Shares of most of the Adani Group companies continued their fall on Monday, hitting fresh lower circuits, despite a detailed rebuttal by the group to the allegations made by US short-seller Hindenburg Research.
The bloodbath has erased over Rs 5.5 trillion in the group’s combined market capitalisation over the last three trading sessions. Last week, several Adani shares hit the lower circuit amid allegations of accounting fraud, stock manipulation and improper use of offshore tax havens levelled by Hindenburg.
However, the fall in Adani stocks may not have a significant bearing on the overall market because of the low retail, HNI (high net worth individual) and mutual fund holding in these stocks. Mutual funds had an exposure of Rs 26,388 crore towards nine Adani Group companies for the quarter ended December, according to reports.
“The market has been volatile in the past few sessions, but Adani is just one of the factors contributing to this volatility. The upcoming Budget, Fed action, RBI meet and the results season may have a higher bearing than the Adani saga,” a research analyst said on condition of anonymity.
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Experts believe panic selling in Adani counters could be contained going forward if the ongoing FPO (follow-on public offer) manages to garner the required subscription.
“It appears likely that a significant portion of the selling may have already materialised considering the thin institutional and retail holding in several of the Adani Group companies. The institutional holding, especially that of mutual funds, is minimal and institutions holding for the longer term may not be selling,” UR Bhat, director at Alphaniti Fintech, said.
Banks, including those that have lent to Adani companies, have taken a beating on the bourses in the aftermath of the Hindenburg report. Experts believe that the selling in banks on Friday may have been overdone. SBI and PNB shares rose marginally on Monday. Bank of Baroda was up 1.6%, while private lenders ICICI Bank and Kotak Mahindra Bank were up 0.9% and 0.7%, respectively.
“The Adani Group has not defaulted on loans and have sizeable assets. The selling on Friday was an overreaction,” the analyst quoted above said.
“The Adani Group is largely in regulated businesses such as roads, power and ports, which generate steady cash flows. Bank borrowing has been secured through these cash flows, and as the largest bank in India has said, there is nothing much to fear about these borrowings at this juncture,” Bhat said.
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SBI had on Friday said that its exposure to Adani Group was well below the Reserve Bank of India’s Large Exposure Framework and was secured by cash-generating assets.
Analysts at CLSA wrote last week that state-owned lenders have a “material” exposure to Adani Group at 30% of the group debt. “For PSU banks, the exposure is more meaningful at 0.6% of loans and 5% of FY24 net worth,” they said. The brokerage pegged the group’s consolidated debt at Rs 2.1 trillion, aggregating the consolidated debt of the top five companies and allowing for some element of double counting. “One caveat is that we are not aware of non-funded exposures that PSU banks might have extended,” the analysts wrote.