Adani’s losses in the market exceeded $100 billion as the pending share sale spooked investors

NEW DELHI/MUMBAI (Reuters) – Shares in India’s Adani Group fell on Thursday after it abandoned a $2.5 billion share offering in its flagship company, swelling market losses to more than $100 billion and raising concerns about the potential systemic impact.

The withdrawal of Al-Adani Company (ADEL.NS) The stock sale borders on a dramatic setback for Gautam Adani, the dropout-turned-billionaire whose fortunes have risen rapidly in recent years but waned over the past week after a US short seller published a critical research report.

The events mark an awkward turn for Adani, who has built partnerships with foreign giants such as France’s TotalEnergies (TTEF.PA) and investors such as Abu Dhabi International Holding Company as he pursues global expansion in businesses ranging from ports and mining to cement and energy.

Adani called off the stock sale late Wednesday as the stock rout triggered by Hindenburg’s criticism of the short-selling intensified, despite the offering being fully subscribed on Tuesday.

Adani Enterprises fell nearly 20% on Thursday, trading at its lowest level since March 2022. Other group companies were also under pressure – Adani Ports and the Special Economic Zone (APSE.NS) It decreased by 5%, while Total Gas Al-Adani fell (ADAG.NS)prepare me for green energy (ADNA.NS) He promised me a transfer (ADAI.NS) Lost 10% each.

Since the release of the Hindenburg Report on January 24, the group’s companies have lost nearly half of their total market value. Adani Enterprises – billed as Adani’s business incubator – alone has lost $24 billion in market capital.

Adani, 60, is also no longer the richest person in Asia, dropping in the world’s richest rankings to 16th, according to the Forbes list, from third place last week.

“Unless Adani is able to restore the confidence of institutional investors, the shares are going to crash,” said Avinash Gorakshekar, head of research at Mumbai-based Profitmart Securities.

The fall in Adani’s shares has raised concerns about a possible broader impact on the Indian financial system.

Government and banking sources told Reuters on Thursday that India’s central bank has asked local banks for details of their exposure to the Adani group of companies. CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion rupees ($24.53 billion) of Adani Group debt in the financial year to March 2022. Read more

Citigroup (CN) A source said that the Wealth unit stopped providing margin loans to its clients against Adani Group securities and decided to reduce the loan-to-value ratio of credit against Adani securities to zero on Thursday.

“We see the market losing confidence in how to measure the level of the bottom, and although there will be a shorting bounce, we expect more fundamental downside risk as more private banks (potentially) cut or lower margin,” Monica Hsiao said. Chief Investment Officer of Triada Capital Trust Fund based in Hong Kong.

In New Delhi, opposition lawmakers filed notices in the Indian Parliament to demand a debate on the US short sellers report. The Congress party called for the formation of a joint parliamentary committee or a supreme court to monitor the investigation into the matter.

Adenyi vs. Hindenburg

The Hindenburg Report last week alleged improper use of offshore tax havens and equity manipulation by the Adani Group. It also raised concerns about the high debts and valuations of seven companies listed in “Adani”.

The Adani group denied the accusations, saying that the short seller’s allegations of stock manipulation were “baseless” and stemmed from ignorance of Indian law. She added that the group has always made the necessary regulatory disclosures.

Earlier this week, the Adani Group said it had received the full support of investors, but investor confidence has waned in recent days.

With shares falling after the publication of the Hindenburg Report, Adani was able to secure subscriptions to sell the shares on Tuesday even though the share market price was below the offer price for the issue. But on Wednesday, stocks plunged again.

Maybank Securities and the Abu Dhabi Investment Authority, as well as the Indian Life Insurance Corporation (LIFI.NS), make a presentation to get the core part of the problem. These investments will now be returned by Adani.

In a late-night announcement on Wednesday, the billionaire said he was pulling the sale of the stock because “the company’s share price has fluctuated throughout the day. Given these exceptional circumstances, the company’s board of directors felt that going forward with the issuance would not be the case.” Morally correct.”

Early Thursday, Al-Adani said in a video address, “The interest of my investors is the most important and everything is secondary. Thus, to protect investors from potential losses, we have withdrawn” the stock sale.

(Reporting: Chris Thomas, Nallur Sethurman, Tanvi Madan, Ira Duggal, Aftab Ahmed, Sumit Chatterjee, Anshuman Daga, Samar Zain; Writing by Aditya Kalra; Editing by Muralikumar Anantharaman

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