New Delhi. Stocks of Adani Group companies took a beating this week due to a fake news. It became clear from Adani Group and NSDL that the accounts of FPIs investing in group companies have not been frozen. Despite this, the company’s shares fell every day from last Monday to Friday and during this period there was a lower circuit in Adani Group companies almost every day. One of the major reasons for this steady decline in the shares of Adani Group companies is the very little or no analyst coverage of the group companies. The lack of analyst coverage of these companies has drawn attention once again due to the collapse of the group’s stocks. Analyst reports help investors to make informed decisions. Low or no coverage from analysts of a company indicates its poor quality. Along with this, it is also indicated that the interest of Genuine Investors in the company is low.
Data from Trendlyne, which tracks capital market information, shows that Adani Green Energy has no coverage. Research reports from only two brokerage firms ICICI Securities and HDFC Securities are available on Adani Enterprises. Adani Total Gas is only tracked by Monarch Networth Capital and ICICI Securities.
The m-cap of 6 companies of Adani Group is around Rs 8 lakh crore.
Among the companies of the Adani Group, only Adani Ports is such that the brokerage firms are very much interested in its coverage. It is tracked by more than two dozen brokerage firms, but its stock has declined despite this. This is shocking in itself because the m-cap of 6 companies of Adani Group is around Rs 8 lakh crore. Adani Green Energy has a market cap of Rs 1.74 lakh crore and is the 22nd largest listed company on BSE. Adani Enterprises is at the 28th position with a market cap of around Rs 1.5 lakh crore. It is followed by Adani Total Gas, Adani Transmission and Adani Ports & Special Economic Zone.Analyst coverage will increase in future
Adani Group’s Chief Financial Officer Jugeshinder Singh had recently said in an interview to CNBC-TV18 that some of the group companies were started a few years back and their analyst coverage will increase in the times to come. He said, if we want, we can get the coverage done by analysts. We don’t go after them. We have good cash flow. Strategic investors have invested funds. Such investors invest in a company only after doing due diligence.
However, his argument does not seem to have merit. Many companies have been listed in the last few years and they are tracked by many brokerage firms. An example of this is Polycab India which was listed two years back and is covered by 10 brokerage firms. Varroc Engineering’s initial public offer came three years ago and is tracked by eight broking firms. The size of these companies is also much less than that of the Adani Group companies.
cause less free float
Experts say that a major reason for the low analyst coverage of Adani Group companies is that their free float is not high. Less free float means that promoters have more stake in the company, leaving fewer shares for foreign institutional investors or domestic institutional investors, ie investors like insurance companies and mutual funds.
This is the share of promoters
Promoters held 74.9 per cent stake in Adani Green Energy for several quarters and it has come down to 56.3 per cent in the March quarter this year. In both Adani Enterprises and Adani Transmission, the promoter holds 74.9 percent stake while in Adani Total Gas and Adani Ports this figure is 74.8 percent and 63.7 percent respectively.
Shares trading at high valuation
Apart from this, Adani Group constantly restructuring its companies. Because of this also investors keep distance from the company. Also, the brokerage firm also does not see the value in their coverage. Gaurav Garg of CapitalVia Global Research says that the valuation of Adani Group shares is very high and they are trading above 100x PE. Also, the company has a huge debt of 1.5 trillion.