Adani shares worth less than US$100 billion

SHARES of Adani Group companies extended declines in Mumbai on Friday (Feb 3), with their market value now more than halved to less than US$100 billion after a critical report by a US short-seller last week sparked a market rout.

Hindenburg Research questioned the Indian conglomerate’s debt levels and use of tax havens. Adani called the report baseless and said its financials remain strong, yet the ensuing stock market crisis has sparked broader concerns of possible systemic impact.

Lawmakers have called for a wider probe into the matter, and sources have told Reuters that the central bank has asked lenders for details of their exposure to the group.

In one of the biggest setbacks for Chairman Gautam Adani, the group shelved its US$2.5 billion share sale on Wednesday which would otherwise have taken place at the height of the rout.

In Friday trade, the share price of Adani Enterprises – the group’s flagship company – nosedived 35 per cent to its lowest level since March 2021. That took losses to nearly US$33.6 billion since last week, representing a 70 per cent decline.

Adani Ports and Special Economic Zone was down 14 per cent, while Adani Transmission and Adani Green Energy slumped 10 per cent each. Adani Total Gas Ltd – a joint venture with France’s TotalEnergie – fell 5 per cent.

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“Contagion concerns are widening, but still limited to the banking sector. Focus remains on further risks of index exclusions,” said Charu Chanana from Saxo Markets in Singapore.

On Thursday, S&P Dow Jones Indices said it would remove flagship firm Adani Enterprises from widely used sustainability indices on Feb 7, making the shares less appealing to environment-conscious investors.

“One of the big risk factors to watch for now is if more indices remove Adani stocks,” said Chanana. “This can result in foreign outflows as funds sell Adani stocks, further aggravating confidence issues.”

Hindenburg in its report said key listed Adani companies had “substantial debt” and that shares in seven Adani listed firms have an 85 per cent downside due to what it called sky-high valuations. It also alleged stock manipulation.

The Adani Group said the allegation of stock manipulation had “no basis” and stemmed from ignorance of Indian law. Its response stated that over the past decade, group companies have “consistently de-levered”.

In total, the seven listed Adani Group companies now have a market capitalisation of US$99 billion, versus US$218 billion before the Hindenberg report.

The meltdown in share prices marks a dramatic turn of fortune for Adani, who in recent years forged partnerships with, and attracted investment from, foreign giants as he pursues global expansion in sectors as varied as ports and power.

Adani is also no longer Asia’s richest person, and has slid to 17th in Forbes’ rankings of the world’s wealthiest people. The 60-year-old had been third behind Elon Musk and Bernard Arnault. Indian rival Mukesh Ambani of Reliance Industries is now Asia’s richest person.

The prices of US dollar bonds issued by Adani Group entities edged higher on Friday after diving on Thursday.

Adani Green’s bonds maturing in September 2024 gained about 7 US cents to 69.69 US cents, having fallen to record low of 60.56 US cents on Thursday. REUTERS