Adani Raut breaks $80bn mark as stock sale fails to dispel doubts

(Bloomberg) — The crisis of confidence plaguing Gautam Adani is deepening as a stock crash sparked by fraud allegations by Hindenburg Research wiped out a third of the market value of his group’s companies, despite the completion of the sale of a key stake.

Most read by Bloomberg

The sell-off accelerated in the afternoon as all 10 billionaire-pegged stocks plummeted. Adani Enterprises Ltd., the flagship firm that completed a $2.5 billion subsequent share sale on Tuesday, shed as much as 15%.

The turmoil points to heightened concerns about the conglomerate’s debt load after rapidly expanding in industries from green energy to media, with Hindenburg’s short seller accusing it of inflating earnings. As the sell-off of the group’s shares topped $80 billion, banks have requested additional collateral in the form of shares on the loan, Bloomberg reported this week.

“This is a waiting situation. They obviously found investors, but Hindenburg Research’s concerns went unheeded,” said Brian Freitas, an analyst at Smartkarma.

Adani Enterprises’ offering was the largest follow-up sale of shares in India and was fully subscribed on the final day, helped by a last-minute surge in demand from institutional investors. At least two of India’s largest business families, including tycoons Sajjan Jindal and Sunil Mittal, reportedly also participated in solidarity with Adani.

Interest from retail investors, whom Adani hoped to attract, has been noticeably weak. The firm is expected to announce the final price of its offer later on Wednesday. The offer attracted a total number of bids 1.12 times the number of shares available, less than six of the seven large sales analyzed by Bloomberg.

Shares of Adani Enterprises fell to Rs 2,527.85 on Wednesday, 19% below the lower end of the offering price range of Rs 3,112-3,276.

The worsening sell-off in Adani affected India’s broader benchmarks, with the Nifty 50 offsetting budget growth by as much as 1.8%. Life Insurance Corporation of India, an Adani shareholder and investor in the sale of shares, fell almost 6%.

What’s next?

The storm that has gripped Asia’s richest man has also tested India: Hindenburg’s accusations raise questions about the country’s corporate governance, while Adani himself called the report an attack on India itself. This has turned the conglomerate into a liability on national stock markets, a sharp break from last year when Adani-related stocks fueled an unprecedented rally in the world.

Market watchers see the fight between Adani and Hindenburg continuing after they exchanged barbs earlier in the week. An Indian conglomerate called the Hindenburg report a “fake”, threatened legal action and claimed it was a “deliberate securities fraud” in its 413-page retraction, which the short seller said ignored all of his key claims and was “confused by nationalism”. “.

The fundraising success appears to have brought immediate relief to the credit market as most of the Adani group’s dollar-denominated bonds extended gains into a second day. The flagship firm’s latest share offering is intended in part to pay off debt.

However, if Adani’s share prices continue to decline, pressure on the share-collateralized conglomerate’s debt will mount: Adani on Friday added about $300 million worth of shares to a loan from a group of banks, including Barclays Plc, according to people familiar with the matter.

In addition, Credit Suisse Group AG has stopped accepting Adani Group bonds as collateral for margin loans to its private banking clients.

“Now it’s important to keep an eye on what kind of holding period investors are willing to have on these stocks,” said Sameer Kalra, founder of Mumbai-based Target Investing. “If a few investors get the majority of a share, there is a risk that some of it will be sold immediately.”

(updates prices)

The most read edition of Bloomberg Businessweek

© 2023 Bloomberg LP

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button