NEW DELHI/MUMBAI: Adani’s market losses exceeded $100 billion on Thursday, raising concerns about a possible systemic impact a day after the Indian conglomerate’s flagship firm abandoned a $2.5 billion stock offering.
Another challenge for Adani came on Thursday when S&P Dow Jones Indices said it would remove Adani Enterprises from widely used sustainability indices, effective February 7, which makes the shares less common for sustainability-minded funds. Will make it attractive
In addition, the National Stock Exchange of India said it has placed Adani Enterprises, Adani Ports and Ambuja Cements on additional watch on shares.
However, Adani Group Chairman Gautam Adani is in talks with lenders to prepay and issue pledged shares to restore confidence in the financial health of his group, Bloomberg News reported on Thursday.
Adani Enterprises’ sudden return to share sales is a dramatic blow to founder Adani, the school-dropout billionaire whose fortunes have risen sharply in recent years, but after a critical research report by a US-based short-seller Fell off in just a week. Hindenburg Research.
Read also: Who is the Hindenburg firm targeting India’s Adani?
The cancellation of the sale of shares sent shockwaves through the markets, politics and business. Adani’s shares plummeted, opposition lawmakers called for a wider investigation and India’s central bank swung into action to investigate the exposure of banks in the group. Meanwhile, Citigroup’s wealth unit stopped offering margin loans to customers against Adani Group securities.
The crisis marks a dramatic turn of fortune for Adani, which in recent years has forged partnerships with foreign giants such as France’s Total Energy and attracted investors such as Abu Dhabi’s International Holding Co., as it moves from ports to power. Pursuing global expansion.
In a surprise move late on Wednesday, Adani called off the share sale as criticisms of Hindenburg accelerated the fall of shares, despite it being fully subscribed the day before.
“Adani may have triggered a crisis of confidence in Indian stocks and this could have wider market implications,” said Ipek Ozkaredskaya, senior market analyst at Swissquote Bank.
Shares of Adani Enterprises plunged 27 per cent on Thursday, closing at their lowest level since March 2022.
Other group companies also lost further ground, with Adani Total Gas, Adani Green Energy and Adani Transmission shedding 10 per cent each, while Adani Ports and Special Economic Zone declined around 7 per cent.
Since the Hindenburg report on January 24, the group’s companies have lost nearly half of their combined market value. Adani Enterprises – described as an incubator of Adani’s businesses – has lost $26 billion in market capitalisation.
Adani is no longer even Asia’s richest man after slipping to 16th in the Forbes ranking of the world’s richest people, his net worth nearly halving in a week to $64.6 billion.
The 60-year-old was third on the list after billionaire Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries is now the richest person in Asia.
Mukesh Ambani, chairman of oil-to-telecom conglomerate Reliance Industries, is now the richest man in Asia. (AFP File)
wider concerns
Adani’s falling stock and bond prices have raised concerns about the potential for wider ramifications for India’s financial system.
Government and banking sources told Reuters on Thursday that India’s central bank has asked local banks for details of their exposure to the Adani group.
CLSA estimates that about 40 per cent of the Adani Group’s $24.5 billion in loans in the financial year till March 2022 were given to Indian banks.
Dollar bonds issued by Adani group entities extended losses on Thursday, with Adani Green Energy’s notes falling to a record low. Reuters, citing sources, reported that Adani group entities made fixed coupon payments on outstanding US dollar-denominated bonds on Thursday.
“We see the market losing confidence in how to measure where the bottom could be, and although there will be short covering rebounds, we expect more fundamental downside risk in the margins of more private banks,” said Monika. Cuts or reductions are likely.” Hsiao, chief investment officer at Triada Capital, a Hong Kong-based credit fund.
In New Delhi, opposition MPs gave a notice in Parliament demanding a discussion on the short-seller report.
The Congress party called for a joint parliamentary committee or a Supreme Court-monitored probe, while some MPs raised anti-Adani slogans inside Parliament, which was adjourned for the day.
Adani vs Hindenburg
Data from Dealogic shows that Adani will see acquisitions worth $13.8 billion in 2022, the highest ever and more than double that of last year.
The canceled fundraising was significant for Adani, which said it would use $1.33 billion for green hydrogen projects, airport facilities and greenfield expressways, and $508 million to repay debt at some units.
Hindenburg Report Alleged improper use of offshore tax havens and stock manipulation by the Adani group. It also raised concerns about the high debt and valuation of seven listed Adani companies.
Adani Group has denied the allegations, saying that the allegation of stock manipulation had “no basis” and stemmed from ignorance of Indian law. It said it has always made necessary regulatory disclosures.
Adani managed to get the share sale subscription on Tuesday even though the market price of the stock was lower than the offer price of the issue. Maybank Securities and Abu Dhabi Investment Authority had bid for the anchor portion of the issue, the investment will now be reimbursed by Adani.
Late on Wednesday, the group’s founder said he was withdrawing the sale in view of falling share prices, adding that his board felt it “would not be ethically correct” to go ahead with it.