(Bloomberg) – The stock market rout rocking Gautam Adani’s indebted conglomerate has entered a third week, with the billionaire and his family prepaying $1.11 billion in equity-backed loans in a bid to restore confidence investors.
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Six of the group’s 10 shares ended lower in Mumbai on Monday, with Adani Transmission Ltd. and Adani Total Gas Ltd. leading losses. The slump since U.S. short seller Hindenburg Research made allegations of fraud against the ports-to-power group in a January 24 report has wiped out $117 billion, nearly half the market value of its companies. Adani has repeatedly denied these allegations.
Concerns over the conglomerate’s access to funding grew further after Bloomberg reported on Saturday that Adani Enterprises Ltd., its flagship company, suspended a bond sale just days after dropping a record-high share offering. S&P Global Ratings has also downgraded its outlook for a port operator and a group electricity distributor, just as some companies are due to report quarterly results this week, giving investors a chance to examine the financial health of the conglomerate.
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Early repayment of founders’ loans will help release 11.77 million shares of Adani Transmission Ltd. and up to 168.27 million shares of Adani Ports & Special Economic Zone Ltd., the group said in a statement on Monday. Adani Ports stock erased intraday declines to end up 9.3%, its biggest gain since April 2021. The flagship ended down 0.9% and is now down 54% since the beginning of the rout.
The ramifications of the sale are spreading further as concerns grow over the exposure of financial institutions and investors to Adani. The uproar has disrupted parliament and India’s main opposition party is stepping up pressure on Prime Minister Narendra Modi for his silence on the issue. He staged protests on Monday to highlight the risk to small investors.
“The focus this week is on Adani Group companies reporting earnings – and comments on debt sustainability,” said Charu Chanana, strategist at Saxo Capital Markets. “There is still a need for the Adani Group to consistently respond to allegations of fraud and emphasize its strong financial position to restore investor confidence.”
Hindenburg Research accused the group of “brazen” market manipulation and accounting fraud, saying a network of fictitious offshore entities controlled by the Adani family in tax havens were used to facilitate corruption, money laundering and the theft of taxpayers.
The conglomerate called the report “false” and threatened legal action. Adani gave a video speech last week declaring that the group’s balance sheet is healthy.
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Indian authorities intervened over the weekend to calm frayed nerves, saying regulators are competent enough to deal with the fallout and banks’ exposure to the group is within limits.
The rout in equities 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, excluding China.
Indicating continued investor concerns over Adani’s debt troubles, eight of the conglomerate’s $15 bonds fell at 6:26 p.m. in Hong Kong on Monday, led by Adani Ports 2031 notes, which fell 1.7 cents, according to prices compiled by Bloomberg. Adani Green Energy Ltd’s US currency debt due in 2024 rose 1.2 cents, gaining for a second day.
The group’s overall debt is “around $30 billion,” Chief Financial Officer Jugeshinder Singh told CNBC TV-18 in an interview aired Jan. 30, without giving further details.
Adani bondholders are holding initial conversations with financial advisers and lawyers to weigh their options, seeking advice on how the group’s debt structure would be affected under various scenarios, including the prospect of regulatory and legal redress.
“Adani had a lot of debt, so in terms of corporate governance, there are always question marks around them,” Catherine Yeung, chief investment officer at Fidelity International Ltd, told Bloomberg Television on Monday. “It really reiterates how, especially in emerging markets, you have to really understand companies, really find details on their balance sheet.”
–With help from Abhishek Vishnoi, Aya Wagatsuma, Bhuma Shrivastava and Harry Suhartono.
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