Adani Group companies lose ₹3.22 lakh crore in market value amidst tussle with Hindenburg Research
- The seven Adani Group companies witnessed a bloodbath on the stock market on Friday, after the Hindenburg Research report alleged stock manipulation and accounting fraud.
- The broader markets also witnessed a meltdown, with the benchmark Nifty50 index plummeting 1.61% and the volatility index shooting up 18%.
- Five out of the seven Adani Group companies closed at their respective lower circuits on Friday.
- All in all, the Adani Group’s cumulative market capitalization fell nearly ₹3.22 lakh crore on Friday alone.
- Gautam Adani’s wealth also tumbled $22.6 billion, according to Forbes’ real-time billionaires list, with Adani falling to the seventh position from the fourth.
AdvertisementThe world’s fourth richest man, Gautam Adani, is now poorer by $22.6 billion after his companies lost nearly ₹3.22 lakh crore in market value. The benchmark indices Sensex and Nifty50, too, witnessed a sharp decline by 1.61% and 1.45% respectively, while the fear gauge, India VIX, shot up 18%.
“Markets went into a tailspin on broad-based selling pressure as recessionary fears in the west and nervousness ahead of the US Federal Open Market Committee meeting on interest rate decision pummeled stocks at will. Investors cashed out of banking, power, realty and oil & gas stocks ahead of the budget and pulled down key indices below the psychological levels,” said Amol Athawale, Deputy Vice President - Technical Research at Kotak Securities.
While Bloomberg Billionaires’ Index pegs Adani’s wealth at $113 billion as of Thursday, Forbes’ real-time billionaires list shows Adani’s wealth at $96.6 billion, after a decline of $22.6 billion.
The seven listed Adani Group companies witnessed a bloodbath on Friday, after the Hindenburg Research report alleged that the Gautam Adani-led group had engaged in stock manipulation and accounting fraud. Five out of the seven group companies closed at their respective lower circuits on Friday.
Concerns of public and private sector banks’ exposure to the Adani Group’s debt have also emerged. According to a CLSA report, banks’ exposure to the Adani Group’s total debt stands at 39%, of which private banks account for 10%.
“PSU banks do have material exposure (30% of group debt) but this debt has not increased in the past three years. Most of the incremental funding to the group for new businesses and acquisitions has come via overseas sources,” the CLSA report said.
While analysts at Jefferies say that they are keeping an eye out for developments when it comes to the Adani Group’s debt, they see low risks for Indian banks due to the group diversifying its debt sources.
“Our recent conversation with industry participants also indicated that cash-flows and repayment timelines of debt have been conservatively planned. While we watch for developments here, we don't see material risk arising to the Indian banking sector,” said the Jefferies report.
Adani Enterprises’ shares closed below the lower limit of the price band of its follow-on public offer (FPO) of ₹3,112.
The bear hug also took down Adani Enterprises’ two recent acquisitions, Ambuja Cements and ACC, both of which plummeted as much as 25% before recovering marginally.
Here’s how much shares of the Adani Group companies fell on Friday:
|Current market price
|Current market cap
|Market cap decline
|Adani Green Energy
|Adani Total Gas
|Adani Ports & SEZ
Source: NSE, change as at 3:30 p.m., January 27, 2023, compared to the previous closing price
Why are Adani Group company shares falling?
Earlier this week, a report by the New York-based Hindenburg Research had alleged that the Adani Group had engaged in stock manipulation and accounting fraud. The company vehemently denied these allegations, calling it a malafide intention to derail its FPO.
Advertisement“We are shocked that Hindenburg Research has published a report on 24 January 2023 without making any attempt to contact us or verify the factual matrix. The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts,” Jugeshinder Singh, chief financial officer, Adani Group, said on Wednesday.
However, Hindenburg Research hit back and said it is open to legal action. “Regarding the company’s threats of legal action, to be clear, we would welcome it. We fully stand by our report and believe any legal action taken against us would be meritless. If Adani is serious, it should also file a suit in the U.S. where we operate. We have a long list of documents we would demand in a legal discovery process,” the New York-based investment research firm said in a statement.
A Reuters report states that market regulator Securities and Exchange Board of India (SEBI) will study the Hindenburg report to aid its ongoing investigation into the Adani Group’s foreign portfolio investors (FPI).
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