NEW DELHI/MUMBAI, Feb 2 (Reuters) – Adani Group’s market losses hit more than $100 billion and raised concerns about their potential systemic impact on Thursday, a day after its flagship company quit a $2.5 billion stock offering.
The withdrawal from the Adani Enterprises (ADEL.NS) stock sale caps a dramatic setback for founder Gautam Adani, the dropout-turned-billionaire whose fortunes have risen rapidly in recent years but dwindled in the past week after a short the seller Hindenburg published a critical research report.
The cancellation of the stock sale sent Adani shares plunging, opposition lawmakers called for a broader investigation and the central bank stepped in to check banks’ exposure.
Citigroup’s (CN) wealth management unit stopped making margin loans to clients against Adani Group securities and cut the loan-to-value ratio for credit against Adani Group securities to zero on Thursday. Adani, a source said. .
Adani has forged partnerships with foreign giants such as France’s TotalEnergies (TTEF.PA) and attracted investors such as Abu Dhabi’s International Holding Company as it pursues global expansion from ports to the energy sector. ‘electricity.
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Adani on Wednesday night called off the stock sale as the stock rout sparked by criticism from short seller Hindenburg intensified, despite the offer being fully subscribed.
“Adani may have triggered a crisis of confidence in Indian equities and that could have broader market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Shares of Adani Enterprises plunged nearly 23% on Thursday, trading at their lowest level since March 2022.
Other group companies also lost ground, with losses of 10% at Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) and Adani Ports and Special Economic Area (APSE.NS) lose 5%.
Since the Hindenburg report of January 24, the companies in the group have lost nearly half of their combined market value. Adani Enterprises – described as an incubator of Adani’s businesses – lost $24 billion in market capitalization.
Adani, 60, is also no longer the richest person in Asia. Adani was previously third on the list, alongside billionaires Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries (RELI.NS) is now the richest person in Asia.
The fall in Adani shares has 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 told Reuters on Thursday.
CLSA estimates that Indian banks were exposed to approximately 40% of Adani Group’s $24.5 billion debt in the fiscal year ending March 2022. Read more
“We see the market losing confidence on how to assess where the bottom may be and while there will be some short-covering rallies, we expect more fundamental downside risks given that more private banks (are ) likely to reduce or reduce the margin,” Monica said. Hsiao, chief investment officer of Hong Kong-based credit fund Triada Capital.
In New Delhi, opposition lawmakers submitted notices to parliament demanding a discussion of the US short seller’s report.
The Congress Party demanded the creation of a joint parliamentary commission or a Supreme Court-monitored inquiry into the matter. Some lawmakers shouted anti-Adani slogans inside the parliament which was adjourned for the day.
ADANI VS HINDENBURG
Adani made acquisitions worth $13.8 billion in 2022, according to Dealogic data, its highest level ever and more than double the previous year.
The canceled fundraiser was key for Adani, which said it would use $1.33 billion to fund green hydrogen projects, airport facilities and green highways, and $508 million to pay down debt. some units.
Hindenburg’s report last week alleged misuse of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about the high level of debt and valuations of seven listed Adani companies.
The Adani Group denied the charges, saying the short seller’s share manipulation allegation had “no basis” and stemmed from ignorance of Indian law.
He said the group has always made necessary regulatory disclosures.
Adani had managed to secure subscriptions to sell shares on Tuesday even though the stock price was below the offering price for the issue.
Maybank Securities and Abu Dhabi Investment Authority had made an offer for the main part of the issue – investments which will now be reimbursed by Adani.
In a late Wednesday evening announcement, the group’s founder said he was withdrawing the stock sale given the falling share price, adding that his board believed “that going from before with the show would not be morally correct”.
Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Mehta, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; written by Aditya Kalra; edited by Muralikumar Anantharaman and Jason Neely
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