Adani’s market losses swelled above $100bn on Thursday, sparking worries about a potential systemic impact a day after the Indian group’s flagship firm abandoned its $2.5bn stock offering.
The shock withdrawal of Adani Enterprises’s share sale marks a dramatic setback for founder Gautam Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years but have plunged in just a week after a critical research report by United States-based short-seller Hindenburg Research.
Aborting the share sale sent shockwaves across markets, politics and business. Adani stocks plunged, opposition politicians called for a wider probe and India’s central bank sprang into action to check on the exposure of banks to the group.
Meanwhile, Citigroup’s wealth unit stopped making margin loans to clients against Adani Group securities.
The crisis marks a dramatic turn of fortune for Adani, who has in recent years forged partnerships with foreign giants such as France’s TotalEnergies and attracted investors such as Abu Dhabi’s International Holding Company, as he pursues a global expansion stretching from ports to the power sector.
In a shock move late on Wednesday, Adani called off the share sale as a stocks rout sparked by Hindenburg’s criticisms intensified, despite it being fully subscribed a day earlier.
“Adani may have started a confidence crisis in Indian shares and that could have broader market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Adani Enterprises shares tumbled by 27 percent on Thursday, closing at their lowest level since March 2022.
Other group companies also lost further ground, with 10 percent losses at Adani Total Gas, Adani Green Energy and Adani Transmission, while Adani Ports and Special Economic Zone shed nearly 7 percent.
Since Hindenburg’s report on January 24, group companies have lost nearly half their combined market value. Adani Enterprises – described as an incubator of Adani’s businesses – has lost $26bn in market capitalisation.
Adani is also no longer Asia’s richest person, having slid to 16th in the Forbes rankings of the world’s wealthiest people, with his net worth almost halved to $64.6bn in a week.
The 60-year-old had been third on the list, behind billionaires Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries is now Asia’s richest person.
On Thursday, Bloomberg News reported that Adani was in talks with lenders to prepay and release pledged shares as he seeks to restore confidence in his conglomerate’s financial health.
The move would see lenders release some of the stock in Adani Group companies that was pledged as collateral, Bloomberg reported, citing a person with knowledge of the matter.
The group has not faced margin calls on these pledges and is seeking the prepayment proactively, according to the report.
The key priority is to remove any concern about margin calls, Bloomberg reported, adding that Adani officials will speak with investors in the coming days and will make all payments on time.
Adani’s plummeting stock and bond prices have raised concerns about a potential wider impact on India’s financial system.
India’s central bank has asked local banks for details of their exposure to the Adani Group, government and banking sources told Reuters on Thursday.
Market and investment group CLSA estimates Indian banks were exposed to about 40 percent of Adani Group’s $24.5bn debt in the fiscal year to March 2022.
Dollar bonds issued by Adani Group’s entities extended losses on Thursday, with notes of Adani Green Energy Ltd crashing to a record low. Adani Group entities made scheduled coupon payments on outstanding US dollar-denominated bonds on Thursday, Reuters reported, citing sources.
“We see the market is losing confidence on how to gauge where the bottom can be and although there will be short-covering rebounds, we expect more fundamental downside risks given more private banks (are) likely to cut or reduce margin,” said Monica Hsiao, the chief investment officer of Hong Kong-based credit fund Triada Capital.
In New Delhi, opposition politicians submitted notices in parliament demanding a discussion of the short-seller’s report.
The Congress Party called for a Joint Parliamentary Committee to be set up or a Supreme Court-monitored investigation, while some MPs shouted anti-Adani slogans inside parliament, which was adjourned for the day.
Adani vs Hindenburg
Adani made acquisitions worth $13.8bn in 2022, Dealogic data showed, its highest ever and more than double the previous year.
The cancelled fundraising was critical for Adani, which had said it would use $1.33bn to fund green hydrogen projects, airports facilities and greenfield expressways, and $508m to repay debt at some units.
Hindenburg’s report alleged improper use of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The Adani Group has denied the accusations, saying the allegation of stock manipulation has “no basis” and stems from ignorance of Indian law. It said it has always made the necessary regulatory disclosures.
Adani had managed to secure share sale subscriptions on Tuesday even though the stock’s market price was below the issue’s offer price. Maybank Securities and Abu Dhabi Investment Authority had bid for the anchor portion of the issue, investments which will now be reimbursed by Adani.
Late on Wednesday, the group’s founder said he was withdrawing the sale given the share-price fall, adding his board felt going ahead with it “will not be morally correct”.