Sell-off in India's Adani deepens to $50 billion
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Adani owned companies are way over valued, needs to come down.
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ravish kumar ki aahh lagi hai isko
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India's Adani slammed by $48 billion stock rout, putting share sale at risk
2 hours ago
(Jan 27, 2023 10:13AM ET)
By Chris Thomas, Sriram Mani and Aditya Kalra
MUMBAI (Reuters) -Shares of India's Adani Enterprises plunged on Friday after a scathing report by a U.S. short seller triggered a selloff in the conglomerate's listed firms, casting doubts on the success of the company's record $2.45 billion secondary share sale.
Seven listed companies of the Adani conglomerate - controlled by one of the world's richest men Gautam Adani - lost a combined $48 billion in market capitalisation, with U.S. bonds of Adani firms also falling after Hindenburg Research flagged concerns in a Jan. 24 report about debt levels and the use of tax havens.
The rout led to a near 20% fall in shares of Adani Enterprises, the group's flagship company, well below the offer price of its secondary sale. As bidding started on Friday, the issue was subscribed around 1%, raising concerns over whether it would be able to proceed.
"The news cycle in the past few days has clearly impacted the share sale and you can clearly see that in the subscription levels, especially the low retail participation," said Narendra Solanki, fundamental research head at domestic brokerage Anand Rathi.
The Adani Group was concerned but prepared to wait it out for now as the share sale continues until Jan. 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 probe into offshore fund holdings of Adani Group, two other sources said. Spokespersons for the regulator and Adani had no immediate comment.
Adani Group dismissed the Hindenburg report as baseless and said it is considering whether to take legal action against the New York-based firm.
With a net worth of $96.6 billion, billionaire Gautam Adani is now the world's seventh richest man, according to Forbes, slipping from the third position due to the stock rout.
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 getting favourable policy treatment from Modi's administration, allegations the billionaire denies.
The Adani Group was established in 1988, beginning with commodities trading. The conglomerate's business interests now extend from ports and airports to mining and renewable power.
The anchor portion of the share sale that began on Friday saw participation from investors including the Abu Dhabi Investment Authority and Maybank Securities on Wednesday.
Shares of the listed Adani firms that plummeted on Friday include Adani Transmission Ltd, Adani Total Gas and Adani Green Energy sinking 20% each - marking their worst day ever - while Adani Ports and Special Economic Zone fell 16.3%.
At the end of the first day of the share sale, investors, mostly retail, had bid for around 470,160 shares in the Adani Enterprises share sale, compared with 45.5 million on offer, according to Indian stock exchange data. 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 3,112 rupees ($38.22) a share and a cap of 3,276 rupees. But on Friday the stock ended at 2,761.45 rupees - well below the lower end of the range.
Anand Rathi's Solanki said "with the current market price below the share sale offer price, it further puts doubts on issue subscription."
Investors' worries extended to Indian banks with exposure to Adani debt. The Nifty Bank index fell over 3%, while the broader 50-share Nifty index ended down 1.6%.
CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion rupees ($24.53 billion) of Adani Group debt in the fiscal year to March 2022.
“There is nothing alarming about Adani exposure and we don't have any concerns as of now,” Dinesh Kumar Khara, chairman of the country’s largest lender State Bank of India, told Reuters, adding that Adani hasn't raised any recent funds from the bank.
"SKY-HIGH VALUATIONS"
Adani met the country's power minister R.K. Singh on Friday, but the agenda of the meeting was not immediately known.
U.S. dollar-denominated bonds issued by Adani Green Energy fell to just under 77 cents on the dollar to their lowest since November, Tradeweb data showed.
In its report, Hindenburg said key listed Adani Group companies had "substantial debt", putting the conglomerate on a "precarious financial footing". It also said "sky-high valuations" had pushed the share prices of seven listed Adani companies as much as 85% beyond actual value.
Billionaire U.S. investor Bill Ackman said on Thursday that he found the Hindenburg report "highly credible and extremely well researched."
Hindenburg said it held short positions in Adani through its U.S.-traded bonds and non-Indian-traded derivative instruments.
Adani Group has repeatedly dismissed concern about its debt levels, defending itself in a presentation titled "Myths of Short Seller" on Thursday.
Jefferies said in a client note it does not see material risk to Indian banks from the group's debt. Adani has said its borrowings are manageable and no investor has raised any concern.
Adani has been diversifying its business interests and last year bought cement firms ACC and Ambuja Cements from Switzerland's Holcim (SIX:HOLN) for $10.5 billion. ACC shares slid 13.2% on Friday, while Ambuja plunged 17.3%.
Indos
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Who is Gautam Adani? Asia’s richest man is rocked by fraud claims.
Gautam Adani speaks at the World Congress of Accountants in Mumbai. (Indranil Mukherjee/AFP/Getty Images)
Niha Masih
January 28, 2023 at 4:57 p.m. EST
Indian billionaire Gautam Adani, who last year briefly catapulted into becoming the world’s second richest person, has had a tough week. On Tuesday, he was accused of fraud and market manipulation by U.S.-based short sellers at Hindenburg Research, leading to the companies that he controls shedding tens of billions in value.
The fortune of Adani, who until recently had a net worth larger than that of Bill Gates and Warren Buffett, declined by more than $22 billion on Friday, according to Forbes, which tracks billionaire fortunes in real time. The seven publicly traded Adani companies, which are involved in everything including energy and infrastructure, lost more than $50 billion in market value this week, Bloomberg News reported.
Hindenburg, which is best known for a 2020 report about misrepresentations at electric vehicle company Nikola, said in research published after a two-year probe that Adani had pulled the “largest con in corporate history.”
Adani Group, the billionaire’s umbrella holding company, called Hindenburg’s charges “baseless and discredited,” and suggested the report was malicious in intent and timed to sabotage a secondary share sale of one of its companies.
Here’s what to know about the allegations surrounding the Indian energy baron who is Asia’s richest person.
Who is Gautam Adani?
Adani, 60, had a humble beginning. Born to a textile merchant in the western state of Gujarat, Adani spent his early career as a small-time plastics trader who traveled by scooter.
His big break came after India began liberalizing its economy in the early 1990s, and he was tasked with developing a deep-water port at Mundra, which now hosts the largest commercial port in the country. From there, his company expanded swiftly into infrastructure, logistics and energy, with coal-related businesses fueling his rise.
James Crabtree, an India specialist who wrote a book on the country’s billionaires, called Adani “modest” in a 2018 Australian Financial Review article.
“Both at home and abroad he also showed a debonair approach to debt … in a process that positioned him as perhaps the most financially aggressive of India’s newest generation of billionaires,” wrote Crabtree, who also noted that the tycoon worked out of an unpretentious office in his home state. (Adani is also a close ally of Indian Prime Minister Narendra Modi, who previously led Gujarat.)
Adani’s net worth has grown rapidly, from $9 billion in 2020 to $127 billion in December, during a broader boom in Indian capital markets. Forbes on Friday said he was worth just under $97 billion.
How big is the Adani empire?
Very, very big. Adani’s companies operate major Indian seaports, produce cement and sell cooking oil. He also recently acquired New Delhi Television, a leading English-language news channel that was one of the last networks seen as journalistically independent.
But coal remains at the heart of his empire, and he is the largest private developer of coal power plants and mines in the world, according to Global Energy Monitor. More than 60 percent of his holding company’s revenue was derived from coal-related business, The Washington Post reported in December.
His empire now stretches to sectors such as defense, renewable energy, transmission and infrastructure.
What are Adani’s connections to Narendra Modi?
Adani’s dizzying rise closely parallels the political career of Modi. The two men first met in the 1990s in their home state of Gujarat, when Adani was an up-and-coming businessman and Modi a promising, mid-level official in the Bharatiya Janata Party.
In the decades since, Adani has juggled ties with political leaders from across India, but the two seemed to mesh, associates of both men previously told The Post. The politician oversaw an infrastructure boom when he led Gujarat and came to respect Adani as an able operator, a former Modi adviser said.
After Modi was first elected prime minister in 2014, he flew to New Delhi from Gujarat in a private jet. A smiling Modi waved from the steps, with Adani’s purple logo looming behind on the plane. (Adani said in a 2016 interview with the Economic Times newspaper that the plane was not used by Modi for “free.”)
The Post reported in December that the Indian government on at least three occasions revised laws to help his coal businesses, saving him at least $1 billion. Critics such as Adani Watch, an Australian-based nonprofit, said the Hindenburg allegations, if proved true, “are just another example of what happens when crony capitalism and regime favoritism create a perceived culture of impunity.”
An Adani spokesperson declined to address the billionaire’s political relationships when provided with a list of questions ahead of The Post’s December report. An Adani associate, who spoke on the condition of anonymity because he was not authorized to publicly comment, told The Post that the billionaire’s success was due to his ability to support Delhi’s economic priorities, such as developing ports to transport coal when India faced shortages and building coal plants when the country needed electricity.
What are the fraud allegations leveled by Hindenburg?
Hindenburg published a report that accused the Adani Group of, among other things, artificially boosting the share prices of its firms over several decades by using a network of overseas shell companies linked to Adani’s family members. Hindenburg argued that Adani’s companies were collectively overvalued on India’s stock market by more than 80 percent.
The billionaire investor Bill Ackman in a tweet Thursday called Hindenburg’s report “highly credible” and “extremely well-researched.”
Indian markets halted trading of some Adani subsidiaries on Friday after a major sell-off.
What happens next?
Adani said it would look to initiate legal action against Hindenburg, which said it would welcome the challenge.
The sell-off has put the fate of an Adani company’s $2.45 billion secondary share sale, which opened Friday, in doubt. One market analyst said he was watching to see if the firm would withdraw its offering or lower its asking price.
The sharp drop in share prices means the “markets have taken the content of the report seriously,” said Hemindra Hazari, an independent research analyst.
The allegations bring into doubt the integrity of Indian capital markets, said Andy Mukherjee, an Indian economics commentator who writes for Bloomberg Opinion.
“This puts the Indian regulator in a difficult position about what it should do next: Seek to restore investor trust by thoroughly probing the allegations of market manipulation, or dismiss them as the handiwork of foreigners jealous with India’s rise?” he said in an email.
The case has also raised questions about the amounts that India’s public-sector bank have lent to Adani. Public-sector banks hold about 30 percent of the Adani Group’s debt, according to Hong Kong brokerage CLSA. The firm said the exposure was manageable even as debt held by the group’s five largest companies doubled in the past four years to $25.7 billion as of March.
Gerry Shih and Anant Gupta in New Delhi contributed to this report.
LakeHawk180
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There’s no “fraud” afaik. Yeah, Adani stocks are way over valued and the conglomerate is in dire need of proper internal controls and investor scrutiny. But I believe in India it belongs to the “too big to fail” category. This won’t be another Satyam, they seem to have done the bare minimum to meet compliances.
Indos
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Dont just see on Adani, what would happen on Indian stock market for the next week as confident on Indian stock market will likely plunge over this issue.
The possible huge outflow of foreign investors in Indian Stock market will likely hurt Rupee as well for the next weeks to come
LakeHawk180
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I doubt it very much. So far we see just Adani stocks and the banks with exposure to Adani affected. Other sectors continue to perform as expected.
Do you consider yourself a good analyst? Ones I know are always pragmatic and hardly fatalist. Their reputation depends on it, I guess that hardly matters to you
Indos
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Adani current investors are in majority hype investors who dont understand thorough financial analysist and cannot make quick sell off. The stock is suspended by Indian authority, we will watch the stock performance after the suspension is lifted.I doubt it very much. So far we see just Adani stocks and the banks with exposure to Adani affected. Other sectors continue to perform as expected.
Do you consider yourself a good analyst? Ones I know are always pragmatic and hardly fatalist. Their reputation depends on it, I guess that hardly matters to you
Other Adani stock holders are state insurer and probably state banks that will not want to do quick sell off on its Adani stock after the reveal of Hindenburg report due to several reasons like current government connection to Adani business and their reluctant to start the snow ball effect on Adani stock due to nationalism sentiment.
The ones who left quickly and made quick sell of are institutions like UAE investors, they are just riding this sensational Adani business among Indians and public investors (foreign and Indians), they do understand Adani business financial is not really that good. I believe they have already made big profit over the hype that was going on for the last 2 years that is helped by Indian economy performance prediction by so many Indian economist, and some foreign institution that I believe invest in India stock market thus has conflict of interest
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What Really Worries Indians About Adani’s Empire
Analysis by Mihir Sharma | BloombergJanuary 27, 2023 at 12:49 p.m. EST
When the Adani Group mobilized to defend itself against accusations — leveled by US-based short sellers Hindenburg Research — that it had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades,” the choice of décor was more persuasive than the denial.
Chief Financial Officer Jugeshinder Singh stood in front of a giant Indian flag that made him look more like a government official than an embattled company executive. The message was clear: If you (a “foreign entity,” in the company’s words) come after Adani, you’re coming after India.
Unfortunately, that’s not entirely untrue. The Adani Group — with investments in ports, roads, rail, airports, and power — is now a crucial vehicle for India’s economic ambitions under Prime Minister Narendra Modi. Adani and Modi are close, and have been for two decades.
But talk of cronyism misses the point. If Adani didn’t exist, the Indian government would have had to invent him: The development model we have now chosen requires risk-taking “national champions” such as the Adani Group. What else did you expect? After all, like so many others, India has turned away from traditional market-supporting structural reform in favor of old-fashioned industrial policy.
Much of what Hindenburg put in its report doesn’t count as news for Indian investors. They have known for years that Adani Enterprises Ltd., the fulcrum of the Adani empire, is loaded down with debt, and that the ultimate source of its funding is remarkably opaque. Adani stock is generally thinly traded; few here will be willing to believe that Adani companies set out to defraud retail investors, even if both public sector banks and state-owned insurers have bet heavily on them.
No, Indians’ real fear is something else — that Gautam Adani and his companies simply cannot do what they say they will. Can they build the roads they have promised, improve the ports they have been given, maintain the airports they won in a bid? Until now, nobody else has been able to do so.
Adani’s companies have not just been entrusted with a wide swathe of India’s infrastructure. They have become the government’s first choice as partners in multiple sectors that framers of our industrial policy have decided are priorities for India’s growth.
Does the government want Indian companies to set up factories that make solar panels? Adani will oblige. Has the prime minister set a stiff renewable energy target? Adani will sign up to meet it. Are we worried we aren’t self-reliant in weaponry? Adani will undertake to create an “indigenous defense ecosystem under ‘Make in India.’” Are policy makers worried about the semiconductor supply chain? Gautam Adani will promise “a value chain that is fully indigenous and aligned with the geopolitical needs of our nation.”
Our worry is not where the Adani Group is picking up the capital in service of these ambitions. India is not necessarily short of capital to achieve some of these ends. It is, however, certainly short of implementation capacity. This is what Adani’s companies has promised to supply. The public sector is too inefficient to build what India needs; the rest of the private sector is too concerned about political risk.
The public sector is not going to turn competent any point soon. Meanwhile, the sort of regulatory, legal and administrative reforms that would reduce political risk are off the table. So, who but Adani will build what the world’s most populous country needs?
Nobody else in Modi’s India has this specific mixture of confidence in government support, ability to navigate byzantine regulations, and willingness to risk enormous sums of money. Some worry that Adani is too big to fail. He isn’t. But he may be too unique to fail.
Wherever the money may have come from — public sector banks, pension funds, faceless pools of offshore capital — what matters for India’s growth is how productively it is spent. Effective oligarchs might be dangerous for a country and, if they’re corrupt, even more so — just ask Russia. Inept oligarchs are calamitous.
If Adani’s companies can deliver a fraction of what he has pledged, then perhaps, in time, they might even grow into the valuations they have already achieved on paper. If they fail, then a lot more goes down than his investors; Adani will take down India’s industrial policy with him. Their big bet on him will then rebound on India’s banks, on India’s politicians, and on India’s citizens.
Indos
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LOL. This is a Non issue that will blow over a week.
This was a Hit Job that was released just before Adani launched its 2.5 Billion $ FPO to fund its "Green Hydrogen Project".
Hindenburg Research specialize in doing Hit Jobs for the US & its Oil Mafia. Hindenburg is best known for its critical reports on the electric vehicle space.
1. It had previous targeted electric truck maker Nikola Corp.
2. Another of its Victims was Electric Vehicle maker Lordstown Motors Corp.
3 Another victim was geothermal power plants company Ormat Technologies
4. Another victim was electric car company Mullen Technologies
5. Another victim was China based Crypto mining company , SOS that powers more than 90% of its mining operations with renewable energy sources.
Another of its Target was Tether cryptocurrency that challenged traditional Banking and USD dominance in the US. Unlike traditional crypto coins, Tethere stable coins made it impossible for hackers to steal crypto coins from anyone.
Now for the Record,
Adani Ports & SEZ and Adani Transmission are audited by Deloitte Haskins & Sells.
Adani Power and Adani Green Energy by SRBC & Co. (Ernst & Young)
Adani Airports subsidiary, MIAL (Mumbai International Airport) is audited by Grant Thornton, while the other six airports are audited as per Airport Authority of India panel provisions in the concession agreement by the audit firm, Gayendra & Co.
So their claim of Adani group being audited by some unknown small firm falls FLAT.
Adani will continue to grow as the Public becomes more aware of such Hit Jobs and companies who do them under the guise of "public good"
This was a Hit Job that was released just before Adani launched its 2.5 Billion $ FPO to fund its "Green Hydrogen Project".
Hindenburg Research specialize in doing Hit Jobs for the US & its Oil Mafia. Hindenburg is best known for its critical reports on the electric vehicle space.
1. It had previous targeted electric truck maker Nikola Corp.
2. Another of its Victims was Electric Vehicle maker Lordstown Motors Corp.
3 Another victim was geothermal power plants company Ormat Technologies
4. Another victim was electric car company Mullen Technologies
5. Another victim was China based Crypto mining company , SOS that powers more than 90% of its mining operations with renewable energy sources.
Another of its Target was Tether cryptocurrency that challenged traditional Banking and USD dominance in the US. Unlike traditional crypto coins, Tethere stable coins made it impossible for hackers to steal crypto coins from anyone.
Now for the Record,
Adani Ports & SEZ and Adani Transmission are audited by Deloitte Haskins & Sells.
Adani Power and Adani Green Energy by SRBC & Co. (Ernst & Young)
Adani Airports subsidiary, MIAL (Mumbai International Airport) is audited by Grant Thornton, while the other six airports are audited as per Airport Authority of India panel provisions in the concession agreement by the audit firm, Gayendra & Co.
So their claim of Adani group being audited by some unknown small firm falls FLAT.
Adani will continue to grow as the Public becomes more aware of such Hit Jobs and companies who do them under the guise of "public good"
But why should everything be done by Adani? Why not spread it around to the Tatas, Reliance, L&T, Birlas, Mahindras, The Infosys, Wipro, HCL etc.?
Why is all the infrastructure work given to Adani?
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