Adani’s $100 billion share sale on top of market losses spooks investors

Adani's $100 billion share sale on top of market losses spooks investors
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NEW DELHI/MUMBAI, Feb 2 (Reuters) – Adani Group’s market losses soared to more than $100 billion on Thursday, a day after its flagship company abandoned a $2.5 billion stock offering, sparking concerns about their potential systemic impact.

Withdrawal of Adani Enterprises (ADEL.NS) The share sale dealt a dramatic blow to founder Gautam Adani, a school dropout-turned-billionaire whose fortunes have risen sharply in recent years but have slumped over the past week after US-based short-seller Hindenburg published a critical research report.

The cancellation of the share sale sent Adani stocks plunging, with opposition lawyers calling for a wider probe and the central bank stepping in to examine the banks’ exposure.

City Group (CN) There are resource units off Adani Group extended margin loans to its clients against securities and cut the loan-to-value ratio for loans against Adani Securities to zero on Thursday, a source said. .

Adani has forged partnerships with foreign giants such as France’s TotalEnergy (TTEF.PA) And it has attracted investors like Abu Dhabi’s International Holding Company as it expands globally, from ports to the power sector.

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Adani late on Wednesday declare closed Despite the offer being fully subscribed, the share sell-off intensified as the stock rout due to criticism of short-seller Hindenburg.

“Adani could trigger a crisis of confidence in Indian stocks and have ramifications for the broader market,” said Ipek Ozkardeskaya, senior market analyst at Swisscote Bank.

Shares of Adani Enterprises fell nearly 23% on Thursday, trading the lowest since March 2022.

Other group companies lost more ground, with Adani Total Gas losing 10% (ADAG.NS)Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) and Adani Ports and Special Economic Zones (APSE.NS) 5% is flowing.

Since the Hindenburg report on 24 January, the group companies have lost almost half their combined market value. Adani Enterprises – described as an incubator for Adani’s businesses – lost $24 billion in market capitalisation.

Adani, 60, is no longer Asia’s richest man, falling to 16th place in the world’s richest people ranking, with his net worth nearly halving to $66 billion in a week, according to the Forbes list. Adani was previously third on the list, behind billionaires Elon Musk and Bernard Arnault.

His rival is Mukesh Ambani of Reliance Industries (RELI.NS) He is now the richest man in Asia.

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widespread concern

The decline in Adani’s stock has raised concerns about the potential for 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 told Reuters on Thursday.

CLSA estimates that Indian banks were exposed to about 40% of Adani Group’s $24.5 billion in loans in the fiscal year to March 2022. Read more

“We see the market losing confidence in gauging where the bottom might be, and although there will be a short-covering rebound, we expect more fundamental risk as more private banks cut or reduce margins,” said Monica Hsiao, Hong Kong. Based credit fund Triada Capital is the Chief Investment Officer.

In New Delhi, opposition lawyers submitted a notice in Parliament demanding a debate on the US short-seller report.

The Congress party has filed a case for setting up a joint parliamentary committee or the Supreme Court has observed an inquiry into the matter. Some lawyers raised anti-Adani slogans inside Parliament which adjourned for the day.

Adani v. Hindenburg

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

The canceled fund raising was important for Adani, which said it would use $1.33 billion to finance green hydrogen projects, airport facilities and greenfield expressways, and $508 million to pay down debt on some units.

The Hindenburg report last week alleged improper use of offshore tax havens and stock manipulation by the Adani Group. It raised concerns over high debt and valuation of seven listed Adani companies.

The Adani Group has denied the allegations, saying the short-sellers’ allegations of stock manipulation have “no basis” and stem from ignorance of Indian law.

It said the group has always disclosed the necessary controls.

Adani managed to secure share sale subscription on Tuesday even though the market price of the stock was below the issue offer price.

Maybank Securities and Abu Dhabi Investment Authority bid for the anchor portion of the issue — the investment that will now return Adani.

In an announcement late on Wednesday, the group’s founder said he was withdrawing the share sale due to falling share prices, adding his board “would not be ethically correct to proceed with the issue.”

Reporting by Chris Thomas, Nallur Sethurman, Tanvi Mehta, Ira Dugal, Aftab Ahmed, Sumit Chatterjee, Angshuman Daga, Samar Jain; Written by Aditya Kalra; Editing by Muralikumar Anantharaman and Jason Neely

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