India's Adani tries to calm investors as market rout continues

[February 13, 2023]  By Aditya Kalra, Bharath Rajeswaran and Jayshree P Upadhyay

NEW DELHI (Reuters) - India's Adani Group sought to reassure investors on Monday as a rout in its shares continued, saying its business plans were fully-funded, its cashflows strong and it remained confident of delivering attractive returns to shareholders.

Led by billionaire businessman Gautam Adani, the group's seven listed stocks have together lost about $120 billion in market value since a Jan. 24 report by U.S. short-seller Hindenburg Research accused it of improper use of offshore tax havens and stock manipulation, allegations the group has denied.

The turmoil continued on Monday, with shares in the listed companies extending their losses.

In a statement to Reuters, the conglomerate said the balance sheet of each of its independent portfolio companies was "very healthy", adding it had secure assets and strong cashflows, with its business plans fully funded.

"We are confident in the continued ability of our portfolio to deliver superior returns to shareholders," Adani Group said in the emailed statement.

Bloomberg News reported on Monday the group had halved its revenue growth target and planned to scale down capital spending. A company spokesperson told Reuters earlier in the day the report was "baseless, speculative", without elaborating.

The Adani crisis has sparked worries of financial contagion in India, protests in parliament where lawmakers have demanded an investigation, ratings outlook downgrades of some Adani units and cast a shadow on the group's capital raising plans. Gautam Adani has also lost his crown as Asia's richest person.

The Securities and Exchange Board of India (SEBI) has been probing the market rout, including examining trade patterns and any potential irregularities in the $2.5 billion share sale of flagship company Adani Enterprises that the Adani group was forced to cancel due to the stock's plunge, Reuters has previously reported.

"Once the current market stabilises, each entity will review its own capital market strategy," Adani Group's statement said.

SEBI is set to brief federal finance ministry officials on Feb. 15 on its investigation into the shelved share sale, two sources told Reuters on Monday. SEBI and the finance ministry did not respond immediately to Reuters requests for comment.

Last week, Moody's downgraded the ratings outlook for some Adani companies, while index provider MSCI said it would cut the weightings of some in its stock indexes.

On Monday, all stocks of the Adani group were under pressure. Adani Enterprises fell 7%, while Adani Total Gas, Adani Power and Adani Transmission lost 5% each.

Adani Total, a joint venture with France's TotalEnergies, has lost 70% since the Hindenburg report, while Adani Enterprises is down 50%.

Adani logo and decreasing stock graph is seen in this illustration taken January 31, 2023. REUTERS/Dado Ruvic/Illustration/Files

Since the Hindenburg report's release, Adani Group has prepaid some of its $25 billion debt and pledged to independently review the short-seller's claims, but the carnage in its securities has continued.

"The effects of management's attempts to reassure investors will take at least three to six months to start reflecting in share prices. Price damage has been significant," said Avinash Gorakshakar, head of research at Profitmart Securities.

India's Supreme Court on Monday resumed hearing public interest petitions that raise concerns about steep investor losses sparked by Hindenburg's report. India’s Solicitor General Tushar Mehta, arguing on behalf of the government and market regulator SEBI, told judges the existing regulatory frameworks were “fully equipped” to deal with such situations.

There would, however, be no objection if the court decided to set up a panel to examine protection mechanisms for investors, Mehta said. The judges told him to come back with the remit of such a panel, and scheduled a further hearing for Friday.

In Mumbai, around 100 political workers and activists of opposition Communist Party of India marched shouting anti-Adani slogans and holding posters with cartoons of Adani and Prime Minister Narendra Modi.

Opposition critics accuse Modi's government of giving undue favours to the Adani Group. The government and Adani both deny excessively close ties.

"The effect of our protests is visible as Adani shares continue to fall," Feroze Mithiborwala, one of the protesters, said.

In recent days, concerns have also arisen about exposure of Indian and foreign lenders to the Adani Group. In its rebuttal of Hindenburg's allegations, the conglomerate had pointed to its international banking relationships as a sign of its strength.

Singapore's DBS Group said on Monday it had a S$1.3 billion ($976 million) exposure to Adani group companies, out of which S$1 billion was to finance its cement business. DBS said it was not concerned about its exposure to the group.

"They're solid, cash-generating companies, so we're not concerned about the exposure," Chief Executive Piyush Gupta told an earnings briefing, referring to the cement business, which Adani acquired for $10.5 billion last year from Holcim.

DBS was among a group of banks that provided financing.

(Additional reporting by Anshuman Daga and Yantoultra Ngui in Singapore, Bharath Rajeswaran and Chris Thomas in Bengaluru, Francis Mascarenhas in Mumbai; Editing by Muralikumar Anantharaman and Mark Potter)

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