Adani-Hindenburg Case: Here's What Analysts Have To Say On Supreme Court Panel Report

Shares of Adani Group companies jumped on Monday, continuing the rally after the Supreme Court-appointed panel did not find any regulatory failure and rejected concerns of systemic risk in the stocks following the Hindenburg Research report.

The market capitalisation of the conglomerate crossed Rs 10 lakh crore to Rs 10,17,685 crore, according to BQ Prime calculations. That's the highest since the group's valuation fell after the Hindenburg Research report released on Jan. 24.

"The events related to Adani Group companies did not have any significant impact at the systemic level," the panel led by Justice Abhay Manohar Sapre said in the report.

Here's what analysts said:

This is a "big sentiment booster" for the Adani Group as it can focus on growth plans again in a "aggressive way", Avinash Goraskshakar, director at Research Profitmart Securities, told BQ Prime.

"The latest Supreme Court committee report on the Adani-Hindenburg development has finally resolved the long-standing matter once and for all in favour of the Adani Group by giving them a clean chit."

The group's flagship Adani Enterprises Ltd. and Adani Transmission Ltd., on May 13, approved raising Rs 12,500 crore and Rs 8,500 crore, respectively, via Qualified Institutional Placement.

"Today's sharp up move in the Adani Group stocks is largely factoring in the Supreme Court committee decision, which to a large extent removes the uncertainty factor," Goraskshakar said.

All the Adani Group companies have to deliver strong financial numbers, which would boost market confidence further, he said.

The fundamentals of Adani Group companies remain as strong as before, according to Deven Choksey, managing director at KRChoksey Shares and Securities.

"Allegations have not affected the growth plans of the group as much as we know. If at all, the group will measure its growth with strong lineage towards equity vs debt," he said.

The Securities and Exchange Board of India, as a regulator, "may want to strike an arrangement with their overseas counterparts to bring under their jurisdiction the regulations pertaining (to) overseas fund raise instruments, including listing of India-listed stocks when they trade in overseas markets", he said.

Such a move would prevent the "repeat of manipulations/short selling". It is important to evolve such regulations so that investors' confidence is protected in all situations, he said.

After the Supreme Court-appointed panel report, "it appears that several issues stated in the Hindenburg report do not hold substance", said Chakri Lokapriya, managing director at TCG Asset Mangement.

"Post the enquiries, Adani Group will expand albeit slowly but surely. The valuations of some Adani companies appear encouraging," he said.

Lokapriya said that he is constructive on Adani Enterprises and Adani Ports and Special Economic Zone Ltd.

Valuations and the deleveraging actions undertaken over the last few months, since the Hindenburg report was published, have put the company on a strong footing, according to Vinit Bolinjkar, head of research at Ventura Securities. "The stocks should rally now, going ahead."

He expects investors to "start nibbling" at the stocks and ensure full allocation following the SEBI report, which is likely to be submitted by Aug. 15.

"The findings (of the Supreme Court-appointed panel's report) clearly reveal that the allegations were absolutely misplaced and that there was no evidence of any price rigging taking place," Bolinjkar said.

The disclosures by FPIs "did not break any regulations and material information disclosed was timely and as per law", he said.

Bolinjkar highlighted that the outcome of the report will be a shot in the arm for the Adani Group, as it "restores their credibility" and "is a thumbs up to the corporate governance practices" of the group.

It will also bolster institutional investors' confidence in the stocks of the Adani Group.

"This report will enable the Adani Group to raise growth capital and also debt, which is vital for a group which has accelerated and ambitious growth plans."

Ventura Securities' pecking order of Adani stock picks for risk-adjusted returns and growth considerations are as follows:

1. Adani Ports and Special Economic Zone Ltd.

2. Adani Total Gas Ltd.

3. Adani Enterprises Ltd.

4. Adani Transmission Ltd.

5. Ambuja Cements Ltd.

6. ACC Ltd.

7. Adani Power Ltd.

8. Adani Green Energy Ltd.

The "clean chit" given by the Supreme Court to the Adani Group on Hindenburg report on Friday has "removed quite a few concerns on the dealings by the group", Deepak Jasani, head of retail research at HDFC Securities said.

"This may help the group to raise funds by QIP in the near term," he said.

Some investors are still waiting for SEBI's report on this issue, Jasani said.

However, the "knee-jerk upward reaction" in stock prices of the group "may not last beyond one or two days", according to him.

The probe against the Adani Group was the "proverbial Damocles Sword hanging there, but with the clarification coming in from the expert committee that it can’t conclude any regulatory failure or wilful manipulation of stock price, it’s just short of giving them a clean chit", said Ambareesh Baliga, independent market analyst.

"Though group stocks can rally further, however, the life-time high will continue to be far-fetched," he said.

Disclaimer: AMG Media Networks Ltd., a subsidiary of Adani Enterprises Ltd., holds 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.