Adani stock market losses hit $145bn one month after short seller attack

Gautam Adani’s business empire has had more than $145bn wiped from its value in the month since a US short seller alleged fraud, laying bare the battle the Indian tycoon still faces in regaining the confidence of investors.

The sell-off triggered by Hindenburg Research, which accused Adani of stock manipulation and accounting fraud, has erased more than 60 per cent from the value of Adani’s publicly traded companies and rocked an empire that spans ports to airports to energy.

Adani has strenuously denied Hindenburg’s allegations, but shares have remained under pressure. Falls on Friday left the overall market capitalisation of the listed groups at the lowest level since Hindenburg levelled its accusations.

The crisis that engulfed the sprawling set of businesses has helped reduce the billionaire’s own fortune by $79bn since the start of the year, allowing rival Indian industrialist Mukesh Ambani to reclaim the title of wealthiest person in Asia.

“Some of the companies were expensive, overly expensive, at more than 100 times PE valuation,” said Abhishek Jain, head of research at Arihant Capital in Mumbai. He added that the “hammering” by investors meant some of the stocks were now at more attractive prices and “can be interesting to have a look [at]”.

Before this year’s turmoil, Adani had expanded his empire at breakneck speed, taking on more debt and pushing into areas that required substantial investment, including hydrogen and solar businesses.

But there are now signs of retrenchment. Several Adani companies have paused upcoming investments, including an $847mn coal power plant acquisition. Last week, an agreement by Adani Power Maharashtra Limited to establish a cement grinding unit with Orient Cements was called off.

“We will not make new commitments till we settle this volatility period,” group chief financial officer Jugeshinder “Robbie” Singh told analysts, following results this month from Adani Enterprises, the group’s flagship company.

A decision to ditch a $2.4bn share sale by Adani Enterprises at the start of the month was one of the most striking blows inflicted by the crisis. Since then, rating agency Moody’s has cut its outlook on several Adani Group companies.

Dollar bonds issued by Adani businesses have sold off, with separate $750mn bonds from Adani Green Energy and Adani Ports, maturing in 2024 and 2027 respectively, each trading at around $0.80 on the dollar.

“People have no problem buying Indian credit,” said the head of Asia bond syndication for a western investment bank. “It’s Adani they won’t touch.”

With the Adani empire still under intense scrutiny, analysts have said that the group should focus on reducing leverage and reassuring investors over the robustness of its underlying businesses.

“He needs to focus on conserving the cash, prepaying the debt,” said Varun Fatehpuria, founder and chief executive of Kolkata-based digital wealth management platform Daulat. “People are looking for more clarity and transparency into the actual health of the business.”

The turmoil on the stock market has also led to stresses over loans taken by Adani’s family backed by shares in the listed companies. Earlier this month, Adani repaid a $1.1bn share-backed loan after facing a margin call of more than $500mn.

According to a person familiar with the matter, executives at the Adani Group want to pay off a further $1bn worth of outstanding share-backed loans taken by the family or “promoters”.

In an effort to reassure bondholders, Adani companies are paying some creditors ahead of schedule. Adani Ports and Special Economic Zone managing director Karan Adani said the company would repay or pre-pay more than $600mn of loans in the coming financial year, to bring down its debt to earnings ratio. The company repaid Rs5bn ($60.3mn) to an Indian mutual fund against maturing commercial papers last week.

“To boost the sentiment of market participants or bondholders, they’ve been paying off a lot of debt early,” said Abhishek Jain, head of research at Mumbai-based Arihant Capital.

Despite the retrenchment in recent weeks, there are signs Adani retains his international ambitions — it is one month since Adani visited Israel to complete the group’s joint acquisition of Israel’s strategic Haifa Port. Meanwhile, Adani Group said it had bid for an under-construction steel plant in the central Indian state of Chhattisgarh, which the government is selling.

In a video released shortly after the Adani Enterprises share sale was ditched, Adani said “we will continue to focus on long-term value creation and growth”.