A $43-bn jump in Gautam Adani's fortune is fraught with many risks

Adani Total Gas, Adani Enterprises and Adani Transmission 'look extended', Bloomberg Intelligence analysts wrote in a June 10 note

A rally in the stocks of companies controlled by Indian billionaire Gautam Adani has added almost $43 billion to his wealth this year, catapulting him to the spot of the second-richest person in Asia. Some analysts say the gains are fraught with risk.

Adani’s net worth of $76.7 billion got a boost from a 330% jump in Adani Total Gas Ltd., a 235% rise in his conglomerate’s flagship Adani Enterprises Ltd. and a 263% increase in Adani Transmission Ltd. this year. Adani group stocks, especially these three, “look extended,” Bloomberg Intelligence analysts Gaurav Patankar and Nitin Chanduka wrote in a June 10 note after analysing technical indicators.

“Among the biggest foreign investors are a few Mauritius-based funds holding over 95% of assets in these companies,” the analysts wrote. “Such concentrated positions, along with negligible onshore ownership, create asymmetric risk-reward as large investors conspicuously avoid Adani.”

The analysis underscores the vulnerability of the rapid wealth surge Adani has seen in 2021, beating the gains for Warren Buffett and his compatriot Mukesh Ambani. A representative for Adani Group declined to comment immediately.

The overseas funds hold a large chunk of shares, effectively reducing the public float and leaving the stocks prone to volatility, the analysts wrote. Elara India Opportunities Fund, Apms Investment Fund, Cresta Fund, Albula Investment Fund, Lts Investment and Asia Investment Corp. have put more than 95% of their assets in Adani group firms, according to data compiled by Bloomberg Intelligence.

The ports-to-power conglomerate also got a boost after MSCI Inc. included three more Adani firms to its India benchmark index last month, taking the group’s total footprint to five. This leads to mandated buying by investors that track this index.

“Adani stocks trade 150%-200% above 200-day moving averages, and statistically look extended,” Bloomberg Intelligence analysts wrote. “Tesla was 126% above the 200-day when it peaked this year.”