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Indian Market Rout Intensifies After Adani Drops $2.5bn Share Sale

The share plunge of Adani listed companies topped $100 billion on Thursday after the group canned its $2.5-billion share sale – a move that raised more questions over the group’s status and dealings

India's Supreme Court on Thursday ordered the market regulator to probe Adani group dealings and any lapses in securities law or discloses.
This file photo from April 2022 shows billionaire Gautam Adani addressing the Bengal Global Business Summit in Kolkata. Hindenburg claimed the group was on a 'precarious financial footing' and questioned its use of opaque tax havens. Image: Rupak De Chowdhuri, Reuters.


The Adani Group’s decision to abandon its $2.5-billion share sale has worsened the Indian conglomerate’s market rout. Over $100 billion has now been wiped off stock values of its seven listed companies over the past week.

The group’s flagship, Adani Enterprises, plummeted 25% again on Thursday after the Adani board called off the share offer late on Wednesday.

And its six other entities also sank, with Adani Ports and SEZ, Adani Total Gas, Adani Green Energy and Adani Transmission falling 10% each, while Adani Power and Adani Wilmar both dropped 5%.

The plunge in company share prices on Wednesday had meant participating investors would be sitting on immediate and large losses.

The group said investors’ money would be refunded, however the move also undermined Adani’s ability to reduce its debt level.



Adani No Longer Asia’s Richest, Market Rout Hits $86 Billion


Concern over wider impact

Gautam Adani has fallen from Asia’s richest man and no-3 on Forbes rich list to 16th. And Adani’s plummeting stocks have raised concerns about the likelihood of a wider impact on India’s financial system.

“The selling may intensify in the afternoon session, as we have seen before. Unless Adani is able to regain the confidence of institutional investors, stocks will be in freefall,” Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities, said.

India’s central bank has asked local banks for details of their exposure to the Adani group of companies, government and banking sources told Reuters on Thursday.

CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion rupees ($24.5 billion) of Adani group’s debt in the fiscal year to March 2022.

Citigroup’s wealth unit has stopped extending margin loans to its clients against securities of Adani group and decided to cut the loan-to-value ratio for credit against Adani securities to zero on Thursday, a source said.

In New Delhi, opposition lawmakers submitted notices in the Indian parliament, demanding discussion on the US short-seller’s report. The Congress party’s lawmaker, Manish Tewari, said he will demand a Joint Parliamentary Committee investigation into the matter, ANI reported.


‘Bought into its own share sale’

Meanwhile, Forbes has questioned whether Adani “bought into its own $2.5 billion share sale”. It noted claims that two companies accused by Hindenburg Research of assisting Adani Group in alleged stock market manipulation were also underwriters in Adani Enterprises’ $2.5-billion share offering.

Forbes said in a report yesterday (US time) that Elara Capital (India) Private Ltd, a subsidiary of London-based investment firm Elara Capital, and Monarch Networth Capital, an Indian brokerage, were two of the 10 underwriters named by Adani Enterprises in its offer agreement for the sale.

It noted that Hindenburg documented alleged links between Elara Capital and Monarch Networth to Adani entities, and said: “The involvement of Elara Capital and Monarch Networth Capital, however, raises questions about whether any of Adani’s personal funds were deployed to help meet the $2.5 billion target.”

The Adani Group denied any connection to Elara Capital funds in its 413-page rebuttal of the Hindenburg report, and said it teamed up with Monarch because of their capacity to tap into retail markets.


Cancellation ‘morally correct’

The share market drama was sparked by a report last week by Hindenburg Research, a US short-seller, which condemned the group’s use of tax havens and its heavy level of debt.

By late Wednesday it had wiped $86 billion off the value of seven listed Adani Group companies – and cast a shadow over Indian regulators’ market oversight.

In a statement to Indian exchanges, Adani said: “Today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct.

“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans,” the billionaire said.

Adani, whose global business interests span ports, airports, mining, cement and power, is battling to stabilise his companies and defend his reputation.

“Once the market stabilises, we will review our capital market strategy,” he added.

On Wednesday, after the Adani share sale closed, his group company stocks plummeted, with shares in Adani Enterprises plunging 28% and others also seeing sharp cuts.

Adani Group has said the Hindenburg claim of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.

Early on Thursday, Adani said in a video address the “interest of my investors is paramount and everything is secondary. Hence, to insulate the investors from potential losses we have withdrawn” the share sale.


‘It raises more questions’

“The pain hitting Adani companies was crippling, so the news that share sale is called off is troubling, as this was supposed to show the company is still believed in by its high net-worth investors,” Edward Moya, a New York-based senior market analyst at brokerage OANDA, said.

“To go through this exercise of a share sale and to call it off raises more questions.”

Early on Wednesday Reuters revealed that India’s market regulator was examining the rout in the shares of Adani Group, looking into several of the allegations made by Hindenburg Research, and any potential irregularities in a share sale by Adani Enterprises.

Hindenburg had disclosed that it holds short positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments.


Critical fundraising

The fundraising was critical for Adani, not just because it would have helped cut his group’s debt, but also because it was being seen by some as a gauge of confidence as he faced the biggest business and reputational challenge of his career.

Adani Group was working with its bankers to refund the proceeds received in the secondary share sale of Adani Enterprises. Anchor investors who had supported the issue included Maybank Securities and Abu Dhabi Investment Authority.

Adani Group had on Tuesday mustered enough support from investors for the share sale to proceed, even when the Adani Enterprises stock price in Mumbai markets traded below the offer price of the share sale.


  • Reuters with additional reporting and editing by Jim Pollard


NOTE: The headline on this report was updated and further details added to the text about the latest market plunge on Thursday February 2, 2023.



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Indian Regulators to Probe Adani Group After Hindenburg Report


Hindenburg Says ‘Sue in US if Serious’ After Adani Threatens to Sue


Adani Mulling Action Against ‘Malicious’ Hindenburg Report


Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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