What’s the further downward risk?

From a peak of INR 24.33 trillion in last year Adani group’s market capitalisation (Mcap) has already nose-dived more than 70% to Rs 7.16 trillion. Is this the end of the slide, or is it going to fall further?

A close scrutiny of the Adani group stocks reveals that, in the first decade during which the group had just one listed company, Adanis’ P/E multiples were in single digits which was far below the market average. In the second decade, when the group started unlocking the value of its closely-held companies, the discounting vastly improved.

In the third decade, when the count of the group’s listed entities increased from 3 to 10, the P/E multiples shot up to three digits which were many times more than the market average. The current slide has corrected the group’s P/E from 147x to 43x. However, this is still far higher than the current market composite P/E of 25x.

At the current market composite P/E, the Adani group’s M-cap should be about INR 4.2 trillion (Rs 4,20,000 Cr). In other words, the group’s M-cap may possibly contract another 40% (about Rs 3,00,000 Cr) under the present circumstances.