Adani’s market losses exceed $100 billion as shelved share sales spook investors

NEW DELHI/MUMBAI, Feb 2 (Reuters) – Shares in India’s Adani Group fell on Thursday after abandoning a $2.5 billion share sale of its flagship company, widening the conglomerate’s market losses to more than $100 billion and triggering a concerns about potential systemic effects.

The exit from the Adani Enterprises (ADEL.NS) share sale is a dramatic setback for Gautam Adani, the school dropout billionaire whose wealth has grown rapidly in recent years US Short Sellers published a key research report while shrinking.

The events are an awkward turn of events for Adani, who has struck partnerships with foreign giants such as France’s TotalEnergies (TTEF.PA) and investors such as Abu Dhabi International Holdings as he seeks to expand globally From ports and mining to cement and strength.

Adani called off the share sale late on Wednesday as a stock slump fueled by criticism from short-seller Hindenburg, although the offer was fully subscribed on Tuesday.

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Adani Enterprises plunged nearly 20% on Thursday, trading at its lowest since March 2022. Other group companies were also under pressure – Adani Ports and Special Economic Zone (APSE.NS) fell 5%, while Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) each down 10%.

Since Hindenburg’s report was published on January 1st. 24, the total market value of the group company lost nearly half. Adani Ventures — described as an incubator for Adani Ventures — lost $24 billion in market value alone.

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

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“Unless Adani can regain the confidence of institutional investors, the stock market will plummet,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.

The slump in Adani’s share price has raised concerns about possible wider impact on India’s financial system.

India’s central bank has asked local banks to provide details of their exposure to Adani group companies on Thursday, government and banking sources told Reuters. CLSA estimates that Indian banks are at risk of about 40% of Adani Group’s 2 trillion rupiah ($24.53 billion) of debt in the fiscal year to March more

Citigroup’s (CN) wealth arm has stopped offering margin loans backed by Adani Group securities to its clients and decided to cut the loan-to-value ratio of credit backed by Adani securities to zero on Thursday, a source said.

“We’ve seen the market lose confidence in how it judges where the bottom might be, and despite the short-covering rally, we expect more fundamental downside risk as more private banks may cut or reduce margins,” said Monica Hsiao of Hong Kong Credit Fund Triada Capital chief investment officer said.

In New Delhi, opposition lawmakers sent notices to India’s parliament to discuss the report by the US short-sellers. The Congress party has called for a joint parliamentary committee or the Supreme Court to oversee an inquiry into the matter.

Adani vs Hindenburg

Hindenburg’s report last week accused Adani Group of improperly using offshore tax havens and manipulating shares. It also raised concerns about high debt and the valuation of seven Adani-listed companies.

Adani Group has denied the allegations, saying the short-seller’s allegations of stock manipulation were “baseless” and stemmed from ignorance of Indian law. It added that the group has been making the necessary regulatory disclosures.

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

Adani managed to secure subscriptions for its shares on Tuesday, despite the market price of the shares being below the issue price, as shares plummeted after the Hindenburg report. But on Wednesday, stocks plunged again.

Maybank Securities and Abu Dhabi Investment Authority and Life Insurance Company of India (LIFI.NS) bid for the anchor tranche of the bond. These investments will now be returned by Adani.

In an announcement late Wednesday night, the billionaire said he was withdrawing the stock sale because the company’s “share price fluctuates throughout the day. Given these exceptional circumstances, the company’s board of directors does not believe it would be morally correct to continue the stock offering.”

“The interests of my investors are paramount and everything else is secondary. Therefore, in order to protect investors from potential losses, we have withdrawn” the share offering, Adani said in a video address earlier Thursday.

Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Madan, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; Writing by Aditya Kalra; Editing by Muralikumar Anantharaman

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