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Adani Enterprises – Logistics + Energy Holdings

December 14, 2009

Adani Enterprises Limited (AEL) is the primary vehicle for the Adani Group’s businesses, with execution being its key strength. It is India’s largest coal trader and owns the country’s highest-selling edible oil brand. The group also built India’s largest private sector multi-product port [MSEZ – Mundra Port].

AEL expects to undertake contract mining for 1.7bn tonnes of coal over a 30-year period. Out of 70mtpa, it has signed contracts for 10mtpa, letters of intent (LOI) for 35mtpa and in-principle approvals for 25mtpa. AEL has taken a resolution to merge the promoter companies that hold the promoter stake in MSEZ with AEL. The valuations and merger ratio have not been decided yet.

Power Business – Merchant power tariffs and earnings momentum in power segment and Additional capacity in the power business will be the Key catalyst.

About 74% of its value will likely be derived from its listed subsidiaries (Adani Power Ltd and MSEZ). AEL will have substantial businesses in its parent entity and will continue to be a play on coal in particular – both contract mining and trading should contribute 17% of estimated value.

Sum of the Parts Valuation as per UBS estimates.
Adani Power Holding – Rs 370
Logistics – Rs 230
Others Edible Oil, Trading, Realty – Rs 70
10% discount for Holding company of Adani Power and Logistics (Mundra Port) = Rs 540

So sum of the parts valuation will be Rs 610 for Adani Enterprises Ltd as per recent UBS estimates.

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