Abu Dhabi-based IHC Increases Stake in Adani Enterprises, Stock Jumps 4%

Abu Dhabi's International Holding Company (IHC) has raised its stake in Adani Enterprises, leading to a surge in investor confidence and reaffirming its faith in the Indian conglomerate's growth prospects. On Wednesday, the share price of Adani Enterprises (AEL) jumped more than 3% driven by the news of IHC increasing its stake in the company to above 5%.

IHC's subsidiary, Green Vitality RSC Ltd., along with its affiliated entities, Green Enterprises Investment Holding RSC Ltd. and Green Energy Investment Holding RSC Ltd., acquired an additional 0.06 percent stake in AEL. This move raised their combined shareholding to 5.04%  in Adani Enterprises. Based on the previous day's closing price, the total value of IHC's holding in the flagship company of the Adani Group reached approximately Rs 14,000 crore.

IHC initially invested $2 billion in three Adani companies, namely Adani Green Energy, Adani Energy Solutions, and Adani Enterprises, in May 2022. However, the recent stake purchase focuses exclusively on Adani Enterprises.

IHC's Conviction in AEL's Ventures

IHC expressed its conviction in Adani Enterprises' incubation model, which includes ventures in airports, data centers, green hydrogen, and various other sectors. IHC believes that these ventures are strategically poised to capitalize on India's robust growth journey.

This development comes shortly after IHC announced the sale of its stakes in two other Adani Group companies. In a portfolio rebalancing strategy, IHC sold its 1.26% stake in Adani Green Energy Ltd and its 1.41% stake in Adani Energy Solutions (Adani Transmission). Nevertheless, IHC remains committed to exploring unique investment opportunities in India. 

Adani Group welcomed IHC's decision to increase its investment in Adani Enterprises, they view it as validation of AEL's position as a global leader in incubating new businesses, especially in sustainable infrastructure, equitable energy transition, and global aviation infrastructure. 

Stock Performance and Global Investor Confidence

As of the previous session, Adani Enterprises' shares closed at Rs 2,387.10, registering a 1.11 percent decrease for the day. Despite a 37.86 percent year-to-date decline, the stock has shown a robust 40 percent growth in the last six months. Technical indicators, such as the relative strength index (RSI) at 38.2, suggest that the stock is currently neither overbought nor oversold.

Despite earlier challenges and controversies, global investors are gradually returning to the Adani conglomerate. French oil major Total Energies recently invested $300 million in Adani Green Energy to form a joint venture for the development of wind and solar farms. Qatar Investment Authority (QIA) also invested $500 million for a 2.7% stake in Adani Green Energy. In August investment firm GQG Partners acquired an 8.1% stake in Adani Power for $1.1 billion.

Adani Enterprises Q1FY24

For the June quarter, Adani Enterprises reported a 44% jump in year-on-year growth in net profit, totaling ₹674 crore. However, the company's revenue declined 38% YoY, and consolidated total income for the quarter reached ₹25,810 crore. Notably, the company's consolidated EBIDTA (Earnings before interest, taxes, depreciation, and amortization) surged 47% to reach ₹2,896 crores, driven by strong operational performance. Other income saw a notable increase, rising to ₹371.5 crore during the June quarter, compared to ₹222 crores in the same period the previous year, which contributed significantly to the growth in net profit.

Conclusion

IHC's increased stake in Adani Enterprises signifies growing confidence in the company's incubation model and India's economic potential. This development holds promising implications for the Adani Group and its stakeholders, as it continues to expand its presence in various sectors.