Is Aswath Damodaran right about the valuation of Adani Enterprises? Here's what Basant Maheshwari says

 

Describing Ashwath Damodaran as a well-known investor, financial advisor Basant Maheshwari has said that the latter's problem is that he converts everything to MS Excel. However, the stock market does not obey Excel calculations. Maheshwari said, it runs on emotions.

Maheshwari was referring to the valuation of Adani shares by Aswat Damodaran. Damodaran had earlier said that Adani Enterprises' stock was valued at $53 billion. Damodaran said the stock "values at approximately ₹947 per share, with upbeat assumptions on revenue growth and operating margins, and without including any Hindenburg allegations of fraud and malfeasance".

Maheshwari also spoke about the accuracy of Damodaran's assessment. He mentioned US-based Peloton, which was in high demand during the lockdown when people bought a lot of sports equipment. When Damodaran predicted it would come down to $19, Maheshwari said, its share was around $28 and it did.


Maheshwari recalled when Damodaran was right about Zomato. During the launch of its IPO, the cost was around ₹150. Damodaran said that the actual value of the stock was ₹41. He was accurate that time too, Maheshwari said.

However, Basant Maheshwari believes that Ashwath Damodaran's prediction during the bear market is correct. Damodaran's predictions are often wrong in bull markets, he added. Maheshwari said Damodaran's data did not reflect market sentiment.

"If it's a deep bear market, he'll be right. If it's a bull market, he'll be wrong."

Meanwhile, SBI's overall credit exposure to the Adani group is very manageable given its large general provisioning reserves of ₹338 billion or 1% of net loans, according to a study released on February 7 by CreditSights, a part of Fitch Ratings. Very manageable considering the buffer.


According to SBI chairman Dinesh Kumar Khara, the bank's overall exposure to the group stood at 0.9% of its total loan book, or roughly Rs 270 billion.

"Do not view credit risk as an issue for Adani Group given the strong general provisioning reserve buffer of State Bank of India (SBI)," said CreditSites' note.