India's Adani begins record share sale as short seller triggers $44 billion rout

India’s Adani begins record share sale as short seller triggers $44 billion rout

MUMBAI, Jan 27 (Reuters) – Shares of India’s Adani Enterprises (ADEL.NS) sank 15% on Friday as a scathing report by a U.S. short seller triggered a rout within the conglomerate’s listed companies, casting doubts on how traders will reply to the corporate’s record $2.45 billion secondary sale.

Seven listed corporations of the Adani conglomerate – managed by one of many world’s richest males Gautam Adani – have misplaced a mixed $43.5 billion in market capitalisation since Wednesday, with U.S. bonds of Adani companies additionally falling after Hindenburg Research flagged issues in a Jan. 24 report about debt ranges and using tax havens.

Adani Group has dismissed the report as baseless and mentioned it’s contemplating whether or not to take authorized motion towards the New York-based agency.

“There had been heavy positions in Adani group (shares), the way in which they’ve risen within the final couple of years,” mentioned Neeraj Dewan, director at Quantum Securities in New Delhi.

“This is a traditional case of panic promoting…,” he mentioned, noting the issues had been additionally spreading to Indian banks with publicity to Adani group’s debt.

The index monitoring state-run banks (.NIFTYPSU) was down 4.6%, whereas the primary Nifty Bank index (.NSEBANK) fell 2.7%.

CLSA estimates that Indian banks had been uncovered to about 40% of the two trillion Indian rupees ($24.53 billion) of Adani group debt within the fiscal 12 months to March 2022.

The beautiful selloff has forged a shadow over Adani Enterprises’ secondary sale which started on Friday. The anchor portion of the sale noticed participation from traders together with the Abu Dhabi Investment Authority on Wednesday.

The agency has set a flooring value of three,112 rupees ($38.22) a share and a cap of three,276 rupees. But by noon on Friday, the inventory had slumped to 2,875 rupees – properly under the decrease finish of the worth providing.

As of 0700 GMT, traders, largely retail, had bid for round 200,000 shares, in contrast with the 45.5 million on supply, based on BSE alternate knowledge. Bidding for retail traders will shut on Jan. 31.

Shares of different listed Adani companies additionally plummetted, with Adani Transmission Ltd (ADAI.NS) Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Ports (APSE.NS) sinking 20% every.

In its report, Hindenburg mentioned key listed Adani Group corporations had “substantial debt”, placing the conglomerate on a “precarious monetary footing”, and that “sky-high valuations” had pushed the share costs of seven listed Adani corporations as a lot as 85% past precise worth.

Billionaire U.S. investor Bill Ackman mentioned on Thursday that he discovered the Hindenburg report “extremely credible and intensely properly researched.”

Hindenburg mentioned it held short positions in Adani by way of its U.S.-traded bonds and non-Indian-traded by-product devices, that means it’s betting that their value would fall.

Adani Group has repeatedly confronted and dismissed concern about debt ranges. It defended itself in a presentation titled “Myths of Short Seller” on Thursday, saying deleveraging by promoters – or key shareholders – was “in a excessive progress part”.

Jefferies in a shopper word mentioned Adani Group had shared particulars of debt and leverage ranges, and that it doesn’t “see materials danger arising to the Indian banking sector”.

Adani Group’s consolidated gross debt stood at 1.9 trillion rupees ($23.34 billion), Jefferies mentioned.

Adani has mentioned its debt is at a manageable degree and that no investor has raised any concern.

Adani Enterprises’ internet revenue for the interval ended Sept. 30, 2022 doubled to 9 billion Indian rupees ($110.31 million) whereas its whole earnings almost tripled to 795 billion Indian rupees, based on its share sale prospectus.

The firm’s whole liabilities as of September 2022 stood at 869 billion rupees ($10.64 billion), the prospectus confirmed.

The Adani conglomerate has been diversifying its enterprise pursuits and final 12 months purchased cement companies ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) from Switzerland’s Holcim (HOLN.S) for $10.5 billion. ACC was down 15% on Friday, whereas Ambuja plunged as much as 25%.

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

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