BENGALURU, Feb 1 (Reuters) – Shares in Indian tycoon Gautam Adani’s conglomerate fell again on Wednesday as losses at his companies deepened to $86 billion after a short-seller report in the US, where the billionaire also lost his title as the richest in Asia. man.
Wednesday’s stock losses saw Adani fall to 15th on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries Ltd ( RELI.NS ) who ranks ninth with a net worth of $83.7 billion.
Before the critical report on US short-seller Hindenburg, Adani was ranked third.
The losses mark a dramatic setback for Adani, the school-dropout-turned-billionaire whose fortunes have risen rapidly in recent years in line with the stock values of his businesses that include ports, airport, mining, cement and power. Now, the tycoon fights to strengthen his companies and defend his reputation.
The share slides come just a day after Adani Group managed to gather backing from investors for a $2.5 billion share sale for parent company Adani Enterprises ( ADEL.NS ), in what what some see as a seal of confidence among investors in times of crisis.
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A Hindenburg Research report last week alleged the group’s improper use of offshore tax havens and stock manipulation. It also raised concerns about high debt and the valuations of Adani’s seven listed companies.
The group denied the allegations, saying the short-seller’s account of stock manipulation was “baseless” and stemmed from ignorance of Indian law. It regularly makes the required regulatory disclosures, it added.
Shares in Adani Enterprises, often described as the incubator of Adani businesses, fell 28% on Wednesday, bringing its losses since the Hindenburg report to more than $18 billion. Adani Ports and Special Economic Zone ( APSE.NS ) fell 19%. Both stocks marked their worst day ever.
“The kind of fall we are seeing in Adani stocks is scary,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.
Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) fell 5% each, and Adani Total Gas (ADAG.NS) fell 10%, with all three falling on their day- daily price limits. Adani Transmission (ADAI.NS) fell 3% and Adani Green Energy (ADNA.NS) 5.6%.
Adani Total Gas, a joint venture with France’s Total ( TTEF.PA ), was the biggest casualty of the short seller’s report, losing about $27 billion.
Dollar bonds issued by Adani entities also continued their slide on Wednesday. Adani Ports’ US dollar-denominated bonds maturing in February 2031 led the losses, falling 3.59 cents to 67.58 cents.
Underscoring the nervousness in some quarters, Bloomberg reported that Credit Suisse ( CSGN.S ) has stopped accepting bonds of Adani group companies as collateral for margin loans to private bank client.
Deven Choksey, managing director of KRChoksey Shares and Securities, said this was a big reason for the share’s slides on Wednesday.
[1/5] Indian billionaire Gautam Adani speaks during an inauguration ceremony after Adani Group completed the purchase of Haifa Port in Haifa port, Israel January 31, 2023. REUTERS/Amir Cohen/File Photo
Credit Suisse had no immediate comment.
After losing $86 billion in recent days – equivalent to 16% of India’s annual budget spending of $550 billion announced on Wednesday – the seven listed entities of the Adani Group now have a combined with a market capitalization of nearly $131 billion.
Trust is broken
“There was a little bounce yesterday after the share sale went through, after it seemed impossible at one point, but now the weak market sentiment has become visible again after the bombshell Hindenburg report,” said Ambareesh Baliga, a Mumbai- based independent market analyst.
“With stocks falling despite Adani’s rebuttal, it clearly shows some damage to investor sentiment. It will take time to stabilise,” Baliga added.
Asked if he was worried about the massive losses in India’s equity markets due to the plunge in Adani Group shares, Economic Affairs Secretary Ajay Seth said the government “does not comment on issues relating to a particular company”.
India’s benchmark Nifty index fell 2.7% since the Hindenburg report. The data also showed that foreign investors sold a net $1.5 billion worth of Indian equities after the Hindenburg report – the biggest outflow in four consecutive days since Sept.
Scrutiny of the conglomerate is intensifying, with an Australian regulator saying on Wednesday it would review Hindenburg’s allegations to determine whether further inquiries are warranted.
India’s market regulator, which oversees conglomerate deals, will add Hindenburg’s report to its own preliminary investigation, sources told Reuters. The regulator has not commented on the Adani-Hindenburg saga.
Indian credit rating agency ICRA Ltd, a unit of Moody’s Investors Service, said on Wednesday it was monitoring the impact of the developments on Adani Group’s rated portfolio. It added that while the large debt-financed capital expenditure plan is a “major challenge”, some of it is discretionary in nature and may be delayed, depending on the liquidity position.
India’s state-run Life Insurance Corporation (LIC) ( LIFI.NS ) said on Monday it would seek clarifications from Adani’s management on the retailer’s short report. LIC had a 4.23% stake in Adani Enterprises at the end of December and more than 9% in Adani Ports and Special Economic Zone. The insurance giant was also a key investor in Adani’s recent share sale.
Shares of cement companies ACC ( ACC.NS ) and Ambuja Cements ( ABUJ.NS ), which Adani Group bought from Switzerland’s Holcim ( HOLN.S ) for $10.5 billion last year, fell to 6.2% and 16.7%, respectively.
Hindenburg said in its report that it has shorted US-bonds and non-Indian traded derivatives of the Adani Group.
Reporting by Chris Thomas in Bengaluru and Aditya Kalra and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran, Nikunj Ohri and Sethuraman NR; Editing by Edwina Gibbs and Mark Potter
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