$108b wiped out: Adani’s woes continue
ADANI ENTERPRISES SHARES TUMBLE 27% TO CLOSE AT LOWEST SINCE MARCH ‘22
Astock market wipeout of nearly $108 billion, a shelved followon public offer, and plunging bond prices — Gautam Adani’s problems don’t seem to be going away.
Adani Enterprises shares tumbled 27 per cent yesterday, closing at their lowest since March 2022. Other group companies also lost further ground, with 10 per cent losses at Adani Total Gas, Adani Green Energy and Adani Transmission, while Adani Ports and Special Economic Zone shed nearly 7 per cent. Trading in some group firms was halted after stocks hit circuit-breakers.
Since the January 24 report by US-based short-seller Hindenburg, group companies have lost nearly half their combined market value. Adani Enterprises — described as an incubator of Adani’s businesses — has lost $26 billion in market capitalisation.
To top that up, Adani is also no longer Asia’s richest person, having slid to the 17th spot in Forbes’ rankings of the world’s wealthiest people, with his net worth almost halved to $64.2 billion in a week. Meanwhile, opposition lawmakers have called for a wider probe and the Reserve Bank of India (RBI) has sprung into action to check on banks’ exposure.
The Indian stock market regulator, Securities and Exchange Board of India, is examining the crash in shares, while Credit Suisse and Citigroup in the US have stopped accepting Adani bonds as collateral for loans they advance to private banking clients.
Adani’s plummeting stock and bond prices have raised concerns of a wider impact on India’s financial system. The RBI has asked banks for details of their exposure to the group.
Arrangers of Adani’s scrapped Rs200 billion ($2.4 billion) equity offering have a different problem at their hands. Now that the FPO has been called off, they now have to scramble to recover minuscule fees from what was supposed to be the country’s biggest-ever follow-on share sale.
Asia’s busiest dealmaker has lost more than $50 billion in the last 10 days. Adani’s business empire is in mayhem, losing more than $100 billion in value, sending the Indian tycoon tumbling down the global rich list.
Bonds of the Indian billionaire’s flagship firm plunged to distressed levels in US trading, and the company abruptly pulled a record domestic stock offering after the Adani Group suffered a major market crash. Banks either want more collateral for loans, or are scrutinising the value of the company’s debt to lend against.
But what led to the meltdown in the indebted conglomerate’s securities? On January 24, Hindenburg Research — an activist US investment group that bets on stocks falling — accused Adani Group of committing “a brazen stock manipulation and accounting fraud scheme over the course of decades”. This included funnelling money from offshore accounts controlled by Adani’s brother Vinod Adani into listed units to inflate their share prices.
The group’s breakneck expansion into multiple new business areas has also pushed up debts.
To reduce its leverage, Adani has secured billions of dollars of investment from abroad.
MASSIVE SELL-OFF
The Hindenburg report has sparked a huge sell-off in shares in Adani’s firms, wiping out more than $100 billion in market value as of yesterday, according to Bloomberg News. Trading in some stocks has had to be repeatedly halted. Adani’s personal wealth has dived by around $60 billion and he has tumbled down the real-time Forbes rich list to number 17 as of yesterday morning. Swiss banking giant Credit Suisse and Citigroup in the United States have stopped accepting Adani bonds as collateral for loans it advances to private banking clients, creating further panic.
The timing of the allegations was also terrible, coming just as Adani was seeking to raise $2.5 billion to strengthen its finances with a share sale.
Late Wednesday, Adani cancelled the sale and announced that all investors would be refunded, saying that going ahead would “not be morally correct”.
‘MALICIOUS AND BASELESS ACQUISITION’
On January 25, Adani’s finance chief called the Hindenburg report a “malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts”. On Sunday the firm issued a 413-page statement that it said rebutted all of Hindenburg’s claims, calling it an attack on the “growth story and ambition of India”. Hindenburg said Adani’s statement failed to answer most of the questions raised in its report. Yesterday the tycoon released a video message to investors insisting that the fundamentals of his group are “strong” and that its record on paying back debt was “impeccable”.
Parliamentary proceedings yesterday were washed out amid noisy protests by the Congress-led opposition, which sought a discussion over research group Hindenburg’s report on Adani Group.
Both Houses were adjourned until 11am today.
As political temperatures soared over the matter, leader of opposition in the Rajya Sabha Mallikarjun Kharge led a demand by the opposition parties, seeking a probe by a joint parliamentary committee (JPC) or by a team under the Chief Justice of India’s supervision into the research group’s report.
Both the Houses were adjourned within minutes of assembling at 11am amid noisy protests by the opposition members.
The Lok Sabha and Rajya Sabha were adjourned till 2pm.
As soon as the Lok Sabha reconvened at 2pm after its proceedings were earlier adjourned at 11.05am over the same issue, the opposition members from the Congress, Trinamool Congress, DMK, Left and Shiv Sena (Uddhav Thackeray group) stormed into the Well of the House, seeking a discussion on the Adani group issue.
Members from the Samajwadi Party, NCP, JD (U) and Bharat Rashtra Samithi stood near their seats in support of the protesting members.
As noisy protests by the opposition members continued, Parliamentary Affairs Minister Pralhad Joshi urged the opposition members to allow the motion of thanks on the President’s address to commence.
Adjourned
“Parliament is for discussion, therefore the first priority is always to allow the motion of thanks on the President’s address. Kindly don’t set a wrong precedent,” Joshi could be heard saying amid the ruckus.
As protests continued, Rajendra Agrawal adjourned the House till Friday.
Soon after, the Rajya Sabha, which too had earlier been adjourned till 2pm, was also adjourned for the day amid protests by the opposition members on Adani issue.
Earlier in the morning, as soon as the Lok Sabha had convened for the day, the opposition members rushed to the Well raising slogans, seeking a discussion on Adani and Hindenburg report.
Speaker Om Birla had just welcomed a Parliamentary delegation from Zambia and started the Question Hour, when the ruckus began.