Adani Stock Rout enters its third week as a flagship selling bond on the shelves

(Bloomberg) — Equity rout in Gautam Adani’s debt-leveraged conglomerate entered its third week as its flagship company suffered another fundraising setback and a major credit rating agency downgraded its outlook. on two of his companies.

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All 10 shares of the group fell in early trading in Mumbai on Monday. The flagship Adani Enterprises Ltd. plunged as much as 9.7%. The meltdown since US short seller Hindenburg Research filed fraud charges against the group in a Jan. 24 report has wiped out $118 billion, or more than half the market value of its companies. Adani has repeatedly denied the claims.

The ramifications of the inexorable selloff are spreading far and wide as concerns grow about the exposure financial institutions and investors have to the conglomerate. The turmoil has rocked the parliament and India’s main opposition party is mounting pressure on Prime Minister Narendra Modi for his silence on the issue. He planned a nationwide protest on Monday to highlight the risk to small investors.

Meanwhile, concerns about the conglomerate’s access to finance are also growing. Adani Enterprises has shelved a key bond sale, Bloomberg News reported Saturday, less than a week after abruptly exiting a record offering of domestic stocks. S&P Global Ratings downgraded its outlook on Adani Ports & Special Economic Zone Ltd. and Adani Electricity Mumbai Ltd to negative on Friday.

“Adani had a lot of debt, so in terms of corporate governance, there are always question marks around them,” Catherine Yeung, investment director at Fidelity International Ltd, told Bloomberg Television on Monday. , you really need to have an understanding of companies, really finding details on their balance sheet.”

Adani Group’s aggregate debt is “about $30 billion,” chief financial officer Jugeshinder Singh told news channel CNBC TV-18 in an interview broadcast Jan. 30, without elaborating.

Adani bondholders are having initial conversations with financial advisors and lawyers to weigh their options, seeking guidance on how the group’s debt structure would be affected under various scenarios, including the prospect of regulatory and legal redress.

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

INDIA CREDIT DAYBOOK: Certain Adani dollar bonds wipe out earnings

Indian authorities stepped in over the weekend to calm frayed nerves from concerns over the turmoil, saying regulators are competent enough to deal with the fallout and banks’ exposure to the group is within limits.

Hindenburg Research accused the group of “brazen” market manipulation and accounting fraud, alleging that a network of Adani family-controlled offshore entities in tax havens have been used to facilitate corruption, money laundering and theft of taxpayers.

The conglomerate called the report “false” and threatened legal action. Adani gave a video speech last week stating that the group’s balance sheet is healthy.

The stocks’ rout cost India its place among the world’s five largest stock markets, while the rupee is the worst-performing emerging Asian currency this year. Foreigners withdrew $3.8 billion from the nation’s stock in 2023, the most among emerging Asian markets excluding China.

A string of quarterly earnings for the group will emerge in the coming days, led by the scheduled release of Adani Transmission Ltd. later on Monday, giving investors more opportunity to examine financial health.

“This week draws attention to Adani Group companies reporting earnings and their comments on debt sustainability,” said Charu Chanana, strategist at Saxo Capital Markets. “Adani Group still needs to consistently respond to allegations of fraud and underscore its strong financial position to restore investor confidence.”

–With the assistance of Abhishek Vishnoi.

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