AEL becomes 4th Adani stock to cross Rs4 trillion market cap

In the last one year, the Adani group has been one of the biggest value creators in terms of market cap accretion. This week, Adani Enterprises became the fourth Adani group company to cross the Rs4 trillion market cap level. The other 3 Adani group companies that had earlier crossed the Rs4 trillion market cap mark were Adani Transmission, Adani Total Gas and Adani Green Energy. Of these, only Adani Transmission is still holding above Rs4 trillion while Adani Green Energy and Adani Total Gas have retreated from higher levels.

As of the close of trading on Wednesday 14th September 2022, Adani Enterprises traded on the BSE at a price of Rs3,571.65 giving the company a market capitalization of Rs4.07 trillion. However, its free float market cap is less than Rs1 trillion indicating that the stock is still very closely held by the promoter group. Incidentally, the company has a P/E ratio of 447 time rolling four quarter earnings and a price/book ratio of over 77 times. The stock has been one of the top performers among the Adani group stocks in the current year. 

One only has to look at the performance of Adani Enterprises in the last one month to get a picture. The stock has surged 24% in the last 1 month as compared to just 2% returns on the Nifty index in the same period. Over the last 3 months, Adani Enterprises has surged by a whopping 70% while the Nifty index has rallied by about 15%. Adani Enterprises acts as the holding and incubating division of the Adani group and some of its new age businesses like roads, airports, data centres, media ventures etc.

One of the big triggers for the rally in Adani Enterprise has been its inclusion in the Nifty 50. This announcement was made on the first of the month and Adani Enterprises will come into the Nifty 50 index in place of Shree Cements effective from 30th September 2022. Adani Enterprises, incidentally, became the second Adani group stock to get a place in the Nifty, after Adani Ports SEZ. This inclusion is likely to feed FPI inflows to the tune of $285 million as passive funds rebalance their holdings in favour of Adani Enterprises.

Adani Enterprises is the flagship of the Gautam Adani Group. Essentially, it operates the incubator, establishing new businesses in the areas of transport, logistics and energy. In addition, the green hydrogen and other decarbonization initiative of the Adani group are also being spearheaded by Adani Enterprises. Since most of the value in Adani Enterprises is in the form of new businesses, traditional valuation metrics do not work too well as they do not reflect the real potential of each business vertical.