Adani Stock Rout Enters Third Week as Flagship Shelves Bond Sale

(Bloomberg) — The stock rout in Gautam Adani’s indebted conglomerate entered a third week as its flagship firm suffered a fresh fundraising setback and a major credit rating agency downgraded the outlook on two of its companies.

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All 10 of the group’s stocks fell in early Mumbai trading on Monday. Flagship Adani Enterprises Ltd. slumped as much as 9.7%. The meltdown since US short-seller Hindenburg Research made fraud allegations against the group in a Jan. 24 report has wiped out $118 billion, or more than half of the market value of its companies. Adani has repeatedly denied the claims.

Ramifications of the relentless selloff are spreading far and wide as concerns grow about the exposure that financial institutions and investors have to the conglomerate. The tumult has disrupted parliament and India’s main opposition party is ramping up the pressure on Prime Minister Narendra Modi over his silence on the issue. It has planned a nationwide protest on Monday to highlight the risk to small investors.

Meanwhile, worries about the conglomerate’s access to funding are also rising. Adani Enterprises has shelved a key bond sale, Bloomberg News reported on Saturday, less than a week after it abruptly abandoned a record domestic stock offering. S&P Global Ratings cut its outlook on Adani Ports & Special Economic Zone Ltd. and Adani Electricity Mumbai Ltd. to negative on Friday.

“Adani did have a lot of debt, so in terms of the corporate governance, there are always question marks around them,” Catherine Yeung, an investment director at Fidelity International Ltd., told Bloomberg Television Monday. “This really reiterates how, especially in emerging markets, you really have to have an understanding of companies, really going to find detail about their balance sheet.”

The Adani Group’s aggregate debt is “just about $30 billion,” Chief Financial Officer Jugeshinder Singh told news channel CNBC TV-18 in an interview aired Jan. 30, without elaborating.

Adani’s bondholders are holding initial conversations with financial advisers and lawyers to weigh their options, seeking guidance on how the group’s debt structure would be impacted under various scenarios, including the prospect for regulatory and legal redress.

Nine of the conglomerate’s 15 dollar bonds fell as of early Monday afternoon in Hong Kong, Bloomberg-compiled prices show.

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Indian authorities stepped in over the weekend to calm frayed nerves over concerns about the turmoil, saying regulators are competent enough to deal with the fallout and banks’ exposure to the group are within limits.

Hindenburg Research accused the group of “brazen” market manipulation and accounting fraud, claiming that a web of Adani-family controlled offshore shell entities in tax havens were used to facilitate corruption, money laundering and taxpayer theft.

The conglomerate has called the report “bogus,” and threatened legal action. Adani gave a video speech last week stating that the group’s balance sheet is healthy.

The stock rout has cost India its place among the world’s five biggest stock markets, while the rupee is the worst-performing emerging Asian currency this year. Foreigners have pulled out $3.8 billion from the nation’s equities in 2023, the most among emerging Asian markets, excluding China.

A slew of quarterly earnings for the group will emerge in the coming days, led by Adani Transmission Ltd.’s scheduled release later Monday, offering investors more opportunity to scrutinize the financial health.

“This week turns the focus to Adani Group companies reporting earnings – and their comments on the debt sustainability,” said Charu Chanana, a strategist at Saxo Capital Markets. “It is still necessary for Adani Group to coherently respond to the fraud allegations, and emphasize its sound financial position to restore investor confidence.”

–With assistance from Abhishek Vishnoi.