Drama Adani: new chapter of the conglomerate founded by Indian billionaire Gautam Adani, grappling with the collapse of the stock on the stock exchange after the allegations of tax fraud and manipulation of the share price leveled by the short seller Hindenburg Research.
The Hindenburg’s allegations have sparked an attack on the giant’s stock and bonds which burned a market capitalization worth more than 66 billion dollars, in the middle of a sale of shares worth 2.5 billion.
In the last few hours, Gautam Adani has tried to disavow the allegations of the short seller publishing a 413-page report.
The report allowed Adani Enterprises stock to rise up to around +10% during the session of the Mumbai stock exchange, thanks to the statements of the financial director of the holdingwho said he was confident in the result of the share issue, which closes tomorrow, Tuesday 31 January.
Earnings have shrunk however, leaving Adani Enteprises in the lurch with a plunge of more than 20% since the beginning of 2023.
Much lighter purchases on the shares of the subsidiary Adani Ports and Special Economic Zone, which suffered a 23% YTD plunge.
Finally, the shares of the other subsidiaries are volatile Adani Green Energy, Adani Power e Adani Transmission.
The Mumbai Stock Exchange Index Nifty 50 Index today it is up after having slipped to its lowest values in three months due to the powerful sell-offs that knocked out Adani shares.
But let’s come to the report with which the giant denied the doubts advanced by the short seller Hindenburg, at a time when, among other things, it sounds the contagion alert on creditor banks.
“Calculated fraud, attack on India”
With a press release issued yesterday, Sunday 29 January, Adani Group wrote that 65 of the 88 issues highlighted by Hindenburg Research have already been addressed and explained by the holding company to the markets, threatening to take legal action against the American short seller.
The letter signed by the conglomerate’s billionaire founder, the richest man in Asia known to have close ties to the Indian Prime Minister Narendra Modi he defined Hindenburg’s attack not only as an attack against his own interests, but against India itself, in an attempt to get some support from the sovereign wings of Indian parties.
It is worth mentioning that Goutama Adani he has often aligned the objectives of his giant with those of the Modi government, which aims to build new ports and airports in India.
“This is not just an attack on a specific company. It is a calculated attack against India, its independence, the integrity and quality of Indian institutions, against India’s growth story and ambitions.”read Adani’s response to Hindenrbug’s allegations, which he had accused the holding company of being “the biggest scam in corporate history“.
Adani defined the short seller’s attack as a “calculated fraud”.
However, the short seller countered by pointing out that Adani’s response is unable to provide concrete evidence against the allegations made.
Something that was also highlighted by Brian Freitas, Smartkarma analyst interviewed by Bloombergwho said Adani’s response may not be enough to calm the investor anxieties.
“The fact that there has been a statement and that things have been said does not mean that they are right – Freitas said – How can such a large group not explain analyst coverage and investment fund holdings? In my view, the biggest problem here is that those who own the shares are helping to keep valuations at stratospheric levels. There will be other checks, given the time that has passed since this saga began “.
However, Freitas also stated that he believed that “the impact on the market, overall, will be contained”.
Through it all, Adani Enterprises’ new share issuance operation has reaped so far overall subscriptions of just 1% in last Friday’s session, when the shares and bonds of the subsidiaries have plunged, in some cases to exceed the daily limit of 20%.
Although in the case of equity issues and Indian IPOs, investors usually wait until the last available day for the submission of offers, the market obviously fears the Hindenburg effect on sentiment.
Billionaire Adani himself, last week, he lost more than $20 billion of his personal wealth.
“Adani’s shares are not particularly liquid, and therefore the demand for the public offering of shares is also an issue Bloomberg Intelligence strategist Nitin Chanduka commented to Bloomberg. shares rarely point to a V-shaped recovery, therefore it is possible that the shares either consolidate at current levels or show further declines”.
Escape from Adani shares and bonds, bonds at record lows
The tension looks set to continue: i bond in dollari di Adani Ports & Special Economic Zone maturing in 2024 fell by 1.1 cents in the last few hours.
Il bond at Adani Transmission with expiry in 2026 tested the minimum of 83.4 US cents, according to Bloomberg reports.
He leaps Adani Ports & Special Economic Zone expiring in 2027 capitulated 7.1 cents to 72 cents on the Hong Kong Stock Exchange, testing the least ever after last week’s 11-cent drop.
But the Adani drama does not end there. Another Bloomberg article reports the names of those banks, which include the big giants of Wall Street and beyond, which could pay for the saga of the Indian billionaire: the names of JP Morgan, Citigroup, Bank of America.
In Europe, the banks most exposed to the collapse of the conglomerate include big names like UBS, Credit Suisse, Deutsche Bank e Barclayswhile in the Middle East the institutions at risk of contagion would be NBD PJSC of the United Arab Emirates, PJSC and the national bank of Qatar QPSC.
Japanese mega banks are also exposed Mitsubishi UFJ Financial Group Inc.the main lending division of Sumitomo Mitsui Financial Group and Mizuho Financial Group Inc., as well as DBS Group Holdings Ltd. and Standard Chartered.
In India, among the most exposed banks, they are mentioned State Bank of India, Axis Bank e ICICI Bank.