NEW DELHI/MUMBAI, Feb 2 (Reuters) – Market losses at Adani Group topped $100 billion on Thursday, a day after its parent company abandoned a $2.5 billion stock offering, fueling concerns about their potential systemic impact.
Withdrawal of Adani Enterprises (ADEL.NS) The stock sale marks a dramatic setback for founder Gautam Adani, a school-dropout billionaire whose wealth has risen rapidly in recent years but fell a week after US-based short-seller Hindenburg issued a critical research report.
The billionaire’s move to halt the stock sale had ripple effects across markets, politics and business. Adani shares tumbled as opposition lawmakers called for a wider probe and the central bank moved to check exposure of banks.
Meanwhile, Citigroup’s (CN) The wealth division stopped providing margin loans to its customers against Adani Group’s securities.
Adani has formed partnerships with foreign companies such as France’s Total Energies (TTEF.PA) Attracting investors such as Abu Dhabi’s International Holding Company, he continued his global expansion into everything from ports to the power sector.
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In a shock move late on Wednesday, Adani halted share sales, fueled by Hindenburg’s criticism that the shares were fully subscribed a day earlier.
“Adani may have triggered a crisis of confidence in Indian stocks, which could have wider market implications,” said Ibek Oskardeskaya, senior market analyst at Swisscote Bank.
Shares of Adani Enterprises fell 27% on Thursday to close at their lowest level since March 2022.
Other group companies also lost 10% in Adani Total Gas (ADAG.NS)Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS)while Adani Ports and Special Economic Zone (APSE.NS) Reduced by almost 7%.
Since Hindenburg’s report on January 24, group companies have lost almost half of their total market value. Adani Enterprises — described as the incubator of Adani’s businesses — lost $26 billion in market capitalization.
Adani, who slipped to 16th place on the Forbes list of the world’s richest people, is no longer Asia’s richest man, with his net worth falling to nearly $64.6 billion in a week.
The 60-year-old was third on the list behind billionaires Elon Musk and Bernard Arnold.
A rival of Mukesh Ambani’s Reliance Industries (RELI.NS) Now the richest man in Asia.
Broad concerns
Adani’s falling shares have raised concerns about its potential to have a wider impact on India’s financial system.
India’s central bank has asked local banks for details of their ties to Adani Group, government and banking sources told Reuters on Thursday.
CLSA estimates that around 40% of the Adani Group’s $24.5 billion in loans in the fiscal year to March 2022 are owed to Indian banks.
“We see the market losing confidence in how to measure the downside, and although there will be short covering rebounds, we expect more private banks to (reduce or reduce margin) risk more basis downside,” Monica said. Hsiao is the chief investment officer of Hong Kong-based debt fund Triada Capital.
In New Delhi, opposition legislators submitted a notice in Parliament seeking a discussion on the short-seller report.
The Congress party called for a joint parliamentary committee or a Supreme Court watchdog hearing, while some MPs raised slogans against Adani, which was adjourned for the day.
Adani VS Hindenburg
Adani will make $13.8 billion worth of acquisitions in 2022, Dealogic data showed, an all-time high and more than double the previous year.
The canceled fundraising was significant for Adani, which had said $1.33 billion would be used to fund green hydrogen projects, airports and greenfield expressways and $508 million to repay debt in some units.
Hindenburg’s report alleged improper use of offshore tax havens and stock manipulation by the Adani Group. This raised concerns about high debt and valuations of seven listed Adani companies.
The Adani Group has denied the allegations, saying the allegation of stock fraud has “no basis” and stems from ignorance of Indian law. It has always made the necessary regulatory disclosures, he said.
Adani managed to get subscriptions to the share sale on Tuesday, even though the share price was lower than the offer price of the issue. Maybank Securities and Abu Dhabi Investment Authority bid for the anchor portion of the issue, and the investments will now be repaid by Adani.
Late on Wednesday, the group’s founder said he was reversing the sale in light of the falling share price, and said it “would not be morally right” for his group to go ahead with it.
Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Mehta, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Taka, Samar Jen; Editing by Muralikumar Anantharaman, Jason Neely and Alexander Smith
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