© Reuters. FILE PHOTO: The Adani Group logo is seen on the facade of one of its buildings on the outskirts of Ahmedabad, India, April 13, 2021. REUTERS/Amit Dave
By Chris Thomas, Sriram Mani and Aditya Kalra
MUMBAI (Reuters) – Shares of India’s Adani Enterprises tumbled on Friday after a scathing report from an American short seller sparked a sell-off in the conglomerate’s publicly traded companies, casting doubt on the success of the conglomerate. the company’s record $2.45 billion secondary share sale.
Seven publicly traded companies in the Adani conglomerate, controlled by one of the world’s richest men, Gautam Adani, lost a combined market capitalization of $48 billion, and the Adani companies’ US bonds also fell after Hindenburg Research signaled their concern in a January 24 report on debt levels. and the use of tax havens.
The defeat caused shares of Adani Enterprises, the group’s flagship company, to fall close to 20%, well below the offer price of its secondary sale. As the bidding began on Friday, the issue was subscribed to around 1%, raising concerns about whether it could continue.
“The news cycle of the last few days has clearly affected the selling of shares and you can clearly see that in underwriting levels, especially in low retail participation,” said Narendra Solanki, head of fundamental research at national brokerage Anand Rathi.
The Adani Group was concerned but prepared to wait for now as the share sale continues until January 31, two people with direct knowledge of the situation said.
India’s capital markets regulator is studying the Hindenburg report as it may help its own investigation into Adani Group’s offshore fund holdings, two other sources said. Spokesmen for the regulator and Adani had no immediate comment.
Adani Group dismissed the Hindenburg report as unfounded and said it is considering legal action against the New York-based firm.
With a net worth of $96.6 billion, billionaire Gautam Adani is now the seventh-richest man in the world, according to Forbes, falling from third on falling stocks.
The 60-year-old hails from the western state of Gujarat, the home state of Prime Minister Narendra Modi. India’s main opposition Congress party has often accused Adani and other billionaires of receiving favorable political treatment from the Modi administration, accusations the billionaire denies.
Adani Group was established in 1988, starting with commodity trading. The conglomerate’s business interests now extend from ports and airports to mining and renewable energy.
The main part of the share sale that began on Friday saw the participation of investors, including the Abu Dhabi Investment Authority and Maybank Securities on Wednesday.
Shares of publicly traded Adani companies that plunged on Friday include Adani Transmission Ltd, Adani Total Gas and Adani Green Energy, which sank 20% each, marking their worst day, while Adani Ports and Special Economic Zone fell 16.3%.
By the end of the first day of the share sale, investors, mostly retail, had bid for about 470,160 shares in the Adani Enterprises share sale, compared with 45.5 million on offer, according to data from the Indian stock exchange. The share sale is being managed by Jefferies, India’s SBI Capital Markets and ICICI Securities, among others.
The firm has set a floor price of Rs 3,112 ($38.22) per share and a ceiling of Rs 3,276. But on Friday, shares ended at Rs 2,761.45, well below the low end of the range.
Anand Rathi’s Solanki said that “with the current market price below the share offer price, doubts about the underwriting of the issue are growing.”
Investor concerns spilled over to Indian banks with exposure to Adani’s debt. The Nifty Bank Index fell more than 3%, while the broader 50-stock Nifty Index ended down 1.6%.
CLSA estimates that Indian banks were exposed to around 40% of the Adani Group’s Rs 2 trillion ($24.53 billion) of debt in the fiscal year to March 2022.
“There is nothing alarming about Adani’s exposure and we don’t have any concerns as of now,” Dinesh Kumar Khara, president of the State Bank of India, the country’s biggest lender, told Reuters, adding that Adani has not raised any funds recently. of the Bank.
“VALUATIONS HIGH IN THE SKY”
Adani met the country’s energy minister, RK Singh, on Friday, but the meeting’s agenda was not immediately known.
US dollar-denominated bonds issued by Adani Green Energy fell to just under 77 cents on the dollar to their lowest level since November, Tradeweb data showed.
In his report, Hindenburg said key publicly traded Adani Group companies had “substantial debt”, placing the conglomerate on “precarious financial footing”. He also said “sky-high valuations” had pushed the share prices of Adani’s seven publicly traded companies up to 85% above actual value.
US billionaire investor Bill Ackman said Thursday that he found the Hindenburg report “highly credible and extremely well-researched.”
Hindenburg said it was short Adani through its US-traded bonds and non-Indian-traded derivatives.
Adani Group has repeatedly dismissed concerns about its debt levels, defending itself in a presentation titled “Myths of the Short Seller” on Thursday.
Jefferies said in a note to a client that it does not see a material risk to Indian banks from the group’s debt. Adani has said that his loans are manageable and no investor has expressed concern about him.
Adani has been diversifying his business interests and last year bought cement companies ACC and Ambuja Cements from the Swiss Holcim (SIX:) for $10.5 billion. ACC shares fell 13.2% on Friday, while Ambuja plunged 17.3%.
