Adani shares plunge into third week as bonds sell off on flagship shelves

(Bloomberg) — Debt conglomerate Gautam Adani’s stock plunge is now in its third week as his flagship firm suffered another setback in fundraising and a major ratings agency downgraded two of its companies.

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All 10 of the group’s shares fell in early trading in Mumbai on Monday. Flagship company Adani Enterprises Ltd. fell by 9.7%. The crisis after U.S. short-selling firm Hindenburg Research filed fraud allegations against the group in a Jan. 24 report wiped out $118 billion, or more than half the market value of its companies. Adani repeatedly denied the claims.

The repercussions of the relentless sell-off are sweeping across the board as concerns grow over the exposure of financial institutions and investors to the conglomerate. The riots have disrupted parliament, and India’s main opposition party is stepping up pressure on Prime Minister Narendra Modi over his silence on the issue. A nationwide protest is scheduled for Monday to highlight the risk for small investors.

Meanwhile, concerns about the conglomerate’s access to funding are also growing. Adani Enterprises has postponed a key bond sale, Bloomberg News reported on Saturday, less than a week after it abruptly withdrew from a record domestic stock offer. On Friday, S&P Global Ratings lowered its outlook on Adani Ports & Special Economic Zone Ltd. and Adani Electricity Mumbai Ltd. to the negative.

“Adani did have a lot of debt, so from a corporate governance standpoint, there are always question marks around them,” Katherine Jung, investment director at Fidelity International Ltd., told Bloomberg Television on Monday. “It really confirms that, especially in emerging markets, you really need to have an understanding of companies in order to really find detailed information about their balance sheets.”

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Adani Group’s total debt is “only around $30 billion,” chief financial officer Jugeshinder Singh said in an interview with CNBC TV-18 news channel, without elaborating.

Adani bondholders are conducting initial discussions with financial advisors and lawyers to weigh their options and get advice on how the group’s debt structure will impact under various scenarios, including the prospect of regulatory and legal recovery.

Nine of the conglomerate’s $15 bonds have fallen as of Monday afternoon in Hong Kong, prices compiled by Bloomberg show.

INDIA CREDIT DAYBOOK: Some Adani Dollar Bonds Erase Gains

Indian authorities intervened over the weekend to calm frayed nerves over fears of unrest, saying regulators were competent enough to deal with the fallout and banks’ exposure to the group’s risk was within acceptable limits.

Hindenburg Research accused the group of “brazen” market manipulation and accounting fraud, saying that a network of offshore shell companies controlled by the Adani family in tax havens were being used to facilitate corruption, money laundering and embezzlement of taxpayers.

The conglomerate called the report “fictitious” and threatened legal action. Last week, Adani delivered a video message saying that the group’s balance sheet is stable.

The stock market crash left India out of the world’s top five stock markets, while the rupee became the weakest currency in emerging Asia this year. In 2023, foreigners withdrew $3.8 billion from the country’s shares, the most among emerging Asian markets outside of China.

A slew of the group’s quarterly earnings will emerge in the coming days, led by Adani Transmission Ltd.’s planned report scheduled for Monday, giving investors more room to scrutinize financial health.

“This week, the focus is on Adani group companies reporting earnings and their debt sustainability commentary,” said Charu Chanana, strategist at Saxo Capital Markets. “Adani Group still needs to consistently respond to allegations of fraud and highlight its strong financial position in order to restore investor confidence.”

–With the assistance of Abhishek Vishnoi.

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