It has taken nearly three weeks but Adani group shares finally surged on Tuesday, a day after the Indian conglomerate moved to repay some loans.
The rally comes after Adani’s seven listed companies lost more than $113 billion – over half the group’s previous market value – since a report by Hindenburg Research in the US that was sharply critical of its use of tax havens and high levels of debt.
The group, led by billionaire Gautam Adani, said on Monday it is pre-paying $1.11 billion of loans on shares ahead of their maturity in 2024 due to recent market volatility.
Separately, JPMorgan said the group companies were still eligible for inclusion in the bank’s bond indexes.
Those two factors were having a positive impact on stocks, Anita Gandhi, director at Arihant Capital Markets, said. “Also aiding the rise is the sharp correction in the group stocks, which have made them attractive,” she said.
Meanwhile, Indian bourse National Stock Exchange of India (NSE) revised on Monday the maximum daily permissible limit for price moves for Adani Green Energy and Adani Transmission to 5% from 10%, according to data on its website.
Adani Enterprises up 15%
The group’s flagship company, Adani Enterprises jumped 20% on Tuesday morning and the stock was trading 15% higher in late trading on Tuesday.
The cumulative losses of Adani group’s seven listed companies still stand at about $109 billion, despite Adani Ports and SEZ also gaining 2.6% on Tuesday and Adani Wilmar adding 5%.
The recovery didn’t reach Adani Green Energy, Adani Total Gas or Adani Power, all of which were 5% lower on the day.
Many Adani group companies report results this week. Adani Ports posted a lower quarterly profit on Tuesday as foreign exchange losses soared, and said it will pay back 50 billion rupees ($605 million) – or 13% of its net debt – in the new fiscal year from April.
While some stocks were recovering, the essence of criticism in the Hindenburg report on January 24, which alleged that the group engaged in stock manipulation via the use of opaque tax havens and that it has a “precarious” debt level, appeared to have gained some traction, until an independent source can clarify matters.
Adani group has denied the allegations, saying it complies with all laws and has made necessary disclosures over time.
Adani has a total notional value of $7.7 billion in the JPMorgan’s CEMBI and JACI indexes, the bank said in a note on Monday.
Besides CEMBI and JACI, Adani’s dollar bonds remain eligible to be part of JPMorgan’s ESG Global Corporate Index (JESG), an integrated environmental, social, and governance corporate benchmark covering investment grade and high-yield markets.
The Adani crisis spilled over to the streets on Monday, with hundreds of members of India’s main opposition Congress party protesting and pressing for a probe into Hindenburg’s allegations.
On Tuesday, dozens of activists from its youth wing gathered outside the Life Insurance Corporation’s office in New Delhi, carrying posters questioning why investigating agencies have remained silent.
Spokespeople for Adani say its core fundamentals are unchanged, but analysts are watching to see if there is an inquiry into the group’s corporate oversight.
Some analysts said on Tuesday that Adani may need to sell some assets to reduce debt, or defer its spending plans because the group’s credibility has taken a hit and it is likely to be more expensive to raise fresh loans, especially from foreign lenders.
“Most of their ambitious projects will have to be heavily scaled back in ambition and timetable, because they will have next to no capacity to raise funds right now,” Tim Buckley, director at Climate Energy Finance, a think-tank that works on financial issues related to transition from fossil fuel to clean energy, was quoted as saying by the BBC.
A number of global funds that specialize in high-yield and distressed-debt situations have bought large amounts of foreign currency bonds of Adani Group firms in the days following the Hindenburg report, according to India’s Economic Times.
It cited several sources and said the funds had bought Adani bonds worth close to $1 billion.
- Reuters with additional editing by Jim Pollard
NOTE: This report was updated on Tuesday February 7, 2023 with details of later trading in Adani companies and Adani Port’s quarterly statement.