NEW DELHI/MUMBAI, Feb 2 (Reuters) – Adani Group’s market losses surged to more than $100 trillion and raised concerns about their potential systemic impact on Thursday, days after its flagship company abandoned a $2.5 billion share offer. in one
The withdrawal of a share sale in Adani Enterprises ( ADEL.NS ) is a dramatic setback for founder Gautam Adani, a school-leaver-turned-billionaire whose wealth has risen rapidly in recent years but faltered last week after a brief U.S. residency. The salesman Hindenburg published a critical research report.
Adani shares plunged after the share sale was suspended, opposition MPs called for a wider investigation and the central bank swung into action to check the banks’ exposure.
Citigroup’s ( CN ) wealth unit has stopped providing margin loans to its clients against Adani Group securities and reduced its loan-to-value ratio to zero against Adani securities on Thursday, a source said. .
Adani has forged partnerships with foreign giants such as France’s TotalEnergies ( TTEF.PA ) and attracted investors such as Abu Dhabi’s International Holding Company as it pursues a global expansion from ports to the energy sector.
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Adani on Wednesday called off the share sale as the share rout deepened due to short sellers Hindenburg, despite the offer being fully subscribed.
“Adani may have started a crisis of confidence in Indian equities which could have wider market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Shares of Adani Enterprises fell nearly 23% on Thursday, the lowest since March 2022.
Other group companies also lost more, with Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) and Adani Ports and Special Economic Zone (APSE.NS) down 10%. in companies throw away 5%
Since Hindenburg’s January 24th report, the companies in the group have lost almost their combined market value. Adani Enterprises – described as Adani’s business incubator – has lost $24 trillion in market capitalisation.
Adani, 60, is no longer Asia’s richest person, dropping to 16th in the world’s richest list after his net worth nearly halved to $66 trillion in a week, according to the Forbes list. Adani was previously third on the list, alongside billionaires Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries ( RELI.NS ) is currently the richest person in Asia.
Wider concerns
The decline in Adani’s shares has raised concerns about the possibility of a wider impact on India’s financial system.
The central bank has asked local banks for details on their exposure to the Adani Group, government and banking sources told Reuters on Thursday.
CLSA estimates that Indian banks were exposed to about 40% of the Adani Group’s $24.5 billion debt in the year to March 2022. read more
“We see the market losing confidence in gauging where the bottom might be and while there will be bounces in short covering, we expect more fundamental downside risks as more private banks cut or reduce margin,” Monica said. Hsiao, chief investment officer at Hong Kong-based credit fund Triada Capital.
In New Delhi, opposition lawmakers tabled notes in parliament to discuss the US short sellers report.
The Congress Party demanded the formation of a Joint Parliamentary Committee or the Supreme Court to oversee the inquiry into the matter. Some MPs shouted anti-Adani slogans inside the parliament, which adjourned for the day.
ADANI VS HINDENBURG
Adani made $13.8 billion in acquisitions in 2022, Dealogic data showed, the largest ever and more than double the previous year.
The canceled fundraising was critical for Adani, which said it would use $1.33 billion to fund green hydrogen projects, airport facilities and green highways, and $508 million to pay down debt at some units.
Last week the Hindenburg report exposed the improper use of offshore tax havens and share manipulation by the Adani Group. He was also concerned about high debt and the valuations of Adani’s seven listed companies.
The Adani Group has denied the allegations, saying the short-seller’s allegations of stock manipulation were “baseless” and stemmed from ignorance of Indian law.
He said the group has always made the necessary regulatory disclosures.
Adani managed to secure subscriptions for the share sale on Tuesday, even though the market price of the shares was below the issue offer price.
Maybank Securities and the Abu Dhabi Investment Authority bid for the anchor portion of the issue — investments that Adani will now repay.
In a late-night announcement on Wednesday, the group’s founder said he was withdrawing the share sale in light of the drop in the share price, adding that his board “would not be morally right to proceed with the matter”.
Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Mehta, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; Written by Aditya Kalra; Editing by Muralikumar Anantharaman and Jason Neely
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