India’s parliament and financial sector are affected by the falling price of Adani shares.
Shares of India’s Adani Group companies fell sharply on Friday as the effects of a market crash kept parliament from working for a second day. A critical research report by a U.S. short seller added to fears of systemic risk.
After the Hindenburg Research report raised questions about the conglomerate’s debt levels and use of tax havens, the market capitalization of seven publicly traded Adani companies dropped by more than half, to less than $100 billion.
The group’s decision to cancel its $2.5 billion share sale on Wednesday shook investor confidence even more. This was one of the worst setbacks for its billionaire chairman, Gautam Adani, whose wealth had grown quickly in recent years.
Related: Asian stocks go up as fears about the Fed lessen, but India is held back by Adani.
Lawmakers have asked for a deeper look into the matter, and Reuters has heard from sources that the central bank has asked lenders for information about how much risk they have with the group.
On Friday, some politicians in parliament yelled slogans against Adani, which is linked to Prime Minister Narendra Modi.
They said, “We want a joint parliamentary committee to look into it.” “Don’t steal from the poor.”
Adani has said that the Hindenburg report is not true and that its finances are still strong, but investor confidence has dropped, causing stock prices to keep going down.
The big fall https://www.reuters.com/graphics/ADANI-INDIA/zdpxdnxrepx/chart.png
Shares of Adair Enterprises Ltd. were down 16% on Friday. Earlier in the week, they had dropped 35% to their lowest point since March 2021.
With the stock’s new low, it has lost almost $33.6 billion since last week, which is a 70% drop.
Adani Ports and Special Economic Zone Ltd was down 2%, while Adani Transmission Ltd and Adani Green Energy Ltd were down 10% each.
Adani Total Gas Ltd dropped 5%.This company is in partnership with France’s TotalEnergies SE.
TotalEnergies said in a statement that it had limited risk from its stakes in Adani companies and had not reevaluated those stakes.
Charu Chanana, a market strategist at Saxo Markets in Singapore, said, “Contagion fears are growing, but they are still only in the banking sector.” “The main focus remains on increased risks of index exclusions.”
On Thursday, S&P Dow Jones Indices announced that it would remove Adani Enterprises’ flagship from widely used sustainability indices on February 7. This would make the indices less appealing to investors who care about the environment.
“Right now, one of the biggest things to watch for is if more indices take Adani stocks off their lists,” said Chanana. “This could cause foreign funds to sell their Adani shares, which would hurt confidence even more.”
Many foreign investors are already not putting much money into India because they think its stock market is too expensive. The end of Adani could spread if it causes a bigger change in mood.
Adani Group stocks plunge after the Hindenburg report. https://www.reuters.com/graphics/ADANI-INDIA/byvrlkqrrve/chart.png
In its report, Hindenburg said that listed Adani companies with “substantial debt” and “sky-high valuations” had a downside of 85% for their shares. It also said that stocks had been manipulated.
The Adani group said that the claim of stock manipulation had “no basis” and was based on a lack of knowledge about Indian law. It also said that group companies have “consistently deleveraged” over the past ten years.
The market value of the seven publicly traded Adani companies is now $113 billion, down from $218 billion before the Hindenburg report.
For Adani, who dropped out of school in Gujarat, Modi’s home state in the west, this is the biggest challenge to his business and reputation that he has ever faced.
Related: In the wake of the short-seller attack, the Adani Group’s market loss has grown to $65 billion.
The stock market crash is a huge setback for Adani, who is 60 years old. In recent years, he worked with foreign giants to form partnerships and get investments as he tried to expand globally in industries like ports and power.
Adani has lost his title as the richest person in Asia to Mukesh Ambani of Reliance Industries Ltd. because he has dropped to 17th on Forbes’ list of the world’s richest people. After Elon Musk and Bernard Arnault, he had been third.
On Friday, the prices of U.S. dollar bonds sold by group members went up a little bit after falling the day before.
The price of Adani Green’s bonds that are due to mature in September 2024 went up by about 7 cents to 69.69 cents, up from a record low of 60.56 cents on Thursday.