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Adani’s Market Losses $100 Billion Following The Financial Crisis

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Adani's Market Losses $100 Billion Following The Financial Crisis

(CTN NEWS) – SINGAPORE – A day after the Indian group’s main firm abandoned its $2.5 billion public offering, Adani’s market losses reached over $100 billion on Thursday, raising concerns about a potential systemic impact.

The removal of Adani Enterprises from popular sustainability indices by S&P Dow Jones Indices, which will take effect on February 7, would present another difficulty for Adani.

And make the stock less desirable to sustainability-focused funds.

Additionally, the National Stock Exchange of India announced that it had added more shares of Adani Enterprises, Adani Ports, and Ambuja Cements to its monitoring list.

Adanis market losses top 100 billion following the financial crisis2

Indian billionaire Gautam Adani speaks during an interview with Reuters at his office in the western Indian city of Ahmedabad April 2, 2014. Picture was taken April 2, 2014. REUTERS/Amit Dave/File Photo

Nevertheless, Bloomberg News reported on Thursday that Adani Group Chairman Gautam Adani is in discussions with lenders to prepay and release pledged shares as he strives to restore trust in the financial health of his conglomerate.

The founder of Adani Enterprises, the school dropout-turned-billionaire whose fortunes rose quickly in recent years.

But have plunged in just a week after a critical research report by U.S.-based short-seller Hindenburg Research, has suffered a dramatic setback with the shocking withdrawal of the company’s share sale.

Aborting the share sale shocked the markets, the political system, and the corporate world.

The price of Adani stock fell, opposition politicians demanded a further investigation, and India’s central bank acted quickly to assess banks’ exposure to the business.

READ MORE: Adani, Asia’s Richest Man, Targeted In $68 Billion Stock Market Crash

Adanis market losses top 100 billion following the financial crisis1

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In the meantime, the wealth division of Citigroup (C.N) stopped lending customers margin loans secured by Adani Group securities.

As he pursues a global expansion spanning from ports to the power sector, Adani has recently formed partnerships with foreign goliaths like France’s TotalEnergies and attracted investors like Abu Dhabi’s International Holding Company.

The crisis represents a dramatic turn of fortune for Adani.

In a shocking move late on Wednesday, Adani canceled the share sale despite it being completely subscribed the day before as a stock crash caused by Hindenburg’s critiques worsened.

Ipek Ozkardeskaya, the senior market analyst at Swissquote Bank, claimed that Adani “may have begun a confidence crisis in Indian shares, which might have broader market ramifications.”

On Thursday, shares of Adani Enterprises fell 27%, closing at their lowest price since March 2022.

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Adani Total Gas, Adani Green Energy, and Adani Transmissionall suffered further losses of 10% each, while Adani Ports and Special Economic Zone lost close to 7%.

Group companies have lost nearly half of their total market value since Hindenburg’s report on January 24. The market capitalization of Adani Enterprises, which is said to as an incubator for Adani’s businesses, has decreased by $26 billion.

Adani’s net worth nearly halved to $64.6 billion in a week, making him no longer the richest person in Asia. Adani has dropped to 16th on Forbes’ list of the world’s richest persons.

The 60-year-old was ranked third after billionaires Bernard Arnault and Elon Musk.

The richest man in Asia is now his adversary Mukesh Ambani of Reliance Industries.

Reuters Graphics

Reuters Graphics

BROADER QUESTIONS

Concerns have been expressed regarding the possibility of a wider impact on India’s financial system as a result of Adani’s falling stock and bond prices.

On Thursday, government and banking sources told Reuters that India’s central bank has requested information from regional banks regarding their exposure to the Adani Group.

In the fiscal year ending in March 2022, according to CLSA, Indian banks were exposed to nearly 40% of the $24.5 billion in debt held by the Adani Group.

On Thursday, the dollar bonds issued by the Adani Group’s businesses continued to lose value, with notes from Adani Green Energy falling to a record low.

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/ AP

On Thursday, according to sources cited by Reuters, Adani Group entities made the monthly coupon payments on outstanding U.S. dollar-denominated debts.

Although there will be short-covering rebounds, we anticipate more fundamental downside risks given that more private banks (are) likely to cut or lower margins, according to Monica Hsiao.

Chief investment officer of Hong Kong-based credit fund Triada Capital. “We see the market is losing confidence in measuring where the bottom can be,” she added.

Opposition members in New Delhi formally requested that the short-report sellers be discussed in parliament.

While the day’s session of parliament was adjourned, the Congress Party demanded the formation of a Joint Parliamentary Committee or a Supreme Court-monitored investigation.

FILE- Adani Group Chairman Gautam Adani attends the 'Invest Karnataka 2016 - Global Investors Meet' in Bangalore, India, Feb. 3, 2016. Asia’s richest man, Gautam Adani, saw his companies shed tens of billions of dollars in market value after short-selling firm Hindenburg Research accused him of “pulling the largest con in corporate history,” triggering a massive sell-off of Adani stocks. (AP Photo/Aijaz Rahi, File)

HINDENBURG vs. ADANI

According to Dealogic data, Adani made acquisitions worth $13.8 billion in 2022, a record-breaking amount and more than double the previous year.

Adani needed the money from the canceled fundraising since it had previously stated that it would require $1.33 billion to pay for green hydrogen projects and airport infrastructure.

And greenfield motorways, as well as $508 million to pay off debt at some units.

The Adani Group was accused of stock manipulation and using offshore tax havens improperly in Hindenburg’s research. High debt and the values of seven listed Adani companies were other issues that were brought up.

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/ AP

The Adani Group has refuted the allegations, claiming that there is “no basis” for them and that they are the result of a misunderstanding of Indian law. It said that it has always disclosed information required by regulations.

Even though the stock’s market price was less than the issue’s offer price on Tuesday, Adani was nevertheless able to collect subscribers for the share sale.

For the anchor component of the issuance, Maybank Securities and Abu Dhabi Investment Authority submitted bids; Adani will now repay these investments.

Due to the share price decline, the group’s founder said late on Wednesday that he was canceling the sale. He added that his board decided that continuing the transaction “would not be morally proper.”

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