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Adani Enterprises Has Not Crashed 80%. It's Been Demerged.

Adani Enterprises seems to have fallen big time. Looking at the stock price, you wonder if Modi’s magic has completely collapsed!

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But it’s not like that.

Adani Enterprises has been “demerged”, in a weird sort of way.

Adani Enterprises owned some stuff that were related to ports, power, and transmission. These, they decided, belong in specific companies. Adani ports and Adani Power are already listed entities, so the power plants and port operations move to those companies.

Adani Enterprises had investments in the Belekeri port in Karnataka, and also owned a big stake in Adani ports. This goes back into the ports business. In exchange, Adani Enterprises shareholders get shares of Adani ports (14,123 shares of Adani Ports for 10,000 shares of Adani Enterprises).

Adani Enterprises also had power assets and ownership they will pass on to Adani Power. Shareholders of Adani Enterprises will get 18,596 shares of Adani Power for every 10,000 shares in Adani Enterprises.

Further there’s a third company – Adani Transmission. This will be separately listed (probably in a few days). All shareholders of Adani Enterprises get one share of Adani Transmission.

Wait, I don’t have 10,000 shares!

You need to stand on the bench and say sorry to Adani Uncle.

No, I’m kidding. But I hope you knew that. I’m supposed to be all formal and all and sometimes in the middle of complicated paragraphs it just gets to me.

Anyways, if you own less, don’t fret. If you own 10 shares of Adani Enteprises, you’ll get:

  • 14 shares of Adani Ports
  • 18 shares of Adani Power
  • 10 shares of Adani Transmission

And the fractions will be sold and the money paid to you at a later date.

So why did Adani Enterprises Fall 80%?

Imagine you held 10,000 shares yesterday. It’s very easy to imagine such things. It’s price was Rs. 637 so you had Rs. 63,70,000.

Now you have:

  • 10,000 Adani Enterprises at Rs. 120 = Rs. 12,00,000
  • 14,123 Adani Ports at 293 = Rs. 41,38,039
  • 18,596 Adani Power at 34 = Rs. 6,32,264
  • 10,000 Adani transmission at a price we don’t know yet.

The three listed firm ownership adds up to 59,70,303. If you assume Adani transmission lists at Rs. 40 or so, you will be “even” on the investment.

(Remember that stocks have fallen a lot today. If Adani were to have fallen 4%, then yesterday’s investment should have fallen to Rs. 61,20,000 or so anyhow – so the difference is even smaller).

The point here is: even if the share has fallen 80%, the amount of money you have lost will not be anywhere close – it will probably have dropped 3-4% along with the market today, that’s all.

Note: We will fix our charting software for Adani Enterprises, and the Modi Index for this soon.