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Adani’s market losses top $100 billion as deferred stock sale scares investors

After its flagship company abandoned a $2.5 billion share sale on Wednesday, Adani Group’s market losses reached $100 billion on Thursday, sparking worries about a possible systemic impact.

The return to sales of Adani Enterprises (ADEL.NS) shares marks a dramatic coup for founder Gautam Adani, the school dropout-turned-billionaire whose fortunes have risen sharply in recent years. Still, US Hindenburg posted an important research report.

The billionaire’s decision to cancel the share sale hit markets, politics and business. Adani’s shares tumbled, opposition lawmakers called for a broader investigation, and the central bank launched an investigation into banks’ risk aversion.

Meanwhile, Citigroup’s (C.N.) wealth unit stopped making margin loans to its clients against Adani Group securities.

Adani has partnered with foreign giants such as France’s Total Energy (TTEF.PA) and has attracted investors such as Abu Dhabi’s International Holding Co in its pursuit of global expansion from ports to the energy sector.

In a surprise move on Wednesday night, Adani called off the share sale as criticism of Hindenburg accelerated the share’s slide, even though he fully subscribed the day before.

“Adani may have triggered a confidence crisis in Indian stocks, and this could have broader market implications,” said Ipek Ozkaredskaya, senior market analyst at Swissquote Bank.

Adani Enterprises‘ stock dropped 27% on Thursday, closing at its lowest price since March 2022.

Other group companies also lost more ground, with Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) losing 10% each, while Adani Ports & Special Economic Zone (APSE.NS) ) ) lost almost 7%.

Since the Hindenburg report on January 24, the group’s companies have lost almost half their combined market value. Adani Enterprises, described as an incubator for Adani’s businesses, has lost $26 billion in market capitalization.

Adani is no longer even the richest man in Asia after falling to 16th in Forbes’ ranking of the world’s richest people; his net worth nearly halved to $64.6 billion in a week.

The 60-year-old was third on the list after billionaire Elon Musk and Bernard Arnault.

His rival Mukesh Ambani of Reliance Industries (RELI.NS) is now the richest man in Asia.

Overall situations

The fall in Adani stock and bond prices has raised concerns about the potential for broader ramifications for India’s financial system.

On Thursday, government and banking sources told Reuters that India’s central bank had asked local banks for facts about their exposure to the Adani group.

CLSA estimates that about 40% of the Adani Group’s $24.5 billion credit exposure is with Indian banks in the fiscal year to March 2022.

Dollar bonds issued by Adani group entities extended losses on Thursday, and Adani Green Energy Ltd (ADNA.NS) notes fell to a record low.

In New Delhi, opposition M.P.s have filed legislative notices demanding a discussion on the short sellers report.

The Congress party demanded an investigation under the supervision of a Parliamentary Joint Committee or the Supreme Court.

Adani VS Hindenburg

Adani will see acquisitions worth $13.8 billion in 2022; the DeLogic data showed an all-time high and more than double the year ago.

The cancelled fundraiser was significant for Adani, which said it would use $1.33 billion to finance green hydrogen projects, greenfield airport facilities and highways, and $508 million to pay down debt on some units. Will do

The Hindenburg report alleged abuse of offshore tax havens and stock manipulation by the Adani group. He also raised concerns about the high debt and valuation of Adani’s seven publicly traded companies.

The Adani Group has denied the allegations, stating that the allegation of stock manipulation was «baseless» and stemmed from ignorance of Indian law. Adani managed to get a sale subscription for the shares on Tuesday, even though the market price of the shares was lower than the offer price of the issue.

Late Wednesday, the group’s founder said he would withdraw the sale given the falling share price, adding that his board felt it would be “not ethically correct” to proceed.

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