A Rs 3.14 lakh-crore jump in Adani’s fortune is fraught with many risks

The sudden jump in wealth that Adani has seen has put him in the second spot among the richest people in Asia, only behind Mukesh Ambani

By Anto Antony

A rally in the stocks of companies controlled by Indian billionaire Gautam Adani has added almost Rs 3.14 lakh crore ($43 billion) to his wealth this year, catapulting him to the spot of the second-richest person in Asia. Some analysts say the gains are fraught with risk.

Adani’s net worth of Rs 5.6 lakh crore ($76.7 billion) got a boost from a 330 per cent jump in Adani Total Gas Ltd., a 235 per cent rise in his conglomerate’s flagship Adani Enterprises Ltd. and a 263% increase in Adani Transmission Ltd. this year. Adani group stocks, especially these three, “look extended,” Bloomberg Intelligence analysts Gaurav Patankar and Nitin Chanduka wrote in a June 10 note after analysing technical indicators.

“Among the biggest foreign investors are a few Mauritius-based funds holding over 95 per cent of assets in these companies,” the analysts wrote. “Such concentrated positions, along with negligible onshore ownership, create asymmetric risk-reward as large investors conspicuously avoid Adani.”

The analysis underscores the vulnerability of the rapid wealth surge Adani has seen in 2021, beating the gains for Warren Buffett and his compatriot Mukesh Ambani. A representative for Adani Group declined to comment immediately.

The overseas funds hold a large chunk of shares, effectively reducing the public float and leaving the stocks prone to volatility, the analysts wrote. Elara India Opportunities Fund, Apms Investment Fund, Cresta Fund, Albula Investment Fund, Lts Investment and Asia Investment Corp. have put more than 95 per cent of their assets in Adani group firms, according to data compiled by Bloomberg Intelligence.

The ports-to-power conglomerate also got a boost after MSCI Inc. included three more Adani firms to its India benchmark index last month, taking the group’s total footprint to five. This leads to mandated buying by investors that track this index.

“Adani stocks trade 150 per cent to 200 per cent above 200-day moving averages, and statistically look extended,” Bloomberg Intelligence analysts wrote. “Tesla was 126 per cent above the 200-day when it peaked this year.”

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