Adani’s market losses top $100bn as shelved stock sale scares investors

NEW DELHI/MUMBAI, Feb 2 (Reuters) – Adani Group’s market losses rose to more than $100 billion, raising concerns about its potential systemic impact on Thursday, a day after its flagship company abandoned a share offering. of 2,500 million dollars.

The withdrawal of Adani Enterprises (ADEL.NS) The share sale caps a dramatic setback for founder Gautam Adani, the school dropout-turned-billionaire whose fortune has risen rapidly in recent years but declined in the past week after US short seller Hindenburg released a report of critical research.

The cancellation of the share sale sent Adani’s shares tumbling, opposition lawmakers called for a broader investigation and the central bank moved into action to control banks’ exposure.

from citigroup (CN) The wealth unit stopped making margin loans to its clients against Adani Group securities and zeroed the loan-to-value ratio for lending against Adani securities to zero on Thursday, a source said. .

Adani has forged alliances with foreign giants such as France’s TotalEnergies (TTEF.PA) and has attracted investors such as Abu Dhabi’s International Holding Company as it pursues a global expansion stretching from ports to the energy sector.

On Wednesday night, Adani called off the share sale as the stock’s slide intensified due to criticism from short seller Hindenburg, even though the offer was fully subscribed.

“Adani may have started a confidence crisis in Indian stocks and that could have broader market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.

Shares of Adani Enterprises plunged nearly 23% on Thursday, trading at its lowest level since March 2022.

Other companies in the group are also losing ground, with losses of 10% in Adani Total Gas (ADAG.NS)Adani Green Energy (DNA.NS) and transmission Adani (ADAI.NS) and Adani Ports and Special Economic Zone (APSE.NS) shedding 5%.

Since the Hindenburg report on January 24, the group’s companies have lost nearly half their combined market value. Adani Enterprises, described as an incubator for Adani’s businesses, has lost $24 billion in market capitalization.

Adani, 60, is no longer the richest person in Asia, having slipped down the rankings of the world’s richest to 16th with a net worth nearly halved to $66 billion in one week, according to the Forbes list. Adani was ranked third on the list, alongside billionaires Elon Musk and Bernard Arnault.

His rival Mukesh Ambani of Reliance Industries (RELI.NS) he is now the richest person in Asia.

WIDER CONCERNS

The nosedive in Adani’s shares has raised concerns about the likelihood of a broader impact on India’s financial system.

The central bank has asked local banks for details of their exposure to the Adani Group, bank and government sources told Reuters on Thursday.

CLSA estimates that Indian banks were exposed to around 40% of the Adani Group’s $24.5 billion of debt in the fiscal year to March 2022. read more

“We see the market losing confidence in how to measure where the bottom may be and while there will be bounces from short covering, we expect more downside fundamental risks as more private banks are likely to cut or reduce spread,” Monica said. Hsiao, chief investment officer of Hong Kong-based credit fund Triada Capital.

In New Delhi, opposition lawmakers have filed notices in parliament demanding a discussion of the US short seller’s report.

The Congress Party demanded the creation of a Parliamentary Joint Committee or a Supreme Court-supervised inquiry into the matter. Some lawmakers chanted anti-Adani slogans inside parliament which was adjourned for the day.

ADANI VS HINDENBURG

Adani made $13.8 billion worth of acquisitions in 2022, Dealogic data showed, its highest level yet and more than double the year before.

The canceled fundraiser was critical for Adani, who had said he would use $1.33 billion to finance green hydrogen projects, greenfield airport facilities and highways, and $508 million to pay down debt on some units.

Hindenburg’s report last week alleged misuse of offshore tax havens and stock manipulation by the Adani Group. He also raised concerns about high debt and the valuations of Adani’s seven publicly traded companies.

The Adani Group has denied the allegations, saying the short seller’s share manipulation accusation was “baseless” and stemmed from ignorance of Indian law.

He said the group has always made the necessary regulatory disclosures.

Adani had managed to secure sale subscriptions for the shares on Tuesday despite the fact that the market price of the shares was below the offer price of the issue.

Maybank Securities and Abu Dhabi Investment Authority had bid for the principal part of the issue, investments that will now be returned by Adani.

In an announcement late Wednesday night, the group’s founder said he was pulling back on the share sale given the falling share price, adding that his board felt “prompting forward with the issue will not be morally correct.” .

Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Mehta, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; written by Aditya Kalra; edited by Muralikumar Anantharaman and Jason Neely

Our standards: The Thomson Reuters Trust Principles.