Black Friday for Adani stocks

Black Friday for Adani stocks

Shares of Adani Group companies slid 5-20% on Friday, with several stocks hitting the lower circuit, after a scathing report by US-based Hindenburg Research triggered a selloff. The bloodbath has erased over `4 trillion in the group’s combined market capitalisation in the last two trading sessions.

On Friday, Adani Enterprises (AEL), the flagship entity of Adani Group, slid 18.5% to `2,762 on the BSE, below the floor price of `3,112 fixed for its `20,000 crore follow-on public offering (FPO), which closes next week. Adani Transmission, Adani Green Energy, Adani Wilmar, Adani Power and Adani Total Gas tanked up to 20% to hit their lower circuits.

A Reuters report said the Securities and Exchange Board of India (Sebi) has increased scrutiny of deals by the Adani Group over the past year and will study the report to add to its own ongoing preliminary investigation into the group’s foreign portfolio investors.

On Friday, proxy advisory firm InGovern said the Hindenburg Research report serves as an opportunity for Adani group to deepen its relationships with long-term institutional investors. “All Adani group companies need greater equity research coverage by sell side analysts. Equity fund raising by Adani group companies, which otherwise do not have very diverse ownership, will result in wider participation by institutional and retail investors. This will also add free float and help in greater price discovery besides dissuading investors to short sell stocks,” the note said.

Adani group chairman Gautam Adani’s net worth slid to the seventh spot in the Forbes Real Time Billionaires’ list, slipping from the third position he held before the Hindenburg report. His net worth stands at $96.5 billion as of January 27, 2023, declining more than $22.7 billion (19%), as per the Forbes data.  

On Wednesday, Hindenburg said offshore shells and funds tied to the Adani Group comprise many of the largest public holders of Adani stocks. Many of these public funds were often Mauritius or offshore-based shell entities with concealed beneficial ownership via nominee directors. A right to information (RTI) request filed by it had confirmed that offshore funds were the subject of an ongoing Sebi investigation, more than a year-and-a-half after concerns were initially raised.

Adani group has a consolidated gross debt of `1.9 trillion and net debt of `1.6 trillion, which is spread across group companies, a recent note by Jefferies said. The top-3 companies by net debt levels are Adani Green Energy, Adani Power and Adani Ports and SEZ, with `300-400 billion in net debt each. Over the past 5-6 years, the group has diversified its borrowing mix and reduced the share of Indian banks in their borrowings from 86% in FY16 to 33% in FY22. The share of bonds as well as foreign banks in total debt has risen to 37% and 18% now, the report said.

Promoter pledges in Adani Ports, Adani Power, Adani Transmission, Adani Green, and Adani Enterprises as a percentage of total shares ranged between 2-19% at the end of December quarter, according to Nuvama Alternative & Quantitative Research. The value of promoter pledges in these companies amounted to `936 billion as on January 25, 2023.