Adani’s market capitalization rose above $100bn on Thursday, raising concerns about its potential impact just a day after the iconic Indian conglomerate withdrew its $2.5bn offering.
The surprise divestment of Adani Enterprises shares marks the return of founder Gautam Adani, the school dropout-turned-billionaire whose wealth has soared in recent years but has fallen just over a week after a scathing report from the United States. dealer Hindenburg Research.
The cancellation of the share sale caused panic in markets, politics and business. Adani’s shares fell, opposition politicians called for a wider investigation and India’s central bank stepped in to review the bank’s exposure to the group.
Meanwhile, Citigroup’s financial unit has stopped lending to clients against Adani Group’s security.
The crisis marks a major shift for Adani, which in recent years has partnered with foreign giants such as France’s TotalEnergies and attracted investors such as Abu Dhabi’s International Holding Company, as it seeks to expand globally from ports to the energy sector.
Surprisingly on Wednesday, Adani suspended the sale of the shares because the stocks caused by Hindenburg’s opposition increased, although they were registered the previous day.
“Enemies may have started a problem of confidence in Indian stocks and that can have a significant impact on the market,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Adani Enterprises shares fell 27 percent on Thursday, closing at their lowest level since March 2022.
Other group companies also lost, with losses of 10 percent at Adani Total Gas, Adani Green Energy and Adani Transmission, while Adani Ports and Special Economic Zone lost about 7 percent.
Since Hindenburg’s report on January 24, the group’s companies have lost nearly half of their market value. Adani Enterprises – described as Adani’s business incubator – has lost $26bn in the stock market.
Adani is no longer Asia’s richest man, dropping to 16th on Forbes’ list of the world’s richest people, with his net worth around half of $64.6bn a week.
The 60-year-old was third on the list, behind billionaires Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries is now the richest man in Asia.
On Thursday, Bloomberg News reported that Adani was in talks with creditors to prepay and release pledged shares as he seeks to restore confidence in his conglomerate’s finances.
The move will see lenders offload some of the assets in Adani Group companies that have pledged as collateral, Bloomberg reported, citing a person familiar with the matter.
The group has not yet received any calls on these pledges and is seeking immediate repayment, according to the report.
The most important thing is to dispel any concerns about the margin calls, Bloomberg said, adding that Adani officials will talk to investors in the coming days and will make full payments on time.
A lot of anxiety
The decline in Adani’s stock and bond prices has raised concerns about the impact on India’s economy.
India’s central bank has asked local banks for details about their exposure to the Adani Group, government and banking sources told Reuters on Thursday.
Market and investment group CLSA estimates that Indian banks met 40% of Adani Group’s $24.5bn debt in the financial year to March 2022.
Dollar bonds issued by Adani Group subsidiaries extended losses on Thursday, with shares of Adani Green Energy Ltd falling sharply. Adani Group’s subsidiaries made the payment of coupons on bonds denominated in US dollars on Thursday, Reuters reported, citing sources.
“We see the market losing confidence in how to know where the bottom may be and although there will be short hedges, we expect the risks presented by the private banks (may) reduce or reduce the margin,” said Monica. Hsiao, chief financial officer of Hong Kong-based credit fund Triada Capital.
In New Delhi, opposition politicians presented a notice to the parliament to discuss the vendor’s summary report.
The Congress Party wants a Joint Parliamentary Committee to be established or an investigation supervised by the Supreme Court, where some MPs shouted hate speech inside the parliament, which was adjourned for the day.
Enemies vs Hindenburg
Adani will earn $13.8bn in 2022, Dealogic data showed, the highest ever and double the previous year.
Achieving the liquidated investment was a priority for Adani, which said it would use $1.33bn to finance greenfield hydrogen projects, airports and greenfield expressways, and $508m to repay debt on other units.
The Hindenburg Report says that the improper use of offshore taxes and misappropriation of goods are Enemies of the Group. It also raised concerns about large debts and the valuation of seven listed Adani companies.
The Adani Group has denied the allegations, saying the allegations of stock fraud are “baseless” and based on ignorance of Indian laws. It said that it has always shown the need for improvement.
Adani managed to get the shares registered on Tuesday despite the market price being below the offer price. Maybank Securities and the Abu Dhabi Investment Authority asked for a large portion of the issue, which will be reimbursed by Adani.
Late on Wednesday, the group’s founder said he was withdrawing the sale due to the drop in prices, adding that his board felt that the future “wouldn’t be right”.
