Jefferies gives ‘buy’ rating on two Adani companies

Leading investment bank Jefferies has assigned a “buy” rating to two companies from Adani Ports Group and Adani Transmission after a Supreme Court-appointed panel nearly delivered a “clean” investigation into an allegation put forward by a controversial report by short-seller Hindenburg.

On the NSE, Adani Transmission gained five percent to reach 825 rupees in the morning trading session while Adani Ports rose 4.88 percent to 721.70 rupees on Monday.

The Jefferies Equity Research report has deeply researched the eight entities included in the Adani Group and analyzed their foray into new business sectors such as green hydrogen, data center, digital play, aerospace, defense and water infrastructure.


Addressing recent concerns about deleveraging, the report noted that the Adani Group had completed the full repayment of the $2.15 billion margin-linked margin-backed financing ahead of schedule on March 31. To acquire Ambuja and reduce the promoter’s pledge position helped deleveraging.

Recommend purchase evaluation

The report recommended the purchase rating of Adani Ports and said the company is India’s largest port operator by volume with a dominant market share of 22 percent. Jefferies expects double-digit growth to continue in the medium term as it replicates the story of Mundra’s market share gain in its acquired ports.

Describing Adani Transmission as India’s only registered private sector entity in the transmission and distribution sector, the report said the company could be a major beneficiary of the Distribution Amendment Act if it is passed.

Adani Transmission’s focus on project execution, multi-vendor relationships and a higher proportion of sovereign party projects were highlighted as key areas of focus as it aims to expand its reach to 5.6 times by 2030, according to Jefferies.

Highlights strengths

The report highlights several strengths of Adani Power as a refractory company with potential for long-term growth and expansion.

Finally, Jefferies highlighted that Adani Wilmar with its focus on diversification into foods has grown its revenue and Ebitda’s by 19 percent and 10 percent compound annual growth rates, respectively, in the past four years.

Including the seven listed companies and the cement companies, the total net debt of the Adani entities was INR 21 crore, as of the end of FY23. It said some of the start-ups, which were in their early stages, may not be adequately reflected in Ebitda as of FY23. 23, thus visually inflating Net Debt/Ebitda.

Jefferies noted that Adani Group revenue grew 23 percent double-digit annually during the 2018-23 fiscal year; She said Ebitda and net profit in the same period grew 20 percent and 40 percent annually. The leverage was 4.2 times net debt/Ebitda on a subsequent 12-month basis, as of the end of fiscal year ’23. The Ebitda calculation excludes other income, Jefferies said.