NEW DELHI/MUMBAI, Feb 2 (Reuters) – Shares in India’s Adani Group sank on Thursday after it abandoned a $2.5 billion offer of shares in its flagship company, pushing the conglomerate’s market losses to more than $100 billion and raising concerns about the potential systemic impact.
The pullback in Adani Enterprises’ ( ADEL.NS ) share sales represents a dramatic drop for Gautam Adani, the school dropout-turned-billionaire whose wealth has soared in recent years but has shrunk in the past week after he short-sold a U.S. critical research report.
The developments are an embarrassing turn for Adani, which has partnered with foreign giants such as France’s TotalEnergies ( TTEF.PA ) and investors such as Abu Dhabi International Holding Company, as it pursues a global expansion of businesses spanning from ports and mining to cement and power.
Adani canceled the share sale on Wednesday night as shares fueled by Hindenburg criticism intensified, despite the offer being fully signed on Tuesday.
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Adani Enterprises fell nearly 20% on Thursday, trading at its lowest level since March 2022. The group’s other companies were also under pressure – Adani Ports and Special Economic Zone ( APSE.NS ) were down 5%, while Adani Total Gas (ADAG.NS) , Adani Green Energi (ADNA.NS) and Adani Transmission (ADAI.NS) lost 10% each.
Since the Hindenburg report was published on January 24, the companies in the group have lost almost half of their combined market value. Adani Enterprises alone – described as the incubator of Adani’s businesses – lost $24 billion in market capitalization.
Adani, 60, is also no longer Asia’s richest person, slipping down the Forbes list of richest people to 16th, from third last week.
“If Adani fails to regain the confidence of institutional investors, the stock will be in freefall,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.
Adani’s fall in shares raised concerns about the likelihood of a wider impact on India’s financial system.
India’s central bank has asked local banks for details of their exposure to the Adani group of companies, government and banking sources told Reuters on Thursday. CLSA estimates that Indian banks were exposed to about 40% of Adani Group’s 2 trillion rupees ($24.53 billion) of debt in the fiscal year to March 2022. read more
Citigroup’s ( CN ) wealth unit has stopped granting margin loans to its clients on Adani Group securities and decided to cut the loan-to-value ratio on loans on Adani securities to zero on Thursday, a source said.
“We see the market losing confidence in how to judge where the bottom may be and while there will be short-term spikes, we expect more fundamental downside risks given that more private banks (are) likely to cut or reduce margins,” Monica Hsiao said. chief investment officer of the Triada Capital credit fund based in Hong Kong.
In New Delhi, opposition lawmakers filed notices in the Indian parliament, demanding a debate on the US vendor’s report. The Congress party has demanded the setting up of a Joint Parliamentary Commission or inquiry into the matter to be overseen by the Supreme Court.
ADANI VS HINDENBURG
Last week’s Hindenburg report alleged improper use of offshore tax havens and stock manipulation by the Adani group. It also raised concerns about the high debt and valuations of Adani’s seven listed companies.
Adani Group rejected the allegations, saying the short seller’s allegation of stock manipulation was “baseless” and stemmed from ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.
Earlier this week, Adani Group said it had full investor support, but investor confidence has waned in recent days.
As shares fell after the release of the Hindenburg report, Adani managed to secure a subscription to the share sale on Tuesday, even though the market price of the shares was below the offer price of the issue. But on Wednesday, the stock fell again.
Maibank Securities and Abu Dhabi Investment Authority, as well as Life Insurance Corporation of India ( LIFI.NS ), bid for the bulk of the issue. Adani will now pay back those investments.
In a statement late Wednesday, the billionaire said he was withdrawing the stock sale because “the company’s share price has fluctuated throughout the day. Given these extraordinary circumstances, the company’s board believes that it will not proceed with the matter. morally correct”.
Adani said in a video address early Thursday that “the interest of my investors is paramount and everything else is secondary. So to insulate investors from potential losses, we have withdrawn” the share sale.
Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Madan, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; Writing by Aditya Kalra; Editing by Muralikumar Anantharaman
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