Adani vs Ambani: War to be the Wealthiest of Asia!

On February 8, 2022, Gautam Adani, the chairman and founder of the Adani Group, surpassed Mukesh Ambani to be the Richest Indian and the Richest Asian according to Bloomberg Billionaires Index. A day later, on February 9, 2022, Mukesh Ambani gained his position back, where his valuation stood at $89.2 billion against Adani’s $86.3 billion.

Gautam Adani has come a long way in being at par with Mukesh Ambani, India’s richest man. Adani Group stocks have benefited quite a lot from the Covid-19 induced bull run that favoured Gautam Adani’s valuation. In this piece, we get into the lives of the two wealthiest persons in India, Gautam Adani and Mukesh Ambani. 

COVID Bull Run, High Promoter Holding Behind Adani’s Wealth?

Adani operates in a bundle of verticals like ports, power, and green energy. It has recently forayed into the airports business taking control of 7 airports under the Public-Private Partnership model. The company’s FMCG arm Adani Wilmar recently debuted on the stock market with a premium valuation. It was after Adani Wilmar’s IPO that Gautam Adani became the wealthiest person in India for a day.

The COVID-19 induced pandemic has contributed immensely to Gautam Adani’s valuation. While most listed Adani companies have posted fair (not impressive) growth in profit margin or revenue, their valuation has broken the ceiling. The rise in share prices in Adani Group companies is given below. 

Adani Group Company	% Increase In Share Price In 2 Years
Adani Total Gas Ltd.	+957.78%
Adani Green Energy Ltd	+803.01%
Adani Enterprises Ltd.	+619.24%
Adani Transmission Ltd.	+497.61%
Adani Power Ltd.	+107.81%
Adani Ports & Special Economic Zone Ltd.	+93.4%

Looking at the table given above we can see the HUGE growth in the share price of Adani stocks. Had you invested Rs 5,000 two years ago in each of the six Adani companies shown above, it would have turned into Rs 1,83,942 by now. A 6X return on an investment of Rs 30,000.

Speaking of Gautam Adani, most of the Adani Group companies have a very high promoter holding. A promoter is a person that sets up a business, brings in the capital, raises investment, and makes key decisions in the company. An average Adani company has a promoter shareholding of around ~75%. Seemingly, Gautam Adani likes to keep it ‘in the house’, most of the ‘promoter holding’ is either in his name or a family member’s name or trust/company that is owned by either Adani or a close family or associate. The person most likely to benefit from an increase in share price is the founder itself. 

Can Adani Pit Against Ambani?

Ambani and Adani have decided to keep the reins of the business within the family. Both companies have extremely complicated, intricate, and peculiar company structures. While Reliance had a legacy of Ambani’s father Late Dhirubhai Ambani, Adani is the first monarch of his conglomerate. 

While Mukesh Ambani is hooked on new economy businesses like 5G, Virtual Reality, IoT, Communications, Information Technology, etc, Adani continues to expand his ‘old economy’ businesses like petroleum, ports, special economic zones, power transmission, power generation, etc. New economy businesses raise higher valuations because of innovation and the discovery of technology. 

While both companies have grown at a similar pace, have similar operating structures and country-wide influence, there is one thing that makes the odds favour Ambani. While Mukesh Ambani is on verge of making Reliance Industries Net-Debt Free, Adani is running a debt-fuelled expansion plan. As of October 2021, Reliance Industries (RIL) has more Cash and Reserves than the debt that it owes, the Adani Group on the other hand owes nearly Rs 155 lakh crore in debt. In general, Reliance Industries has always used the sale of equity to raise funds combined with some bonds and rights issues. On the other hand, Adani has fuelled its expansion mostly through debt. 

Adani has seven of its subsidiaries listed on the stock market, and the recent bull run has benefitted the group. Governments across the world have now started taking excess cash out of the system to battle rising inflation. Eventually, the money could make its way out of the stock market, adversely affecting Gautam Adani’s portfolio. 

Who do you think can sustain their positions in the long term? Can Adani’s debt dampen his chances of being one of the richest people in the world? Let us know in the comment section available in the marketfeed app.