Adani Group On An Expansion Spree After Strong Recovery, Says Jefferies

The Adani Group is on an expansion spree, with a potential capital expenditure of $90 billion over the next decade, after surging back from the Hindenburg lows, according to Jefferies.

During the last financial year, the billionaire Gautam Adani-owned group of companies focused on containing debt, reducing the founders' share pledge, the brokerage said in a May 30 note.

The group's Ebitda rose 40% year-on-year in fiscal 2024, it raised fresh funds from investors, promoters increased stakes in group companies, and group market capitalisation rebounded, Jefferies noted. "The group is back on an expansion spree and eyeing $90 billion in capex over the next decade."

Jefferies has maintained its 'buy' rating on all four Adani companies it covers.

Here is what the brokerage has to say about the companies.

• The brokerage maintained 'buy' with a target price of Rs 3,800 per share.

• Leverage remained contained at three times financial year 2023-2024.

• Company eyes increase in capex over next years to scale up new businesses with net debt/Ebitda remaining contained below 5 times.

• Capex includes Rs 50,000 crore capital expenditure on Adani New Industries Ltd. and airport business, Rs 12,000 crore on roads, Rs 10,000 crore on new PVC project and remaining in other projects.

• Management doesn’t foresee net debt/Ebitda crossing ~5 times while doing capex.

• The brokerage maintained a 'buy', with a target price of Rs 1,640 per share.

• Ebitda was 5% lower than expectations in the fourth quarter of fiscal 2024, as realisations were tad lower.

• Capex prudence and return focus remain.

• Market share gains continue, with dedicated freight corridor commissioning at Mundra also helping.

• In the brokerage's view, logistics potential is the sweetener.

• The brokerage maintained a 'buy', with a target price of Rs 1,365 per share.

• Ebitda was 9% above estimates in the fourth-quarter of fiscal 2024, on new transmission line addition during the year.

• The management believes in minimising volatility in its asset base across parameters.

• Debt is being refinanced and raised to match the life of the respective asset at a fixed rate as far as possible.

• Vendor back-to-back arrangements to limit the impact of commodity price changes as far as possible.

• The brokerage maintains a 'buy' rating, with a target price of Rs 735 per share.

• Management reiterated that capital expansion timelines are on track.

• Efficiency capital expenditure, supported by a robust balance sheet and group adjacencies, should drive a decline in the cost curve.

• The brokerage believes that cost initiatives by industry leaders will phase out inefficient players, driving consolidation.

• Following Q4, the brokerage maintains FY25 consolidated EBITDA estimates while raising FY26 by 5%.

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