BackAdani vs Hindenburg: What we know so far
In the last one week, Adani Group stocks have erased more than $118 billion in market value triggered by the report from Hindenburg Research.
PremiumThe Gautam Adani led conglomerate is still facing the heat even after a week of a report by US based short seller Hindenburg Research which accused the Adani Group of 'brazen stock manipulation and accounting fraud scheme over the course of decades.'
In the last one week, Adani Group stocks have erased more than $118 billion in market value triggered by the report from Hindenburg Research.
On 3 February, The Reserve Bank of India (RBI) said the country's banking system remains resilient and stable.
“There have been media reports expressing concern about the exposures of Indian banks to a business conglomerate. As the regulator and supervisor, RBI maintains a constant vigil on the banking sector and on individual banks with a view to maintaining financial stability," said RBI without naming Adani Group.
In the latest developments:
1)S&P Global Ratings on Friday revised outlook on Adani Ports and Adani Electricity to negative from stable while affirming the rating.
"There is a risk that investor concerns about the group's governance and disclosures are larger than we have currently factored into our ratings, or that new investigations and negative market sentiment may lead to increased cost of capital and reduce funding access for rated entities," S&P said in a statement.
2) The National Stock Exchange on Thursday placed as many as three Adani group companies, including Adani Enterprises, Adani Ports and Special Economic Zone and Ambuja Cements, under short-term additional surveillance measure (ASM) framework, effective from3 February, 2023.
3) Major banks such as SBI, Bank of Baroda, others have come out with public statements stating their exposure to the group.
“The overall exposure to Adani Group is at one-fourth of the ceiling set under a large exposure framework. The exposure has come down over the past 3 years. 30% of exposure is either secured by a guarantee from a PSU or is to a joint venture with a PSU," said Bank of Baroda
“SBI has an overall exposure of ₹27,000 crore in Adani group which is 0.88% of the loan book as on 31st December 2022. The loans are against assets and businesses that are cash-generating. So, we don’t see any challenge, no cause of concern for us, said SBI Chief Dinesh Khara.
Insurance major, LIC also in a statement said that it holds a 4.23% stake in the flagship Adani firm, while its other exposures include a 9.14% stake in Adani Ports and 5.96% in Adani Total Gas.
4) Adani group's flagship firm Adani Enterprises called off its ₹20,000 crore FPO.
“Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdrawing the completed transaction," Adani Enterprises said in an announcement to the stock exchanges late Wednesday evening.
How did it start:
On 24 January, Hindenburg Research said that the seven listed companies of the Adani group, have an 85% downside on a fundamental basis due to sky-high valuations, Hindenburg said in the report.
The report pointed out the debt on the company. "Key listed Adani companies have also taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. 5 of 7 key listed companies have reported ‘current ratios’ below 1, indicating near-term liquidity pressure," the report said.
Adani's response:
In 413 page response to the Hindenburg Research saying that the report baseless and termed the allegations "unsubstantiated speculations".
“It is tremendously concerning that the statements of an entity sitting thousands of miles away, with no credibility or ethics has caused serious and unprecedented adverse impact on our investors," the Adani Group said.
The group also said, "not merely an unwarranted attack on any specific company but a calculated attack on India,"
Hindenburg Research response:
Hindenburg said the Adani response did not address any of the substantive points that the report raised. Rather, Adani has 'stoked a nationalist narrative' that seeks to conflate the 'meteoric rise and the wealth of its chairman, Gautam Adani, with the success of India itself'.
Adani Group led by billionaire Gautam Adani has now slipped to 22nd spot in the Forbes Real-time billionaire list for 2023.
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