NEW DELHI/MUMBAI, Feb 2 (Reuters) – Adani Group’s market losses swelled to more than $100 billion on Thursday, raising concerns about their potential systemic impact, a day after its flagship company launched a $2.5 billion stock offering gave up
The withdrawal of Adani Enterprises’ ( ADEL.NS ) share sale marks a dramatic reversal for founder Gautam Adani, the dropout billionaire whose fortune has risen rapidly in recent years but fell in just a week after the U.S.-based short-seller is. Hindenburg published a critical research report.
The billionaire’s move to cancel the stock sale has an impact across markets, politics and business. Adani shares fell, opposition lawmakers called for a wider investigation and the central bank jumped into action to control the banks’ exposure.
Meanwhile, Citigroup’s ( CN ) wealth unit has stopped extending margin loans to its clients against Adani Group securities.
Adani has forged partnerships with foreign giants such as France’s TotalEnergies ( TTEF.PA ) and attracted investors such as Abu Dhabi International Holding Company as it pursues a global expansion stretching from ports to the power sector.
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In a shock move late on Wednesday, Adani called off the share sale as a share rout sparked by Hindenburg’s criticism intensified, despite being fully subscribed a day earlier.
“Adani may have started a crisis of confidence in Indian equities and that could have wider market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Shares of Adani Enterprises fell 27% on Thursday, closing at their lowest level since March 2022.
Other group companies also continued to lose ground, with 10% losses at Adani Total Gas ( ADAG.NS ), Adani Green Energy ( ADNA.NS ) and Adani Transmission ( ADAI.NS ), while Adani Ports and Special Economic Zone ( APSE.NS ) ) lost almost 7%.
Since Hindenburg’s report on January 24, the group companies have lost almost half of their combined market value. Adani Enterprises – described as the incubator of Adani’s businesses – lost $26 billion in market capitalization.
Adani is also no longer Asia’s richest person, falling to 16th in the Forbes ranking of the world’s richest people, with his net worth almost halving to $64.6 billion in a week.
The 60-year-old man was third on the list, behind billionaires Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries ( RELI.NS ) is now the richest person in Asia.
[1/4] Indian billionaire Gautam Adani addresses delegates during the Bengal Global Business Summit in Kolkata, India April 20, 2022. REUTERS/Rupak De Chowdhuri
BROAD WORRY
Adani’s falling stock and bond prices have raised concerns about the likelihood of a wider impact on India’s financial system.
India’s central bank has asked local banks for details on their exposure to Adani Group, government and banking sources told Reuters on Thursday.
CLSA estimates that Indian banks were exposed to about 40% of Adani Group’s $24.5 billion in debt in the fiscal year to March 2022.
Dollar bonds issued by entities of Adani Group extended losses on Thursday, with notes of Adani Green Energy Ltd (ADNA.NS) crashing to a record low.
“We see the market losing confidence in gauging where the bottom may be and although there are short-covering rebounds, we expect more fundamental downside risks as more private banks (are) likely to reduce or reduce margins,” said Monica Hsiao, chief investment officer of Hong Kong-based credit fund Triada Capital.
In New Delhi, opposition lawmakers tabled notices in Parliament demanding discussion of the short sellers’ report.
The Congress party called for a Joint Parliamentary Committee to be set up or a Supreme Court-monitored inquiry, while some lawmakers shouted anti-Adani slogans in Parliament, which was adjourned for the day.
ADANI VS HINDENBURG
Adani made acquisitions worth $13.8 billion in 2022, Dealogic data show, its highest ever and more than double the previous year.
The canceled fundraiser was critical for Adani, which had said it would use $1.33 billion to finance green hydrogen projects, airport facilities and greenfield expressways, and $508 million to repay debt on some units.
Hindenburg’s report alleges improper use of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The Adani Group denied the allegations, saying the allegation of share manipulation had “no basis” and stemmed from an ignorance of Indian law. It said it has always made the necessary regulatory disclosures.
Adani had managed to secure subscriptions for the share sale on Tuesday, even though the market price of the stock was below the offer price of the issue. Maybank Securities and Abu Dhabi Investment Authority had bids for the anchor part of the issue, investments that will now be reimbursed by Adani.
Late on Wednesday, the group’s founder said he was withdrawing the sale due to the share price slump, adding that his board felt it “would not be morally correct”.
Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Mehta, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen and Bansari Mayur Kamdar; Editing by Muralikumar Anantharaman, Jason Neely and Alexander Smith
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