Adani vs Hindenburg: Indian-American NYU professor calls firm overvalued, won't buy its shares

The Hindenburg Research report calling Adani's meteoric rise the biggest con in corporate history, has shaken up India's stock markets. As it raised 89 questions against the conglomerate, the report focused on Adani's use of shell firms to jack up prices of stocks, which were later used to borrow more debt. As Adani's defenders are decribing Hindenburg's allegations as a conspiracy against Indian markets, Indian-American NYU Professor Aswath Damodaran has described Adani's stocks as overpriced.

Calls Adani's stock overpriced

The valuation guru valued Adani Enterprises at Rs 947 per share, which is almost 40 per cent lower than its current market price. He argued that considering fundamentals such as cash flow and risks, Adani Enterprises has been priced too high. Damodaran added that the firm lagging behind in profit and lower margins in its sector, are reasons behind this gap.

Competent in an Indian market full of frauds?

But at the same time he disagreed with Hindenburg calling Adani being over-leveraged a con. According to him, being over-leveraged is just a risk that investors take to squeeze out higher returns. Although he called Adani competent, Damodaran juxtaposed the firm against an Indian market full of frauds and incompetent players.

Still won't buy family-run group's shares

The Hindenburg Report also highlighted how all key positions in the Adani group are held by family members, reducing transparency. Damodaran also wrote that family businesses have higher risk of opacity, and that the Adanis were able to exploit weaknesses of the Indian market to their advantage.

Although he didn't agree with Hindenburg's description, Damodaran maintained that he won't buy Adani shares, which are overpriced even if the short-seller's observations aren't considered. He also cited Adani being a family business for his view, since an investor would have to buy into cross-holdings and transactions between family-owned firms.