© Reuters. FILE PHOTO: Traffic moves past the Adani Group logo installed at a roundabout on a ring road in Ahmedabad, India February 2, 2023. REUTERS/Amit Dave/File Photo
NEW DELHI (Reuters) – Shares of Adani Group companies extended their slide in Mumbai on Friday, with their market value now more than halved to less than $100 billion after a critical report by a U.S. short seller last week sparked a market rout.
Hindenburg Research questioned the Indian conglomerate’s debt level and use of tax havens. Adani called the report baseless and said its financial results remained strong, but the ensuing stock market crisis raised wider concerns about a possible systemic effect.
Lawmakers have called for a wider investigation into the matter, and sources told Reuters the central bank had asked lenders for details of their exposure to the group.
In one of the biggest setbacks for chairman Gautam Adani, the group on Wednesday postponed its $2.5 billion share sale, which would normally have taken place at the height of the breakup.
In trading on Friday, the share price of Adani Enterprises Ltd – the group’s flagship – fell 35% to its lowest level since March 2021. That brought losses to nearly $33.6 billion since last week, a 70% drop.
Adani Ports and Special Economic Zone Ltd fell 14%, while Adani Transmission Ltd and Adani Green Energy Ltd fell 10% each. Adani Total Gas Ltd – a joint venture with France’s TotalEnergies SE – fell 5%.
“Contagion concerns are spreading, but still confined to the banking sector. The focus remains on further index exclusion risks,” said Charu Chanana at Saxo Markets in Singapore.
On Thursday, S&P Dow Jones Indices said it would remove parent company Adani Enterprises Ltd from widely used sustainability indices on February 7, making the stock less attractive to environmentally conscious investors.
“One of the big risk factors to watch out for now is if more indices remove Adani shares,” Chanana said. “This may result in overseas outflows as funds sell Adani shares, further exacerbating confidence issues.”
In his report, Hindenburg said key Adani-listed companies had “substantial debt” and that shares in seven Adani-listed companies were down 85% due to what he called sky-high valuations. Manipulation of shares is also mentioned.
Adani Group said the share manipulation allegations were “baseless” and stemmed from ignorance of Indian law. The response stated that over the past decade, the group’s companies have been “consistently shrinking”.
In total, Adani Group’s seven listed companies now have a market capitalization of $99 billion, up from $218 billion before the Hindenberg report.
The fall in share prices marks a dramatic reversal of fortunes for Adani, which in recent years has forged partnerships with and attracted investment from foreign giants as it pursues global expansion in sectors as diverse as ports and energy.
Adani is also no longer the richest person in Asia and has dropped to 17th place on the Forbes list of the world’s richest people. The 60-year-old was third behind Elon Musk and Bernard Arnault. Indian rival Mukesh Ambani of Reliance Industries Ltd is now the richest person in Asia.
Prices of US dollar bonds issued by Adani Group entities rose on Friday after falling on Thursday.
Adani Green’s bonds due September 2024 gained about 7 cents to 69.69 cents, after hitting a record low of 60.56 cents on Thursday.