India’s Adani sparks record share selloff as short seller triggers $44 billion rout

MUMBAI, Jan 27 (Reuters) – Shares in India’s Adani Enterprises (ADEL.NS) It fell 15% on Friday after a dovish report from a US short-seller sparked a rout among the group’s listed companies, raising doubts about how investors would respond to the company’s record $2.45 billion secondary sale.

The seven listed companies of the Adani conglomerate, controlled by Gautam Adani, one of the world’s richest men, have lost a total of $43.5 billion in market capitalization since Wednesday. Adani’s US stocks also fell in a report on January 24. Regarding debt levels and the use of tax havens.

The Adani Group has dismissed the report as baseless and said it is considering legal action against the New York-based company.

“The Adani Group (shares) have had high positions in the last two years,” said Neeraj Dewan, director at Quantum Securities in New Delhi.

“It’s a classic case of panic selling…” he said, adding that worries spread to Indian banks with exposure to Adani Group’s debt.

Code for Monitoring State-run Banks (.NIFTYPSU) The benchmark Nifty banking index fell 4.6% (.NSEBANK) fell 2.7%.

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

The stunning sale has cast a shadow over Adani Enterprises’ secondary sale, which began on Friday. Wednesday saw the participation of investors including the Abu Dhabi Investment Authority.

The company set a floor price of Rs 3,112 ($38.22) and a ceiling of Rs 3,276 per share. But by noon on Friday, the stock price had fallen to Rs 2,875 – at the low end of the price offer.

As of 0700 GMT, investors, mostly retailers, had bid for about 200,000 shares, according to BSE exchange data. The auction for retail investors ends on January 31.

Shares of other Adani companies listed along with Adani Transmission Ltd also fell (ADAI.NS) Adani Total Gas (ADAG.NS)Adani Green Energy (ADNA.NS) and Adani Ports (APSE.NS) 20% sinking each.

In its report, Hindenburg said the main listed Adani group companies have “substantial debt” and put the group in a “secure financial position”, while “sky-high valuations” boosted the share prices of the seven listed Adani companies to 85. % beyond the actual value.

Billionaire US investor Bill Ackman said on Thursday that the Hindenburg report was “very credible and very well researched”.

Hindenburg said it held short positions in Adani through its US-traded bonds and Indian non-traded derivatives, betting that their prices will fall.

The Adani Group has repeatedly dismissed concerns over debt levels. It defended itself in a presentation titled “Myths of the Short Seller” on Thursday, saying promoters – or key stakeholders – are in a “high growth phase”.

Jefferies said in a client note that Adani Group shared details of debt and leverage levels and “does not see any material risk to the Indian banking sector”.

Adani Group’s combined total debt is 1.9 trillion rupees ($23.34 billion), Jefferies said.

Adani has said its debt is manageable and no investors have raised any concerns.

Adani Enterprises’ net profit more than doubled to INR 9 billion ($110.31 million) for the period ending September 30, 2022, while its total revenue nearly tripled to INR 795 billion, according to its share sale prospectus.

The company’s total liabilities stood at 869 billion rupees ($10.64 billion) as of September 2022.

The Adani Group diversified its business interests and last year acquired cement companies ACC. (ACC.NS) and Ambuja Cements ( ABUJ.NS ) Holcim of Switzerland (HOLN.S) $10.5 billion. ACC fell 15% on Friday, while Ambuja fell as much as 25%.

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

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