The value of Gautam Adani’s business empire has plunged more than $145 billion in a month since a US short seller alleged fraud, leaving the Indian tycoon still facing a battle to regain investor confidence .
The selloff triggered by Hindenburg Research, which accused Adani of stock manipulation and accounting fraud, has wiped more than 60 percent off the value of Adani’s publicly traded companies and shaken an empire that grew from ports Ranging from airports to energy.
Adani has strongly denied Hindenburg’s allegations, but shares remain under pressure. Falls on Friday left the listed conglomerates’ overall market capitalization at the lowest level since Hindenburg made his allegations.
The crisis gripping a vast set of businesses has helped reduce the billionaire’s own fortune by $79bn since the start of the year, allowing rival Indian industrialist Mukesh Ambani to reclaim the title of richest man in Asia. Got it.
“Some companies were overvalued at over 100 times PE valuations,” said Abhishek Jain, head of research at Arihant Capital in Mumbai. He said the “hammering” by investors meant some shares were now at more attractive prices and “could be interesting to take a look at.” [at],
Before this year’s turmoil, Adani had expanded his empire at a rapid pace, taking on more debt and pushing into areas that needed substantial investment, including hydrogen and solar businesses.
But now there are signs of retrenchment. Several Adani companies have put on hold upcoming investments, including the $847 million acquisition of a coal power plant. Last week, Adani Power Maharashtra Limited’s agreement with Orient Cements to set up a cement grinding unit was cancelled.
“We will not make new commitments until we have settled this period of volatility,” group chief financial officer Jugeshinder “Robbie” Singh told analysts after group flagship Adani Enterprises’ results this month. “
The decision to abandon a $2.4 billion share sale by Adani Enterprises earlier in the month was one of the most striking blows inflicted by the crisis. Since then, rating agency Moody’s has cut the outlook of several Adani Group companies.
Dollar bonds issued by Adani businesses have sold out, with separate $750 million bonds from Adani Green Energy and Adani Ports maturing in 2024 and 2027, respectively, trading at around $0.80 on the dollar each.
“People have no problem buying Indian debt,” said the head of Asia bond syndication for a Western investment bank. “It’s Adani they won’t touch.”
With the Adani empire still under intense scrutiny, analysts say the group must focus on leveraging the strength of its underlying businesses and reassuring investors.
“They need to focus on conserving cash, prepaying loans,” said Varun Fatehpuria, founder and chief executive of Daulat, a Kolkata-based digital wealth management platform. “People are looking for more clarity and transparency into the true health of the business.”
The turmoil in the stock market has also put pressure on loans backed by shares in listed companies held by Adani’s family. Earlier this month, Adani repaid a $1.1 billion share-backed loan after facing margin calls of over $500 million.
Adani Group executives want to repay more than $1 billion of outstanding share-backed loans taken by the family or “promoters”, according to a person familiar with the matter.
In an effort to reassure bondholders, Adani companies are making prepayments to some creditors. Karan Adani, managing director of Adani Ports and Special Economic Zone, said the company will repay or prepay debt of over $600 million in the coming financial year, to reduce the debt to income ratio. The company last week paid 5 billion rupees ($60.3 million) to an Indian mutual fund in lieu of maturing commercial papers.
“To boost the sentiment of market participants or bondholders, they are paying off a lot of debt early,” said Abhishek Jain, head of research at Mumbai-based Arihant Capital.
Despite the layoffs in recent weeks, there are signs that Adani has retained its international ambitions – this is a month after Adani visited Israel to wrap up the group’s joint acquisition of Israel’s strategic Haifa Port. Meanwhile, Adani Group said it had bid for an under-construction steel plant in the central Indian state of Chhattisgarh, which the government is selling.
In a video released soon after Adani Enterprises’ share sale closed, Adani said, “we will continue to focus on long-term value creation and growth”.