Invested 1 lakh in Adani Enterprises 5 years ago? Here's your return today

Adani Enterprises has demonstrated substantial growth over the past five years. (Image: Pixabay)
Adani Enterprises has demonstrated substantial growth over the past five years. (Image: Pixabay)

Summary

  • Given Adani Enterprises’ multi-bagger gains over the past 5 years, has its valuation outpaced the broader market's growth?

Adani Enterprises has become a dominant force in India's infrastructure and energy sectors.

Founded in 1993, the company is a diversified powerhouse with a strategic industrial ecosystem.

Headquartered in Ahmedabad, this Adani group leader boasts a multifaceted portfolio. Its roots are firmly planted in core infrastructure like ports and roads. Its branches reach towards the sun in energy production and even new-age ventures like data centres.

The year 2023, however, saw them become a household name due to both a meteoric rise and a short-seller report by Hindenburg Research that triggered a dramatic market response.

Despite the controversy, shares of Adani Enterprises on 24 May 2024erased all the losses inflicted by a scathing short-seller report.

Through it all, their strategic expansion has made them a wealth creating machine for investors.

Let's take a look...

About Adani Enterprises

Adani Enterprises Ltd (AEL) is the flagship company of the Adani group.

It is one of the largest Indian conglomerates with operations across multiple industries: airports, data centres, defence & aerospace, edible oil & foods, agro, and more.

So, how is Adani Enterprises structured?

Here is its corporate chart…

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The Adani Group comprises various companies, as depicted in the figure above. These include Adani Green Energy, Adani Transmission (ATL), Adani Total Gas (ATGL), Adani Power (APL), Adani Ports and Special Economic Zone (APSEZ), Adani Wilmar (AWL), ACC (ACC), and Ambuja Cements (AMBUJACEM).

These eight listed companies, along with the parent company Adani Enterprises (AEL), represent the core of the Adani Group.

Among these, Adani Wilmar is the only company under Adani Enterprises, that is joint venture between the Adani Group and the Wilmar Group. The other companies were demerged and listed separately as they matured and expanded.

Adani Enterprises directly incubates several ventures, including Adani New Industries (ANIL), Adani Digital (ADL), AdaniConnex Pvt. (a joint venture with EdgeConnex), Adani Airport Holdings (AAHL), Adani Roads Transport (ARTL), and Adani Aero Defence Systems & Technologies (AADSTL).

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Adani Enterprises vs Sensex

If you had invested 100,000 in Adani Enterprises 5 years ago, your investment would be worth 2,159,319.5 today.

Thisis a whopping 2,060.3% return in 5 years.Sensexonthe otherhandwould have given you a return of 89% during the same period.

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Adani Enterprises has shown consistent performance since its listing on the stock exchanges. Since its debut in 1999, the company's stock has surged over 55,784.3%.

In 2023, during the peak of the Hindenburg crisis, shares of Adani Enterprises fell to a low of 1,017.5 on 3 February 2024.

However, loyal investors have seen a 3X return since then. Following a 23% increase over the past two weeks, the shares have erased all losses induced by the controversial Hindenburg report.

Despite this recovery, the stock remains about 21% below its all-time peak of 4,189.5, which was reached on 21 December 2022.

Why did Adani Enterprises perform better?

Adani Enterprises' outperformance can be attributed to several key factors.

First, being part of the Adani group grants it a robust brand reputation and trust among customers, translating into higher customer acquisition.

This credibility provides a competitive edge in attracting business and fostering long-term relationships.

Second, Adani Enterprises has pursued an aggressive growth strategy by continuously diversifying into new and emerging sectors such as solar manufacturing, defence, and data centres.

This diversification helps mitigate risks associated with dependency on a single industry and allows the company to capitalize on growth opportunities across different sectors.

Third, Adani Enterprises has made substantial investments in airport and port operations, significantly enhancing its infrastructure capabilities.

This has made it a dominant force in India’s infrastructure sector.

Additionally, collaborations, such as the joint venture with EdgeConnex, have provided technological expertise and market access, enhancing the company’s capabilities and global presence.

These strategic alliances have enabled Adani Enterprises to penetrate new international markets, diversifying its revenue streams.

Robust financial performance

Adani Enterprises has demonstrated substantial growth over the past five years. The revenue CAGR stands at approximately 27.84%, reflecting significant expansion and strong performance.

The net profit CAGR is even more impressive at approximately 59.33%, indicating that despite fluctuations in profit margins, the company has managed to grow its profitability considerably.

The reason behind this is the fact that even though some companies of the group have become profitable, various units (and recent acquisitions) are still in the development/turnaround stage with little or no profits.

The combined effect is visible in the consolidated net profit margin, which was as low as 0.7% in FY22.

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Over the past five years, the company has accumulated significant debt due to substantial investments in numerous new growth sectors, including airports, cement, copper refining, green hydrogen, petrochemical refining, roads, and solar cell manufacturing.

However, the company is continuously working to reduce its debt.

Adani Enterprises: A Growth Odyssey (2019-2024)

Adani Enterprises, the driving force of the Adani Group, has charted a remarkable course of growth and diversification over the past five years (2019-2024). Let's delve into the key milestones that mark this journey.

Organic Growth (2019-2022):

⦁ Adani Enterprises emerged as a leader in India's green energy push by making substantial investments in solar and wind power projects. This organic expansion established them as a key player in the nation's clean energy transition.

⦁ Recognizing the growing digital landscape, Adani Enterprises ventured into the data center business through a joint venture. This move positioned them to capitalize on the rising demand for data storage and processing infrastructure.

Inorganic Growth (2019-2022):

⦁ Adani Enterprises strategically demerged Adani Green Energy and Adani Gas into separate listed entities. This allowed for a sharper focus on each company's core business.

⦁ Through a series of well-timed acquisitions, Adani Enterprises became the #2 largest integrated railway operator in India. This inorganic expansion solidified their presence in the nation's crucial infrastructure sector.

⦁ Further strengthening their hold on the logistics sector, Adani Enterprises strategically acquired multiple airports. This move aimed to create a more robust and integrated transportation network.

Integrated Powerhouse (2019-2024):

⦁ A hallmark of Adani Enterprises' success is its focus on integration. Most businesses within the Adani Group are well-integrated, either internally or with other group companies. This fosters collaboration, optimizes resource allocation, and ultimately leads to higher margins and better value creation for shareholders.

Market Dominance (2023-2024):

⦁ Adani Enterprises' stock price experienced significant growth, solidifying its position as a major player in the Indian market.

⦁ A short-seller report by Hindenburg Research in 2023 triggered market volatility, testing the company's resilience.

⦁ Despite the controversy, Adani Enterprises remains a dominant force in core sectors and continues to pursue strategic expansion.

Major Project Milestones

The company inaugurated Phase I of a world-class terminal capable of catering to 8 million passengers annually, featuring elevated pathways that separate arrival and departure flow.

In the March 2024 quarter, Adani Enterprises added 10 new routes, 7 new airlines, and 18 new flights.

Additionally, the company commissioned the first unit of its greenfield copper refinery project in Mundra, demonstrating the Adani group's ability to plan and execute large-scale projects in record time.

Furthermore, Adani Enterprises inaugurated India’s first large-sized monocrystalline ingot and wafer unit with a 2 GW capacity, compatible with wafer thicknesses of 182 mm and 210 mm.

What Next?

Adani Enterprises is eyeing massive opportunities in the water treatment sector and is implementing various sewage and water treatment plants across the country.

Alongside its ventures in other industries, AEL is also establishing capabilities in the defence sector, with an order book of approximately 80 bn.

Additionally, the Adani Group has entered into a joint venture with EdgeConneX, the world’s largest private data centre operator, to build data centre facilities with a capacity of 1 GW over the next ten years.

The group also plans to invest a massive US$ 50 billion (bn) over the next ten years in green hydrogen and allied sectors.

Conclusion

Going forward, Adani Enterprises is unlikely to abandon its successful strategy of expanding into new sectors.

The company may explore international opportunities, particularly in ports and renewable energy, which could propel it to a global stage.

Additionally, its ambitious plans to reduce the cost of green hydrogen underscore the group's dedication to fostering sustainability on a grand scale.

The robust financial performance of the Adani group's listed portfolio in the second quarter further reinforces its trajectory of success.

The group has set an ambitious target to achieve an EBITDA of 900 bn within the next 2-3 years.

For more, you could quickly refer to both fundamentals and valuations of Adani group stocks on Equitymaster's Indian stock screener.

Happy Investing!

Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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