Gautam Adani closes in on Jeff Bezos with 1,000% stock surge

By Blake Schmidt, Pei Yi Mak, Alexander Sazonov and P R Sanjai

First he became the richest person in Asia. Then his net worth surpassed those of Warren Buffett and Bill Gates. Now he’s fast approaching a level of wealth only rivaled by Jeff Bezos and Elon Musk.

Gautam Adani’s ascent, by about any measure, has been nothing short of remarkable. During a year in which many fortunes around the world have crumbled, his net worth has nearly doubled, increasing $64.8 billion to $141.4 billion and making him the third-richest person on the planet, according to the Bloomberg Billionaires Index.

His surging fortune is due in part to the jump in oil and natural gas prices, which has lifted the MSCI World/Energy Index to a 36 per cent total return in 2022, compared with an 18.4 per cent loss for the broader gauge of global stocks. But even in a period of big gains across the industry, Adani’s firms stand out above the rest, with some share prices more than doubling this year. It’s attracting fresh scrutiny to the valuations of his companies, the leverage embedded throughout his business empire and his ties to the government.

Read | Asia’s richest man Gautam Adani is searching for new group M&A chief

His Adani Green Energy Ltd. and Adani Total Gas Ltd. trade at more than 750 times profit, while Adani Enterprises Ltd. and Adani Transmission Ltd. have valuations north of 400 times. By comparison, Musk’s Tesla Inc. and Bezos’s Amazon Inc. have price-to-earnings ratios of about 100, while fellow billionaire Mukesh Ambani’s Reliance Industries Ltd. trades at 28 times.

Adani, 60, has shifted his conglomerate’s focus in line with what Prime Minister Narendra Modi deems crucial to meeting India’s long-term economic goals. He’s done that in part through a debt-fueled expansion that led Fitch Group unit CreditSights to call his empire “deeply overleveraged” in a report last month.

“Adani has built up an extraordinary fortune through a mix of aggressive risk-taking, rapid debt accumulation and canny political connections,” said James Crabtree, author of “The Billionaire Raj,” a book about India’s wealthy and inequality. “His rapid rise over barely a decade to the summit of India and Asia’s tycoon class represents the possibilities and rampant inequality of India’s new Gilded Age.”

A representative for the Adani Group declined to comment for this story.

Adani, a college dropout who was held for ransom and survived a terror attack, tried his luck in Mumbai’s diamond industry in the early 1980s before turning to coal and ports. He went on to build a business empire spanning everything from airports to data centers, media and cement. Last year, he vowed to invest $70 billion in green energy to become the world’s largest renewable-energy producer.

Judging by the stock market, Adani’s moves have been wildly successful. Shares in some of his companies have climbed more than 1,000 per cent since 2020. That compares with an advance of about 44 per cent for the nation’s benchmark S&P BSE Sensex Index.

Read | Adani Group says not overleaveraged, loans from public sector banks halved

Adani Group shares climbed on Tuesday, with Adani Total Gas and Adani Enterprises up more than 2 per cent.

The sharp gains, particularly as global financial markets waver in the face of higher interest rates, have added to existing worries over opaque shareholder structures and a lack of analyst coverage. By contrast, the dollar bonds for many of the group’s companies have tumbled.

“You don’t know how his market is rising so sharply because there doesn’t seem to be much institutional investor interest,” said Hemindra Hazari, an independent research analyst based in Mumbai.

The CreditSights analysts who warned about the excessive debt levels of Adani’s firms said the founders, known as “promoters” in India, need to inject more equity capital into the companies to reduce leverage on their balance sheets. They also expressed concern that entering new, unrelated businesses that are capital intensive raises its own set of risks.

The Adani Group responded by saying it’s improved its debt metrics over the past decade, with the leverage ratios of its portfolio companies now “healthy” and in line with their respective industries. Net debt has dropped to 3.2 times earnings before interest, taxes, depreciation and amortization from 7.6 times in 2013, the group said. At the same time, stakes pledged for loans have slid from highs in 2020, when a Covid-fueled stock rout pushed Adani and his family to increase collateral.

Despite the skepticism, CreditSights said it drew “comfort” from the group’s strong relationships with banks as well as the administration of Modi, who won reelection in 2019 with almost two-thirds of the votes. Sharon Chen, a Bloomberg Intelligence analyst who covers Adani’s ports and utilities units, said she’s not concerned by the level of leverage and doesn’t expect any funding issues.

“He’s not only on an acquisition spree and banks are willing to fund him,” but he has close ties to the current administration, Hazari said. “As long as this government lasts — and it is expected to last quite a long time — the music will continue.”