Adani Group May Not Do Everything Straight But Wrong To Describe It As 'Biggest Con' In History, Says Ashwath Damodaran

Ashwath Damodaran, who’s often referred to as the ‘dean of valuation’, believes that the “market was over-stretched” when it valued all of Adani’s companies collectively at ₹18,16,137 crore ($220 billion). Nevertheless, according to him, short-seller Hindenburg Research is likely exaggerating when it calls Adani to be “the biggest con” in history.

What Happened? Damodaran, a widely respected authority on valuations, said in a blog post published on Saturday, that he would value Adani Enterprises’ share price at ₹945 — well below its valuation even after last week’s stock crash — with ‘upbeat’ assumptions on revenue growth and operating margins, and without factoring any of the Hindenburg accusations of fraud and wrongdoing.

That said, the Professor of Finance at the Stern School of Business at New York University, adds that Hindenburg was possibly “indulging in hyperbole” when it described Adani to be “the biggest con” in history.

“A con game to me has no substance at its core, and its only objective is to fool other people and part them from their money,” he states.

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Damodaran, who is among the most respected voices in business valuation, corporate finance and investment philosophies, globally, believes that Adani Group, despite all its flaws, is a capable player in a business (infrastructure) that is riddled with frauds and inefficiencies, especially in India.

Agreeing to some of the allegations levelled by Hindenburg against Adani in its report, Damodaran notes, "I am prepared to believe that the Adani group has played fast and loose with the exchange listing rules, that it has used intra-party transactions to make itself appear more credit-worthy than it actually is and even though it didn't directly manipulate its share price, it used the growth in its market capitalization to its advantage, especially when raising new capital.”

Addressing the concern around the involvement of institutions like LIC and public banks, Damodaran adds that he wouldn’t go as far to label their passive stance on it all so far as “wastefulness or corruption” and instead attribute them to “inaction and apathy.”

“A more nuanced version of the Adani story is that the family group has exploited the seams and weakest links in the India story, to its advantage, and that there are lessons for the nation as a whole, as it looks towards what it hopes will be its decade of growth,” Damodaran writes in his blog post.

Price Action: This is how the Adani Group shares traded on Monday, shortly after markets opened.

Adani Enterprises shares traded 6.44% lower at ₹1,482.40.

Adani Green Energy was down 5% to trade at ₹887.55.

Adani Ports & SEZ was up 1.36% to trade at ₹505.65.

Adani Power shares traded 5% lower at ₹182.45.

Adani Total Gas shares traded 5% lower at ₹1,544.70.

Adani Wilmar shares plunged to hit lower circuit at open, down 5% to ₹380.40.

Adani Transmission shares were also down 10% to ₹1,261.40.

Ambuja Cement shares traded 2.86% lower at ₹363.00. ACC shares traded 0.80% lower at ₹1,910.95.

NDTV was down 4.98% to trade at ₹201.20.

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