India’s Adani starts record share sell-off as short sellers post $44 billion loss

MUMBAI (Reuters) – Shares of India’s Adani Enterprises (ADEL.NS) It sank 15% on Friday after a scathing report from a US short seller triggered a rout in the conglomerate’s listed companies, casting doubt on how investors will respond to the company’s record $2.45 billion in secondary sales.

Seven companies included in the Adani Group — which is controlled by one of the world’s richest men Gautam Adani — have lost $43.5 billion in market capitalization since Wednesday, with Adani’s companies’ US bonds also tumbling after Hindenburg Research cited concerns in a Jan. 24 report. About debt levels and the 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.

“There have been heavy positions in (shares of) the Adani Group, the way they have risen in the past two years,” said Neeraj Dewan, a director at Quantum Securities in New Delhi.

“This is a classic case of panic selling…,” he said, noting that fears are also spreading to Indian banks with exposure to debt from the Adani Group.

Tracking index of state-run banks (.NIFTYPSU) The main Nifty Bank index fell 4.6% (.NSEBANK) decreased by 2.7%.

CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion Indian rupees ($24.53 billion) of Adani Group debt in the fiscal year to March 2022.

The stunning sale overshadowed Adani Enterprises’ secondary sale that began on Friday. The main part of the sale saw participation from investors, including the Abu Dhabi Investment Authority, on Wednesday.

The company set a minimum share price of 3,112 rupees ($38.22) and a maximum price of 3,276 rupees. But by midday on Friday, the stock had fallen to Rs 2,875 – well below the minimum bid.

As of 0700 GMT, investors, mostly individuals, had bid for about 200,000 shares, compared to 45.5 million offered, according to BSE exchange data. Bids for retail investors will close on January 31st.

Shares of other listed Adani companies also fell, with Adani Transmission Ltd (ADAI.NS) Take me back to Total Gas (ADAG.NS)Come back to green energy (ADNA.NS) and Adani Ports (APSE.NS) Sinking 20% ​​each.

Hindenburg said in its report that the main companies listed in the Adani Group have “significant debts,” which puts the group on an “unstable financial footing,” and that “high valuations” have pushed the share prices of seven Adani-listed companies to 85. % exceed the actual value.

Billionaire US investor Bill Ackman said Thursday that he found the Hindenburg Report “extremely reliable and very well researched.”

Hindenburg said it has held short positions in Adani through its US-traded bonds and non-India derivatives instruments, meaning it is betting its price will fall.

Adani Group has repeatedly faced concern about debt levels. She defended herself in a presentation titled “Myths of the Short Seller” on Thursday, saying deleveraging by promoters — or major shareholders — was “in a high growth phase.”

Jefferies said in the client note that the Adani Group had shared details of debt and leverage levels, and that it did not “see material risks arising from the Indian banking sector”.

Jefferies said the total combined debt of the Adani Group was 1.9 trillion rupees ($23.34 billion).

Adani said her debt is at a manageable level and no investor has expressed any concerns.

Adani Enterprises’ net profit for the period ended Sept. 30, 2022 has doubled to 9 billion Indian rupees ($110.31 million) while its total income has nearly tripled to 795 billion Indian rupees, according to the share sale prospectus.

The prospectus showed that the company’s total liabilities in September 2022 amounted to 869 billion rupees ($10.64 billion).

Adani Group has diversified its business interests and last year bought ACC Cement Companies (ACC.NS) and Ambuja cement (ABUJ.NS) from the Swiss company Holcim Favorite For $10.5 billion. ACC is down 15% on Friday, while Ambuja is down as much as 25%.

(Report) by M. Sriram and Chris Thomas; Editing by Aditya Kalra, Christopher Cushing, and Kim Coghill

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