (AEL), Adani Ports & SEZ (APSEZ), Adani Energy Solutions Ltd (AESL), and Adani Green Energy (AGEL), mobilising $1.87 billion from the international private equity firm, GQG Partners, further in June 2023, raised additional $ 1.38 billion from international al private equity firm GQG Partners by diluting stake in AEL, AGEL and AESL. Recently, in August 2023, the Group has raised $ 0.5 billion from Qatar Investment Authority by diluting stake in AGEL

In addition, three of the group's companies have received board approval to raise $4 billion in the next 12 months. In the last four years, the group has diluted equity amounting to $9.51 billion to bring on board global players like Total Energies, Qatar Investment Authority, and Abu Dhabi-based IHC Group and GQG Partners.

In the next two decades, the Adani group of companies and its promoters aim to mobilize $50 billion in equity. This is in addition to the individual companies' internal funds, which amount to around $100 billion. The goal is to invest nearly $500 billion in core infrastructure as a base case.
The new areas include green hydrogen, airports, roads, data centre, water, petrochemicals, etc.