Adani Power shares grabbed headlines on September 22 after reportedly crashing nearly 80% in a single session. The sharp drop, however, was not a reflection of panic selling but an adjustment following the company’s first-ever 1:5 stock split. Adjusted for the corporate action, the stock surged nearly 19% to a fresh record high.
Adani Power opened at Rs. 141.80 compared to Friday’s close of Rs. 709.05, giving the illusion of a massive fall. In reality, the share split reduced the face value from Rs. 10 to Rs. 2 and multiplied the total number of shares five times.
A shareholder holding 10 shares worth Rs. 100 each now owns 50 shares valued at Rs. 20 each. The portfolio value remains Rs. 1,000. This technical adjustment explains the fall, even as the stock in adjusted terms hit a 52-week high of Rs. 168.50 on the BSE, up nearly 19% on the day.
Adani Power’s board approved the split in August. The aim was to enhance liquidity and attract retail investors by making the stock more affordable. Following the split, the company’s paid-up equity base expanded from 385.7 crore shares of Rs. 10 each to 1,928.4 crore shares of Rs. 2 each.
A stock split differs from a bonus issue. In a split, the face value of shares is lowered to create more units, but ownership value and dividend entitlements remain unchanged. A bonus issue distributes additional free shares without altering the face value.
The rally follows a favorable ruling from the Securities and Exchange Board of India (SEBI), which has dismissed allegations by Hindenburg Research, the US-based short-seller, who alleged that Adani Group manipulated stock prices through opaque fund routing.
SEBI determined that while there were related-party transactions, they were properly disclosed and were in compliance with regulations, clearing Gautam Adani’s group from any misconduct.
This regulatory clarity has fueled optimism amongst investors, with Adani Power being one of the group’s best-performing since early 2023. The stock has surged more than 380% since its post-Hindenburg lows in February 2023.
Stanley initiated coverage of Adani Power with an ‘overweight’ rating and named it a “top pick.”The brokerage described the company as a case study in corporate turnaround, highlighting the resolution of regulatory hurdles and the completion of value-accretive acquisitions.
It also noted expectations of strong earnings growth driven by timely project completions and new power purchase agreements.
With SEBI’s clean chit, a more liquid share base post-split, and renewed institutional backing, Adani Power looks set to remain in focus. While the stock split does not alter fundamentals, it improves accessibility for retail investors.