(Bloomberg) — The stock rout roiling Gautam Adani’s indebted conglomerate entered a third week as its flagship firm suffered a fresh fundraising setback and a major credit rating agency downgraded the outlook on two of its companies.
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Eight of the group’s 10 stocks fell in Mumbai trading on Monday. Flagship Adani Enterprises Ltd. slumped as much as 9.7%, before paring the decline to around 2%. The meltdown since US short-seller Hindenburg Research made fraud allegations against the group in a Jan. 24 report has wiped out $118 billion, or more than half of the market value of its companies. Adani has repeatedly denied the claims.
The ramifications of the selloff are spreading far and wide as concerns grow about the exposure that financial institutions and investors have. The tumult has disrupted parliament and India’s main opposition party is ramping up pressure on Prime Minister Narendra Modi over his silence on the issue. It has planned a nationwide protest on Monday to highlight the risk to small investors.
Worries about the conglomerate’s access to funding rose further after Adani Enterprises shelved a bond sale just days after it abandoned a record stock offering. S&P Global Ratings also has cut its outlook on a port operator and an electricity distributor in the group, just as some of the companies are due to release quarterly earnings this week.
“This week turns the focus to Adani Group companies reporting earnings – and their comments on the debt sustainability,” said Charu Chanana, a strategist at Saxo Capital Markets. “It is still necessary for Adani Group to coherently respond to the fraud allegations, and emphasize its sound financial position to restore investor confidence.”
Adani Transmission Ltd. is set to report earnings Monday. Others including Adani Ports and Special Economic Zone Ltd. and Adani Green Energy Ltd. will release results later in the week, offering investors an opportunity to scrutinize the conglomerate’s latest financial health.
Hindenburg Research accused the group of “brazen” market manipulation and accounting fraud, claiming that a web of Adani-family controlled offshore shell entities in tax havens were used to facilitate corruption, money laundering and taxpayer theft.
The conglomerate has called the report “bogus,” and threatened legal action. Adani gave a video speech last week stating that the group’s balance sheet is healthy.
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Indian authorities stepped in over the weekend to calm frayed nerves, saying regulators are competent enough to deal with the fallout and banks’ exposure to the group are within limits.
The stock rout has cost India its place among the world’s five biggest stock markets, while the rupee is the worst-performing emerging Asian currency this year. Foreigners have pulled out $3.8 billion from the nation’s equities in 2023, the most among emerging Asian markets, excluding China.
Indicating investors’ persistent concerns about Adani’s debt woes, nine of the conglomerate’s 15 dollar bonds fell Monday, Bloomberg-compiled prices show.
The group’s aggregate debt is “just about $30 billion,” Chief Financial Officer Jugeshinder Singh told news channel CNBC TV-18 in an interview aired Jan. 30, without elaborating.
Adani’s bondholders are holding initial conversations with financial advisers and lawyers to weigh their options, seeking guidance on how the group’s debt structure would be impacted under various scenarios, including the prospect for regulatory and legal redress.
“Adani did have a lot of debt, so in terms of the corporate governance, there are always question marks around them,” Catherine Yeung, an investment director at Fidelity International Ltd., told Bloomberg Television Monday. “This really reiterates how, especially in emerging markets, you really have to have an understanding of companies, really going to find detail about their balance sheet.”
–With assistance from Abhishek Vishnoi, Aya Wagatsuma and Bhuma Shrivastava.
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