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Adani’s market losses top $100 billion as shelved share sale spooks investors
NEW DELHI/MUMBAI, Feb 2 (Reuters) – India’s Adani group shares sank on Thursday after it abandoned its flagship company’s $2.5 billion stock offering, swelling the conglomerate’s market losses to more than $100 billion and sparking worries about the potential systemic impact.
The withdrawal of Adani Enterprises’ (ADEL.NS) share sale caps a dramatic setback for Gautam Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years but dwindled over the past one week after a U.S.-based short-seller published a critical research report.
The events are an embarrassing turn for Adani who has forged partnerships with foreign giants such as France’s TotalEnergies (TTEF.PA) and investors such as Abu Dhabi’s International Holding Company as he pursues a global expansion of businesses that stretch from ports and mining to cement and power.
Adani late on Wednesday called off the share sale as a stocks rout sparked by short-seller Hindenburg’s criticisms intensified, despite the offer being fully subscribed on Tuesday.
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Adani Enterprises plunged nearly 20% on Thursday, trading at its lowest since March 2022. Other group companies were also under pressure – Adani Ports and Special Economic Zone (APSE.NS) was down 5%, while Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) lost 10% each.
Since Hindenburg’s report was released on Jan. 24, group companies have lost nearly half their combined market value. Adani Enterprises – described as an incubator of Adani’s businesses – alone has lost $24 billion in market capitalisation.
Adani, 60, is also no longer Asia’s richest person, having slid in the rankings of the world’s wealthiest to 16th, as per Forbes’ list, from third last week.
“Unless Adani is able to regain the confidence of institutional investors, stocks will be in freefall,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.
Adani’s plummeting stocks have raised concerns about the likelihood of a wider impact on India’s financial system.
India’s central bank has asked local banks for details of their exposure to the Adani group of companies, government and banking sources told Reuters on Thursday. CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion rupees ($24.53 billion) of Adani group’s debt in the fiscal year to March 2022. read more
Citigroup’s (C.N) wealth unit has stopped extending margin loans to its clients against securities of Adani group and decided to cut the loan-to-value ratio for credit against Adani securities to zero on Thursday, said a source.
“We see the market is losing confidence on how to gauge where the bottom can be and although there will be short-covering rebounds, we expect more fundamental downside risks given more private banks (are) likely to cut or reduce margin,” Monica Hsiao, Chief Investment Officer of Hong Kong-based credit fund Triada Capital, said.
In New Delhi, opposition lawmakers submitted notices in the Indian parliament, demanding discussion on the U.S. short-seller’s report. The Congress party demanded setting up a Joint Parliamentary Committee or a Supreme Court monitored investigation into the matter.
ADANI VS HINDENBURG
Hindenburg’s report last week alleged an improper use of offshore tax havens and stock manipulation by the Adani group. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The Adani group has denied the accusations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.
Earlier this week, the Adani group said it had the complete support of investors, but investor confidence has tapered in recent days.
As shares plunged after the Hindenburg report publication, Adani managed to secure the share sale subscriptions on Tuesday even though the stock’s market price was below the issue’s offer price. But on Wednesday, stocks plunged again.
Maybank Securities and Abu Dhabi Investment Authority, as well as India’s Life Insurance Corporation (LIFI.NS), had bid for the anchor portion of the issue. Those investments will now be returned by Adani.
In a late night announcement on Wednesday, the billionaire said he was withdrawing the share sale as the company’s “stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct.”
Early on Thursday, Adani said in a video address the “interest of my investors is paramount and everything is secondary. Hence, to insulate the investors from potential losses we have withdrawn” the share sale.
Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Madan, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; Writing by Aditya Kalra; Editing by Muralikumar Anantharaman
Our Standards: The Thomson Reuters Trust Principles.
Hindenburg bet against India’s Adani puzzles rival U.S. short sellers
Feb 1 (Reuters) – When Hindenburg Research revealed a short position in Adani Group last week, some U.S. investors said they were intrigued about the actual mechanics of its trade, because Indian securities rules make it hard for foreigners to bet against companies there.
Hindenburg’s bet has been lucrative so far. Its allegations, which the Indian conglomerate has denied, have wiped out more than $80 billion of market value from its seven listed companies and knocked billionaire Gautam Adani from his perch as the world’s third-richest man. On Wednesday, a $2.5 billion sale of shares by one of its companies Adani Enterprises ADEL.NS was called off.
The short seller has said it held its position, which profits from the fall in the value of Adani Group shares and bonds, “through U.S.-traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities.” But it has revealed little else about the size of its bets and the kind of derivatives and reference securities it used, leaving rivals wondering how the trade worked.
“I wanted to short it myself, but I was not able to find a way to do it with my prime broker,” said Citron Research founder Andrew Left, referring to Adani Enterprises and other companies .
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Hindenburg declined to comment to Reuters on the method it used to place its bets against Adani. Adani Group and the stock market regulator the Securities and Exchange Board of India (SEBI) did not respond to a request for comment.
DIFFICULT TO SHORT
Typically, investors who want to bet that the company’s stock will fall borrow shares in the market and sell them, hoping to buy them back at a lower price, in a practice called short selling.
Short sellers such as Hindenburg like to build positions quietly before unveiling their thesis about the company to maximize profits. Discretion is necessary for them, as word of their presence in the stock sometimes can be enough to cause the shares to fall.
In India, however, securities rules make it hard to quietly build positions. Institutional investors are required to disclose their short positions upfront and there are other restrictions and registration requirements on foreign investors.
With the Adani Group, there are added complications: the shareholding is concentrated in the hands of the Adani family and its shares do not trade on exchanges abroad.
Nathan Anderson, Hindenburg’s founder, has been coy even with peers about his bet against Adani. Left and Carson Block, the founder of Muddy Waters Research and another prominent short seller, told Reuters that they got a single word response – ‘thanks’ – to messages of congratulations they sent to Anderson, when usually they would talk shop.
Cracking the code of how Hindenburg did the trade could lead to more short sellers taking positions against Indian companies, which have been rare, analysts said.
“Once these things (short-seller attacks) begin there are others who could be looking,” said Amit Tandon, managing director of proxy and governance firm Institutional Investor Advisory Services (IiAS) in India.
DERIVATIVE TRADES
Reuters could not learn details of Hindenburg’s trades. But several bankers familiar with trading in Indian securities said the more profitable piece of the short seller’s bet would likely lie in the derivative trades it had placed.
Some of Adani’s U.S. dollar corporate bonds , , fell 15-20 cents in the days after the report was released, which would make that bet profitable.
But there are limits. Only a few billion dollars of bonds in total were outstanding and they were not easily available to borrow, one debt banker said.
A more profitable way, these bankers said, would be to place the bet via participatory notes, or P-notes, which are lightly regulated offshore derivatives based off shares of Indian companies.
The entities that create the P-notes are registered with the Indian stock market regulator, but anyone can invest in them without having to directly register with SEBI. An investor can further use intermediaries to obscure its position.
Moreover, the market for P-notes is large. Billions of dollars’ worth of P-notes are traded every year, regulatory data shows, making it possible to place large bets, the bankers said.
(This story has been refiled to add dropped word ‘to’ in the lead paragraph)
Reporting by Shankar Ramakrishnan, Svea Herbst-Bayliss and Carolina Mandl; additional reporting by Jayshree Pyasi in Mumbai and Anshuman Daga in Singapore; Editing by Paritosh Bansal and Anna Driver
Our Standards: The Thomson Reuters Trust Principles.
Adani abandons $2.5 billion share sale in big blow to Indian tycoon
NEW DELHI, Feb 1 (Reuters) – Gautam Adani’s flagship firm called off its $2.5 billion share sale in a dramatic reversal on Wednesday as a rout sparked by a U.S. short-seller’s criticisms wiped billions more off the value of the Indian tycoon’s stocks.
The withdrawal of the Adani Enterprises (ADEL.NS) share offering marks a stunning setback for Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years in line with stock values of his businesses.
“Today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct,” Adani said.
“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans,” the billionaire added in a statement to Indian exchanges.
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Adani, whose global business interests span ports, airports, mining, cement and power, is battling to stabilise his companies and defend his reputation.
“Once the market stabilizes, we will review our capital market strategy,” he added.
A report by Hindenburg Research last week alleged improper use by the of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The Jan. 24 report has since triggered a $86 billion erosion in market capitalisation of seven listed Adani Group companies.
Adani Group has denied the allegations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.
REFUNDS
Adani Group was working with its bankers to refund the proceeds received by in the secondary share sale of Adani Enterprises. Anchor investors who had supported the issue included Maybank Securities and Abu Dhabi Investment Authority.
The company aims to protect the interests of its investing community by returning the proceeds, it said.
Adani Group had on Tuesday mustered enough support from investors for the share sale to proceed, in what some saw as a stamp of investor confidence amid the storm.
But after a brief respite, the selloff in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone (APSE.NS) dropping 19%, the worst day on record for both.
The fundraising was critical for Adani, not just because it would have helped cut his group’s debt, but also because it was being seen by some as a gauge of confidence as he faced the biggest business and reputational challenge of his career.
Wednesday’s stock losses saw Adani slip to 15th on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries (RELI.NS) who ranks ninth with a net worth of $83.7 billion.
The share sale had succeeded on Tuesday even when the Adani Enterprises stock price in Mumbai markets traded below the offer price of the share sale.
“I do not know how the markets will behave in short term. But this is a measure to enhance (Adani’s) reputation since the investors were staring at a 30% loss even before the shares were alloted,” said Rajesh Baheti, chief executive, Crossseas Capital Services, an algo trading firm.
Reporting by Aditya Kalra and Jahnavi Nidumolu in Bengaluru; Editing by Anil D’Silva, Kirsten Donovan and Alexander Smith
Our Standards: The Thomson Reuters Trust Principles.
Adani loses Asia’s richest crown as stock rout deepens to $84 billion
BENGALURU, Feb 1 (Reuters) – Shares in Indian tycoon Gautam Adani’s conglomerate plunged again on Wednesday as a rout in his companies deepened to $84 billion in the wake of a U.S. short-seller report, with the billionaire also losing his title as Asia’s richest person.
Wednesday’s stock losses saw Adani slip to 15th on Forbes rich list with an estimated net worth of $76.8 billion, below rival Mukesh Ambani, the chairman of Reliance Industries Ltd (RELI.NS) who ranks ninth with a net worth of $83.6 billion.
Before the critical report by U.S. short-seller Hindenburg, Adani had ranked third.
The losses mark a dramatic setback for Adani, the school-dropout-turned-billionaire whose business interests stretch from ports and airports to mining and cement. Now, the tycoon is fighting to stabilise his businesses and defend his reputation.
It comes just a day after the group managed to muster support from investors for a $2.5 billion share sale for flagship firm Adani Enterprises on Tuesday, in what some saw as a stamp of investor confidence.
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The report by Hindenburg Research last week alleged improper use by the Adani Group of offshore tax havens and stock manipulation. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.
Shares in Adani Enterprises (ADEL.NS), often described as the incubator of Adani businesses, plunged 30% on Wednesday. Adani Power (ADAN.NS) fell 5%, while Adani Total Gas (ADAG.NS) slumped 10%, down by its daily price limit.
Adani Transmission (ADAI.NS) was down 6% and Adani Ports and Special Economic Zone (APSE.NS) dropped 20%.
Adani Total Gas, a joint venture with France’s Total (TTEF.PA), has been the biggest casualty of the short seller report, losing about $27 billion.
“There was a slight bounce yesterday after the share sale went through, after seeming improbable at a point, but now the weak market sentiment has become visible again after the bombshell Hindenburg report,” said Ambareesh Baliga, a Mumbai-based independent market analyst.
“With the stocks down despite Adani’s rebuttal, it clearly shows some damage on investor sentiment. It will take a while to stabilise,” Baliga added.
SCRUTINY
Underscoring the nervousness in some quarters, Bloomberg reported on Wednesday that Credit Suisse (CSGN.S) had stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients.
Deven Choksey, managing director of KRChoksey Shares and Securities, said this was a big factor in Wednesday’s share slides.
Credit Suisse had no immediate comment.
Scrutiny of the conglomerate is stepping up, with an Australian regulator saying on Wednesday it would review Hindenburg’s allegations to see if further enquiries were warranted.
Data also showed that foreign investors sold a net $1.5 billion worth of Indian equities after the Hindenburg report – the biggest outflow over four consecutive days since Sept. 30.
Headaches for the Adani Group are expected to continue for some time.
India’s markets regulator, which has been looking into deals by the conglomerate, has said it will add Hindenburg’s report to its own preliminary investigation.
State-run Life Insurance Corporation (LIC) (LIFI.NS)said on Monday it would seek clarifications from Adani’s management on the short seller report. The insurance giant was, however, a key investor in the Adani Enterprises share sale.
Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group.
Reporting by Chris Thomas in Bengaluru and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran and Aditya Kalra; Editing by Edwina Gibbs and Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
Adani’s $2.5 bln share offer backed by investors, despite short-seller attack
MUMBAI, Jan 31 (Reuters) – Indian billionaire Gautam Adani’s $2.5 billion share sale inched closer to full subscription on Tuesday as investors pumped in funds after a tumultuous week for his group in which its stocks were pummeled by a scathing short-seller report.
The secondary share sale of flagship Adani Enterprises (ADEL.NS) was subscribed 93% on Tuesday, including the anchor investor portion, Indian stock exchange data showed. The share sale needed at least 90% subscription to go through.
By Monday, the book building process of the country’s largest share sale had received only 3% in bids, amid swirling concerns that the share sale could struggle due to a market rout in Adani’s stocks in recent days.
The share sale is critical for Adani, not just because it is India’s largest follow-on offering and will help cut debt, but also because its success will be seen as a stamp of confidence by investors at a time the tycoon faces one of his biggest business and reputational challenges of recent times.
The offer closes days after Adani’s public faceoff with Hindenburg Research, which on Jan. 24 flagged concerns about the use of tax havens and “substantial debt” at the group. It added that shares in seven Adani listed companies have an 85% downside due to what it called “sky-high valuations”.
That has since sparked $65 billion in cumulative losses for stocks of the Adani group, which called the report baseless.
The support for Adani’s share sale came even as the flagship’s shares were trading at 2,967 rupees, up nearly 2.5% but below the lower end of the share sale price band of 3,112 rupees.
“It looks down to the wire with just a few hours remaining on the last day, but the offering should go through. Institutions seem to be subscribing to capitalise on opportunity to buy in bulk quantities outside the open market,” said Dipan Mehta, founder director of Elixir Equities.
Adani Group’s total gross debt in the financial year ended March 31, 2022, rose 40% to 2.2 trillion rupees ($26.83 billion). Adani said on Sunday – while responding to Hindenburg’s allegations – that over the past decade the group has “consistently de-levered”. Hindenburg later said Adani’s “response largely confirmed our findings and ignored our key questions.”
The group had in recent days repeatedly said investors were standing by its side and the share offering would go through, amid rising concerns that may not happen. Bankers at one point had considered tweaking the pricing of the issue, or extending the sale, Reuters had reported.
Adani even said the Hindenburg report was a “calculated attack” on the country and its institutions while its CFO compared the market rout of its stocks to a colonial-era massacre.
Demand from retail investors remained muted, garnering bids only worth around 10% of the shares on offer for that segment. On Tuesday, demand mostly came from foreign institutional investors, as well as corporates who bid in excess of 1 million rupees each, data showed.
Over the weekend and through Monday, Adani’s firm held extensive discussions with investment bankers and institutional investors to attract subscriptions, according to two sources with direct knowledge of the talks.
Abu Dhabi conglomerate International Holding Company (IHC.AD) said it will invest $400 million in the issue.
“The follow-on public offering has to go through to restore investor confidence,” said V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The Hindenburg report and its fallout have drawn global attention. Adani is now the world’s eighth richest person, down from third ranking on Forbes’ rich list last week.
Adani Transmission (ADAI.NS) rose 1.6% on Tuesday, after losing 38% since the Hindenburg report, while Adani Ports and Special Economic Zone (APSE.NS) climbed 3.2%.
Adani Total Gas (ADAG.NS) languished at its 10% lower price limit, while Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) were down 5% each.
Global index publisher FTSE Russell said on Tuesday it continues to monitor publicly available information on the group, in particular from the Indian regulatory authorities.
Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group. On Tuesday, U.S. dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their fall into a second week.
($1 = 82.0025 Indian rupees)
Reporting by M. Sriram and Chris Thomas; Editing by Aditya Kalra and Muralikumar Anantharaman
Our Standards: The Thomson Reuters Trust Principles.