Losses of Billionaire Adani’s Empire Rise to $107 Billion

The crisis of confidence shaking the Indian conglomerate worsens day by day.

The bill increases daily. 

The damage to Gautam Adani’s conglomerate, caused by accusations of fraud, price manipulation, money laundering and problems of governance from the New York short-seller Hindenburg Research, is deepening.

Credit Suisse and Citigroup no longer accept certain securities issued by the entities that make up the Adani empire as collateral for margin loans to private clients, according to Bloomberg News. 

The central bank of India has also asked the country’s financial institutions to disclose their exposure to the conglomerate, which holds mines, ports, power plants and data centers in India. 

“The biggest risk is if Adani Group face a severe deterioration in access to financing, particularly at its highly leveraged entities,” said Lucror Analytics analyst Leonard Law in a note. 

“That said, the group can likely continue to raise funds from onshore banks and bonds for now.”

Stock Market Rout of Adani Group Continues

The liquidation of shares in entities linked to Adani Group is continuing on the Mumbai Stock Exchange. Adani Enterprises, the flagship of the Adani Group empire, fell another 26.5% in the Feb. 2 trading session. The day before, Adani Enterprises shares had fallen 28%. 

Adani Transmission lost 10%, Adani Green Energy fell 10%, while Adani Port & Special Economic Zone lost about 6.1% and Adani Total Gas lost 10%.

In total, the entities of the Adani conglomerate have lost some $107 billion in market capitalization in the six trading sessions following the publication of Hindenburg’s accusations, according to Bloomberg News.

Investors are shedding the bonds issued by Adani entities. Two of the dollar bonds issued by Adani Ports and Special Economic Zone, maturing in 2027 and 2029, have both lost almost 20% since the publication of the Hindenburg report, according to data from Bloomberg.

The bond issued by Adani Green Energy maturing in September 2024 plunged nearly 30%. Adani Group has payment schedules of approximately $34.7 million on dollar bonds expected this week.

“The fundamentals of our company are very strong,” founder Gautam Adani, 60,  said in a video on Feb. 2. “Our balance sheet is healthy and assets, robust. Our Ebitda levels and cash flows have been very strong and we have an impeccable track record of fulfilling our debt obligations. We will continue to focus on a long term value creation and growth.”

His personal wealth also has slumped. On Jan. 24, just before Hindenburg published its report, his net worth was estimated at $119 billion. That estimate was $72.1 billion as of Feb. 1, according to the Bloomberg Billionaires Index. It dropped $47 billion, or almost 40%, in eight days. 

The tycoon, who last September became the second richest man in the world, is now 13th on the list. If Adani Group’s stock-market liquidation continues, he likely will continue to tumble in the rankings.

Adani Is a Subject of National Debate in India

Adani’s misfortunes have become a subject of national debate in India. 

The expansion of the billionaire’s empire has coincided with the development ambitions of Prime Minister Narendra Modi, who wants to make India an alternative to China for investors. The local press says Adani and Modi are close. 

Separately, the conglomerate said Hindenburg’s accusations were an attack on India.

“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” Adani Group said, in a 413-page report, on Jan. 29.

The Indian parliament adjourned for the day on Feb. 2 after the rejection of a request by opposition lawmakers for a debate on the standoff between Adani and Hindenburg. Opposition lawmakers wanted to discuss this affair, which shines a spotlight on the business climate in India. 

Modi has so far stayed silent on the matter. But the local press says the Adani debacle could become a headache for the prime minister, who will run for a third term next year.

Hindenburg Research on Jan. 24 said that it had shorted stocks of the Adani conglomerate through U.S.-traded bonds and non-Indian-traded derivative instruments. This means that the New York-based investment firm, a well-known short-seller, is betting on a short-term drop in the prices of these equities.

The short-seller claims that the conglomerate has used shell companies in tax havens to boost its revenue and manipulate the stock prices of its various entities. The report describes a galaxy of shell entities based in the Caribbean, Mauritius and the United Arab Emirates controlled by the Adani family.

“We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades,” Hindenburg wrote.

“Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities.”

Adani Group has rejected the allegations as baseless and has threatened to pursue all possible legal remedies in Indian courts. 

Related Posts

Union Capital Financial Group Ltd, registered in the British Virgin Islands, does not provide investment services inside the United States. The company only provides consulting, advisory and educational services.