Plummeting Adani shares send ripples through India’s parliament, finance sector

SHARES of India’s Adani Group companies fell sharply on Friday (Feb 3) as ripples from a market rout disrupted parliament for a second day, fanning fears of systemic risk after a critical research report by a US short-seller. Seven listed Adani enterprises lost more than half their market capitalisation, which shrivelled dramatically, after the Hindenburg Research report raised questions about the conglomerate’s debt levels and use of tax havens.

Investor sentiment was jolted further after the group shelved its US$2.5-billion share sale on Wednesday, one of the biggest setbacks for its billionaire chairman, Gautam Adani, whose fortunes had risen rapidly in recent years.

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

Adani has called the Hindenburg report baseless and said its financials remain strong, but investor sentiment has withered. Shares of the flagship company, Adair Enterprises, were down 16 per cent on Friday after earlier losing 35 per cent to their lowest level since March 2021. The stock’s new low took its losses to nearly US$33.6 billion since last week, for a decline of 70 per cent.

Adani Ports and Special Economic Zone, Adani Transmission and Adani Green Energy and Adani Total Gas, a joint venture with France’s TotalEnergies, all slumped.

“Contagion concerns are widening, but still limited to the banking sector,” said Charu Chanana, a market strategist with Saxo Markets in Singapore. “The focus remains on further risks of index exclusions.” On Thursday, S&P Dow Jones Indices said it would drop the Adani Enterprises flagship from widely used sustainability indices on Feb 7, which would blunt their appeal for 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.”

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Foreign investors, many already underweight on India as they consider its stock market overpriced, are reducing exposure. Adani’s wipeout could spread if it triggers a bigger mood shift.

In its report, Hindenburg said key listed Adani companies had “substantial debt” while shares in seven listed firms had a downside of 85 per cent 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. It added that over the past decade, group companies have “consistently de-levered”.

The seven listed Adani firms together have a market capitalisation of US$113 billion, versus US$218 billion before the Hindenburg report.

Adani has ceded the crown of Asia’s richest person to Indian rival Mukesh Ambani of Reliance Industries as he has slid to 17th in Forbes’ ranking of the world’s wealthiest people. He had been third, after Elon Musk and Bernard Arnault. REUTERS