(Bloomberg) – Indian policymakers and regulators stepped in over the weekend to calm frayed nerves over fears that unrest surrounding billionaire conglomerate Gautam Adani could ripple through the local economy and hurt the global investor sentiment towards the country.
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While Prime Minister Narendra Modi has yet to comment publicly on the saga, officials in his administration have said Indian regulators are independent and competent to deal with the fallout. The Securities and Exchange Board of India said it was committed to ensuring market integrity. The central bank assured that the banks respect the limits of their exposure to the Adani group.
The market value of Adani’s empire has nearly halved since a scathing report by US short seller Hindenburg Research was released on January 24 accusing it of stock manipulation and accounting fraud. The group has repeatedly denied Hindenburg’s allegations of corporate wrongdoing and threatened legal action.
The uproar has become a national issue, with lawmakers disrupting parliament to demand answers, as Adani’s interests often intertwine with India’s growth plans. The main opposition party has stepped up pressure on Modi over his silence and has planned a nationwide protest on Monday to highlight the risk to retail investors.
Most of the Adani Group’s dollar bonds rose on Monday, with Adani Green Energy Ltd’s $750 million note rising. of 2024 leading the advance, climbing 1.2 cents on the dollar to 72.4 cents at 10:02 a.m. in Hong Kong. Monday’s moves come on top of last week’s gains for several of the group’s debt securities, but ticket prices are still down about 8 cents to 23 cents on the dollar since Hindenburg Research’s initial report.
Bankers and industrialists also shared their views on the impact on India. Asia’s richest financier Uday Kotak says while he doesn’t see systemic risks to India’s financial system from ‘recent events’, the country’s big business relies on global sources debt and equity financing, and local underwriting and capacity building need to be improved.
Billionaire businessman Anand Mahindra has said ‘never, ever bet against India’ amid questions whether the current challenges in the business sector will stumble the nation’s ambitions to be a global economic force.
As the saga enters its third week, investors brace for heightened volatility and attention increasingly turns to how the Adani Group will manage to finance its debts.
The rout in corporate stocks has cost India its place among the world’s five largest stock markets, while the rupee is the worst performing emerging Asian currency this year. Foreigners took $3.8 billion out of the country’s stocks in 2023, the most among emerging Asian markets.
New Delhi rushes to limit the blow.
Indian regulators “will do their job” in dealing with the allegations against the Adani Group, Finance Minister Nirmala Sitharaman said on Saturday. The recent market turmoil will not impact the country’s economic fundamentals, she said. Commerce Minister Piyush Goyal echoed a similar sentiment, saying Indian financial markets were among the most respected and best regulated in the world.
Concerns over how the Adani Group will manage its various debts have increased after Adani Enterprises Ltd. ended a record $2.5 billion follow-on stock sale, citing the need to protect the interests of its investors.
It also suspended a plan to raise up to 10 billion rupees ($122 million) through its first-ever public bond sale, Bloomberg News reported on Saturday, citing people familiar with the matter.
S&P Global Ratings has lowered its outlook on Adani Ports and SEZ Ltd. and Adani Electricity Mumbai Ltd. to negative. “There is a risk that investor concerns about group governance disclosures may be greater than what we have currently factored into the ratings,” the ratings firm said in a statement.
There are also risks that further investigations and negative market sentiment will drive up the cost of capital and reduce access to funding for rated entities, he said.
–With help from Anup Roy, Adrija Chatterjee and Harry Suhartono.
(Updates with Adani bond price movements.)
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