Aswath Damodaran dissects Adani crisis: What’s the fair value of this ‘competent’ infra play?

“I am puzzled that Hindenburg’s short thesis spends as much time as it does trying to convince us that the company is over levered. Being over levered is not a con game,” wrote Aswath Damodaran in a blog

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Valuation guru Aswath Damodaran believes that Adani Group, despite all its flaws, remains competent in India’s infrastructure space that’s full of incompetent players. He pegs the fair value for Adani Enterprises at Rs 947.

“It is possible that Hindenburg was indulging in hyperbole when it described Adani to be ‘the biggest con’ in history. I am puzzled that Hindenburg’s short thesis spends as much time as it does trying to convince us that the company is over-levered. Being over-levered is not a con game, but a risk that equity investors in many investments take to increase their returns,” Damodaran wrote in his blog on Sunday.

While valuing the stock at only Rs 947 apiece, he factored in upbeat assumptions on revenue growth and operating margins. That is a 38 percent downside from the stock’s Friday close of Rs 1,531.

The reason behind this, he says, is that the company’s profitability has lagged, partly because investments take time to pay off and partly because it is in low-margin businesses.