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UBS Investment Research
Adani Enterprises
I mpact of Karnataka Lokayukta report
Event: State Lokayukta names AEL for involvement in illegal exports
News reports suggest that Adani Enterprises (AEL) has been named in the
Karnataka Lokayukta report for shipping out iron ore beyond permissible limits
from the Belekeri port terminal (in the state of Karnataka, operated by AEL and
not Mundra Port) during the period 2006-11 (this port had three other operators in
addition to AEL and all have been named in the report). The Lokayukta report
suggests punitive action against the company including cancellation of the lease
granted at the Belekeri port.
Impact: company says port operations conducted as per permissible laws
The AEL stock price corrected by ~21% on Friday. In a filing with the stock
exchanges on Saturday, the company has stated that- 1) It had discontinued
operations at the Belekeri port since June-10, 2) the operations at the port were
conducted as per permissible laws, 3) it has had no opportunity to make any
representations and the allegations are unilateral, 4) it does not operate any iron-ore
mine in the country and 5) any illegal gratification cannot be attributed to AEL as
it has merely been a port operator (and never had any interest in the cargo).
Action: maintain Neutral rating based on valuations
There is limited information available currently on the issue and the news flow is
likely to impact sentiment. The Lokayukta is an anti-corruption ombudsman
organization at the state level and is only an advisory body to the government.
Valuation: maintain PT of Rs645
We have an SOTP based price target of Rs645
Adani Enterprises
Founded in 1988 by Gautam S Adani, Adani Enterprises is the flagship
company of the Adani Group. It has several businesses such as power generation
and trading, coal mining and trading, edible oil manufacturing, agri-logistics and
trading, real estate development, trading in metals, city gas distribution,
bunkering, and oil & gas.
Statement of Risk
The key risks that AEL is exposed to in our view include: 1) Fuel cost from
Indonesia might be higher or availability could be lower, 2) sharp decline in
merchant tariffs, 3) lack of sufficient track record of Chinese power equipment
with Indian coal, 4) execution risks across businesses, especially power and
mining, and 5) lower-than-expected efficiencies in Indian coal mining
operations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Adani Enterprises
I mpact of Karnataka Lokayukta report
Event: State Lokayukta names AEL for involvement in illegal exports
News reports suggest that Adani Enterprises (AEL) has been named in the
Karnataka Lokayukta report for shipping out iron ore beyond permissible limits
from the Belekeri port terminal (in the state of Karnataka, operated by AEL and
not Mundra Port) during the period 2006-11 (this port had three other operators in
addition to AEL and all have been named in the report). The Lokayukta report
suggests punitive action against the company including cancellation of the lease
granted at the Belekeri port.
Impact: company says port operations conducted as per permissible laws
The AEL stock price corrected by ~21% on Friday. In a filing with the stock
exchanges on Saturday, the company has stated that- 1) It had discontinued
operations at the Belekeri port since June-10, 2) the operations at the port were
conducted as per permissible laws, 3) it has had no opportunity to make any
representations and the allegations are unilateral, 4) it does not operate any iron-ore
mine in the country and 5) any illegal gratification cannot be attributed to AEL as
it has merely been a port operator (and never had any interest in the cargo).
Action: maintain Neutral rating based on valuations
There is limited information available currently on the issue and the news flow is
likely to impact sentiment. The Lokayukta is an anti-corruption ombudsman
organization at the state level and is only an advisory body to the government.
Valuation: maintain PT of Rs645
We have an SOTP based price target of Rs645
Adani Enterprises
Founded in 1988 by Gautam S Adani, Adani Enterprises is the flagship
company of the Adani Group. It has several businesses such as power generation
and trading, coal mining and trading, edible oil manufacturing, agri-logistics and
trading, real estate development, trading in metals, city gas distribution,
bunkering, and oil & gas.
Statement of Risk
The key risks that AEL is exposed to in our view include: 1) Fuel cost from
Indonesia might be higher or availability could be lower, 2) sharp decline in
merchant tariffs, 3) lack of sufficient track record of Chinese power equipment
with Indian coal, 4) execution risks across businesses, especially power and
mining, and 5) lower-than-expected efficiencies in Indian coal mining
operations.
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