Indian regulator looking into $86 billion Adani share wipeout

Adani shares suffer new setback on Indian stock exchangesShares plunge on day after successful share saleSEBI investigates possible irregularities in $2.5bn share sale

BENGALURU, Feb 1 (Reuters) – India’s markets regulator is investigating a downturn in the shares of billionaire Gautam Adani’s companies, a source with direct knowledge told Reuters, as losses sparked by a damning US short-selling report spiked on Wednesday 86 billion US dollars have risen .

The Securities and Exchange Board of India (SEBI) is also investigating several of Hindenburg Research’s allegations and possible irregularities in a sale of key shares by flagship Adani Enterprises (ADEL.NS) on Tuesday, the source said, speaking on condition of anonymity.

SEBI and Adani Group spokespersons did not immediately respond to requests for comment.

Among several allegations, Hindenburg last week accused the Adani Group of using offshore tax havens and stock manipulation. It also raised concerns about the high level of debt and valuations of the seven listed Adani companies.

The group has denied the allegations, saying the short seller’s narrative of stock manipulation has “no basis” and is based on an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.

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On Tuesday, Adani Group rallied support from investors for a $2.5 billion share sale for Adani Enterprises, in what some saw as a sign of investor confidence in a time of crisis.

But the meltdown in Adani Group stocks and bonds continued on Wednesday, with shares in Adani Enterprises plummeting 28% and Adani Ports and Special Economic Zone (APSE.NS) tumbling 19%, the worst day on record records for both.

The losses mark a dramatic setback for Gautam Adani, the high school dropout-turned-billionaire whose wealth has soared in recent years in line with the share values ​​of his companies, which include ports, airports, mining and cement.

Now the tycoon, who slipped out of Forbes’ top 10 list of the rich on Wednesday, is struggling to stabilize his businesses and defend his reputation.

Underscoring the nervousness of some quarters, Bloomberg reported that Credit Suisse (CSGN.S) has stopped accepting bonds from Adani Group companies as collateral for margin loans to its private banking clients. Credit Suisse had no immediate comment.

Deven Choksey, chief executive of KRChoksey Shares and Securities, said it was a major factor in Wednesday’s slide.

After shedding $86 billion over the past few days — 16% of India’s $550 billion in annual budget spending announced on Wednesday — the Adani Group’s seven listed companies now have a combined market capitalization of about 131 billion dollars.

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[1/5] Indian billionaire Gautam Adani speaks during an inauguration ceremony after the Adani Group completed the purchase of the Port of Haifa in early January 2023 at the Port of Haifa, Israel January 31, 2023. REUTERS/Amir Cohen

DRAINAGE

Indian credit rating agency ICRA Ltd, a unit of Moody’s Investors Service, said Wednesday it was monitoring the impact of developments on its rated portfolio at Adani Group.

It added that while the group’s large debt-financed investment plan was an “important challenge”, some of it was discretionary in nature and could be deferred depending on liquidity conditions.

An Australian regulator said Wednesday it would also look into Hindenburg’s allegations to see if further investigations were warranted.

Wednesday’s stock losses saw Adani slip with an estimated net worth of $75.1 billion.

Prior to Hindenburg’s report, Adani had ranked third.

Asked if he was worried about major losses in Indian stock markets as shares of the Adani Group slumped, Economy Minister Ajay Seth said the government “does not comment on matters related to any particular company”.

India’s benchmark index, the Nifty, is down 2.7% since the Hindenburg report. The data also shows that foreign investors sold a net $1.5 billion worth of Indian stocks after the report — the biggest outflow in four consecutive days since Sept. 30.

Shares in Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) each fell 5% on Wednesday, and Adani Total Gas (ADAG.NS) tumbled 10%, with all three falling below their daily price limits. Adani Transmission (ADAI.NS) is down 3% and Adani Green Energy (ADNA.NS) is down 5.6%.

Adani Total Gas, a joint venture with France’s Total (TTEF.PA), was the biggest victim of the short seller report, losing about $27 billion.

Shares in cement firms ACC (ACC.NS) and Ambuja Cements (ABUJ.NS), which the Adani Group bought from Switzerland’s Holcim (HOLN.S) for $10.5 billion last year, fell 6.2% % and 16.7%, respectively.

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Dollar bonds issued by Adani entities also continued their slide on Wednesday. US dollar-denominated Adani Ports bonds due February 2031 led the losses, falling 3.59 cents to 67.58 cents.

Hindenburg said in its report it had shorted US bonds and non-India-traded Adani Group derivatives.

Reporting by Chris Thomas in Bengaluru and Aditya Kalra and Aditi Shah in New Delhi; Additional reporting from Bharath Rajeshwaran, Nikunj Ohri and Sethuraman NR; Edited by Edwina Gibbs, Aditya Kalra and Mark Potter

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