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Adani's market losses top $100bn as shelved share sale spooks investors

Indian billionaire Gautam Adani
Indian billionaire Gautam Adani

NEW DELHI/MUMBAI: Adani Group's market losses swelled to more than $100 billion and sparking worries about their potential systemic impact on Thursday a day after its flagship company abandoned a $2.5 billion stock offering.

The withdrawal of Adani Enterprises' share sale caps a dramatic setback for founder Gautam Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years but have dwindled over the past one week after US-based short-seller Hindenburg published a critical research report.

Cancelling the share sale saw Adani stocks plunge, opposition lawmakers call for a wider probe and the central bank spring into action to check on banks' exposure.

Citigroup's wealth unit has stopped extending margin loans to its clients against securities of Adani Group and cut the loan-to-value ratio for credit against Adani securities to zero on Thursday, a source said.

Adani has forged partnerships with foreign giants such as France's TotalEnergies and has attracted investors such as Abu Dhabi's International Holding Company as it pursues a global expansion stretching from ports to the power sector.

Adani late on Wednesday called off the share sale as a stocks rout sparked by short-seller Hindenburg's criticisms intensified, despite the offer being fully subscribed.

"Adani may have started a confidence crisis in Indian shares and that could have broader market implications," said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.

Adani Enterprises shares plunged by nearly 23 per cent on Thursday, trading at its lowest since March 2022.

Other group companies also lost further ground, with 10 per cent losses at Adani Total Gas, Adani Green Energy and Adani Transmission and Adani Ports and Special Economic Zone shedding 5 per cent.

Since Hindenburg's report on Jan. 24, group companies have lost nearly half their combined market value. Adani Enterprises - described as an incubator of Adani's businesses - has lost $24 billion in market capitalisation.

Adani, 60, is also no longer Asia's richest person, having slid in the rankings of the world's wealthiest to 16th with net worth almost halved to $66 billion in a week, as per Forbes' list. Adani was earlier third on the list, next to billionaires Elon Musk and Bernard Arnault.

His rival Mukesh Ambani of Reliance Industries is now Asia's richest person.

Adani's plummeting stocks have raised concerns about the likelihood of a wider impact on India's financial system.

The central bank has asked local banks for details of their exposure to the Adani Group, government and banking sources said on Thursday.

CLSA estimates that Indian banks were exposed to about 40 per cent of the $24.5 billion of Adani Group debt in the fiscal year to March 2022.

"We see the market is losing confidence on how to gauge where the bottom can be and although there will be short-covering rebounds, we expect more fundamental downside risks given more private banks (are) likely to cut or reduce margin," said Monica Hsiao, chief investment officer of Hong Kong-based credit fund Triada Capital.

In New Delhi, opposition lawmakers submitted notices in parliament demanding discussion on the US short-seller's report.

The Congress Party demanded a Joint Parliamentary Committee be set up or a Supreme Court monitored investigation into the matter. Some lawmakers shouted anti-Adani slogans inside parliament which was adjourned for the day.

Adani made acquisitions worth $13.8 billion in 2022, Dealogic data showed, its highest ever and more than double the previous year.

The cancelled fundraising was critical for Adani, which had said it would use $1.33 billion to fund green hydrogen projects, airports facilities and greenfield expressways, and $508 million to repay debt at some units.

Hindenburg's report last week alleged an improper use of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.

The Adani Group has denied the accusations, saying the short-seller's allegation of stock manipulation had "no basis" and stemmed from an ignorance of Indian law.

It said the group has always made the necessary regulatory disclosures.

Adani had managed to secure share sale subscriptions on Tuesday even though the stock's market price was below the issue's offer price.

Maybank Securities and Abu Dhabi Investment Authority had bid for the anchor portion of the issue -- investments which will now be returned by Adani.

In a late night announcement on Wednesday, the group's founder said he was withdrawing the share sale given the share price fall, adding the his board felt "that going ahead with the issue will not be morally correct." - Reuters

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