Shares of Adani Group companies slid for the sixth straight session on Thursday with the group’s combined market capitalisation (m-cap) seeing a drop of $106 billion since last Tuesday’s close as a video statement by group chairman Gautam Adani failed to assuage investor concerns.
Adani Enterprises (AEL) called off its Rs 20,000-crore follow-on public offering (FPO) late on Wednesday, citing sustained market volatility and the interest of investors.
There’s trouble brewing in the bond market as well. Bonds of firms related to Gautam Adani’s flagship Adani Enterprises have come under pressure after the FPO was withdrawn.
According to reports, Citigroup’s wealth unit has stopped extending margin loans to its clients against securities of Adani Group companies. Earlier, Switzerland-based investment bank Credit Suisse stopped accepting bonds of Adani Group as collateral for margin loans to its private banking clients. Its private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai.
The Reserve Bank of India (RBI) has sought details from banks about the exposure to Adani companies amid the sustained fall in the shares of group firms and the withdrawal of the follow-on public offer of Rs 20,000 crore.
Separately, market regulator Securities and Exchange Board of India (Sebi) is examining the fall in shares of Adani Group and possible irregularities in the share sale by its flagship company, according to a Reuters report.
The AEL FPO was withdrawn after it had garnered bids for 50.8 million shares against the offer size of 45.5 million shares on the final day, with an overall subscription of 1.12%.
“For me, the interest of investors is paramount and everything else is secondary. So, to insulate the investor from potential losses, we have withdrawn the FPO. This decision will not have any impact on our existing operations as well as future plans,” chairman Adani said in a video message uploaded on YouTube.
He further said AEL’s balance sheet is healthy with strong cash flows and secured assets, and the company has an impeccable track record of servicing its debt. “We will continue to focus on long-term value creation and growth will be managed by internal accruals. Once the market stabilises, we will review our capital market strategy.”
Flagship Adani Enterprises tanked 26.5% to end at Rs 1,565 on Thursday, after a 27% fall the previous day.
Adani Transmission, Adani Green Energy and Adani Total Gas – all tanked by 10%, hitting the lower limit. Adani Power, Adani Wilmar and NDTV slid 5% each. Adani Ports was down over 6%. Ambuja Cements and ACC gained 5.3% and 0.05%, respectively.
Last week, US-based Hindenburg Research released a 103-page report highlighting accounting fraud, stock manipulation and improper use of offshore tax havens by the Adani Group. The firm said it had taken a short position in Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments.
On Sunday, the Adani Group, in a 413-page response to the allegations made by Hindenburg, said the US firm’s conduct was nothing short of a calculated securities fraud and contempt for Indian regulators and judiciary. It said that 65 of Hindenburg’s questions related to matters already disclosed by Adani portfolio companies in their annual reports available on their websites, offering memorandums, financial statements and stock exchange disclosures. Eighteen questions were related to public shareholders and third parties (and not the Adani portfolio companies), while the balance five were baseless allegations based on imaginary fact patterns.
Hindenburg, for its part, said the group was trying to lead the focus away from substantive issues and stoke a nationalist narrative instead.
Global index provider MSCI last week sought feedback from its subscribers on Adani Group and its associated securities. The feedback may not necessarily translate into any specific action, but the index provider has the option of excluding the eight Adani stocks with a cumulative weight of 5.75% in the MSCI indices, if volatility continues. The index provider could also reduce the weight of Adani Group shares by a half, resulting in cumulative outflows of $1.5 billion, according to estimates.