MUMBAI, Jan 27 (Reuters) – Shares in India’s Adani Enterprises (ADEL.NS) fell 15% on Friday as a scathing report by a U.S. short-seller sparked a plunge in the group’s listed company, casting doubt on investment. How investors will respond to the company’s record $2.45 billion secondary sale.
Adani Group’s seven listed companies – controlled by one of the world’s richest men, Gautam Adani – have lost a combined $43.5 billion in market value since Wednesday, according to Hindenburg Research. Adani’s US bonds also fell after expressing concerns on Jan. 10. 24 Report on debt levels and use of tax havens.
Adani Group dismissed the report as baseless and said it was considering whether to take legal action against the New York-based company.
Neeraj Dewan, director at Quantum Securities in New Delhi, said: “Adani Group (stock) has a large position and that’s how it has been going up for the past few years.”
“This is a classic case of panic selling…” he said, noting that such concerns also spread to Indian banks that are exposed to Adani Group debt.
An index tracking state-owned banks (.NIFTYPSU) fell 4.6 percent, while the main Nifty Bank index (.NSEBANK ) fell 2.7 percent.
CLSA estimates that Indian banks face about 40% of Adani Group’s 2 trillion rupees ($24.53 billion) of debt in the fiscal year to March 2022.
The stunning sell-off casts a shadow over Adani Enterprises’ secondary sale, which started on Friday. Investors, including Abu Dhabi Investment Authority, took part in a major part of the sale on Wednesday.
The company set a floor price of 3,112 rupees ($38.22) per share, with a ceiling of 3,276 rupees. But by midday on Friday, the stock had fallen to 2,875 rupees – well below the floor of the issue price.
Investors, mainly retail investors, had bid about 200,000 shares by 0700 GMT, against an offer of 45.5 million shares, according to BSE exchange data. Retail investor bidding will close on January 1. 31.
Shares in other listed Adani companies also tumbled, with Adani Transmission Ltd (ADAI.NS), Adani General Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Ports (APSE.NS ). ) fell 20% each.
In its report, Hindenburg said Adani Group’s main listed companies were “heavily indebted”, leaving the group on “unstable financial footing” and that “sky-high valuations” had pushed up the share prices of seven Adani listed companies up to 85 % above the actual value.
Billionaire U.S. investor Bill Ackman said Thursday he found Hindenburg’s report “very credible and very well researched.”
Hindenburg said it has a short position in Adani through its U.S.-traded bonds and non-India-traded derivatives, meaning it is betting that their prices will fall.
Adani Group has repeatedly confronted and dismissed concerns about debt levels. It defended itself in a presentation on Thursday titled “The Myth of the Short Seller”, saying the deleveraging of promoters – or major shareholders – was “in a hypergrowth phase”.
Adani Group has shared details of debt and leverage levels and that it does not “see significant risks in the Indian banking sector,” Jefferies said in a client note.
Adani Group has consolidated total debt of 1.9 trillion rupees ($23.34 billion), Jefferies said.
Adani said its debt was at a manageable level and no investors had raised any concerns.
Adani Enterprises’ net profit for the period ended September doubled its revenue to 9 billion Indian rupees ($110.31 million) by December 30, 2022, while its total revenue was almost Tripled to INR 795 billion.
The prospectus showed the company had total liabilities of 869 billion rupees ($10.64 billion) as of September 2022.
Adani Group has been diversifying its business interests, buying cement companies ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) from Switzerland’s Holcim (HOLN.S) last year for $10.5 billion. ACC fell 15% on Friday, while Ambuja plummeted 25%.
Reporting by M. Sriram and Chris Thomas; Editing by Aditya Kalra, Christopher Cushing and Kim Coghill
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