Adani Group has lost Rs 9 lakh crore m-cap in the last seven trading sessions. The total m-cap of the group tanked to Rs 10 lakh crore on February 3, 2023, from Rs 19.2 lakh crore as of January 24, 2023.
Adani Power, Adani Total Gas, Adani Wilmar, Adani Green, Adani Transmission, Adani Ports, Adani Enterprises, Ambuja Cements, ACC and NDTV are the ten listed Adani Group stocks on Dalal Street and the shares have crashed up to 50% after the Hindenburg report.
Shares of Adani Total Gas tanked the most 51% to Rs 1901.65 from Rs 3,885.45 during the same period, followed by Adani Green Energy (down 40%), Adani Enterprises (down 38%), Adani Transmission (down 37%), Adani Ports and SEZ (down 35%), Ambuja Cements (down 33%), Adani Wilmar (down 23%), Adani Power (down 22.5%), ACC (down 21%) and NDTV (down 17%).
Shares of Adani Enterprises even crashed 35 per cent in early trade on Friday after S&P Dow Jones Indices said it would exclude Adani Enterprises from widely used sustainability indices with effect from February 7. However, the stock ended 1 per cent higher on the Bombay Stock Exchange.
Also read: Adani Enterprises shares rebound 65% from 52-week low; stock volatility makes investors scratch their heads
“Adani Enterprises will be removed from the Dow Jones Sustainability indices following a media & stakeholder analysis triggered by allegations of stock manipulation and accounting fraud,” S&P Dow Jones Indices said on Thursday.
The stock rout started after US-based short seller Hindenburg Research published a damning report on the Adani Group on January 24, 2023.
According to Hindenburg report, seven listed Adani firms have an 85 per cent downside potential on a fundamental basis due to sky-high valuations. The report also claimed that the Adani Group is engaged in “accounting fraud, stock manipulation and money laundering” over the course of decades.
Adani Group accused Hindenburg Research of not doing proper research and “copy-pasting” from the company disclosures. In an over 400-page response, the group led by Gautam Adani called all the allegations “misleading”.
Wondering what’s next?
According to Anuj Jain, Research Head and Co-Founder, Green Portfolio, Adani pack has always commanded very high valuation and time and again doubts have been raised on the same. Despite the rout in share prices, Adani Enterprises, Adani Transmission, Adani Green Energy and Adani Total – trades at PE of 3 digits.
Jain believes that very little overvaluation is left to be shed else market forces have brought them to fair valuations now. “We should not forget that these companies are seeing very rapid growth and the business model is more or less inelastic to demand and annuity kind. We believe that the worst is almost over. However, one share is very interesting i.e. Adani Ports & Special Economic Zone Ltd,” he said.
“At a PE of 20 with a margin profile of more than 50%, ample cash generation and not too much stretched balance sheet, I think it is unnecessarily beaten too much,” he added.
Sonam Srivastava, Founder, Wright Research said, “While the overvaluation of the Adani stocks was not a surprise, the detailed allegations of fraud and market manipulation are pretty horrendous. There have been rumours about the same on social media last year, but the regulators never took a stand, and the allegations died down.”
Srivastava believes that the detailed investigations by Hindenburg are a revelation and would help the Indian market by clearing up the ambiguous corporate governance issues of Adani companies,” said Sonam Srivastava, Founder at Wright Research.
“While the tug of war is still going on between Adani and Hindenburg, it is quite clear that Adani has had very little auditory supervision, almost no coverage by analysts and the regulator has not taken any steps to investigate their business processes or price actions. We hope that this situation gets clarified, regulators step up and any wrongdoing or lack thereof comes out clearly for all the capital market participants,” she added.
Also read: ‘Take whatever they say with caution,’ Zerodha’s Nikhil Kamath warns against Hindenburg’s short selling motives
Here’s the story so far
Last Wednesday night, the Board of Adani Enterprises Ltd announced the withdrawal of its Rs 20,000-crore follow-on public offer (FPO) amid current market volatility. “Given the unprecedented situation and the current market volatility the Company aims to protect the interest of its investing community by returning the FPO proceeds and withdrawing the completed transaction,” said Adani Enterprises.
Shares of Adani group crashed up to 35% on Budget day amid a report that Credit Suisse has stopped accepting bonds of Adani companies as collateral for margin loans.
According to Bloomberg, Citigroup Inc’s wealth arm also stopped accepting securities of Adani group of firms as collateral for the margin loan.
National Stock Exchange on Thursday placed Adani Enterprises, Adani Ports, Ambuja Cements under ASM (Additional Surveillance Margin) framework with effect from February 3, 2023, which will require 100% margin to trade in their shares.
“There shall be Additional Surveillance Measures (ASM) on securities with surveillance concerns based on objective parameters viz. Price / Volume variation, Volatility etc,” said NSE on its website to explain the measure.
U-turn on Budget day
Sensex zoomed over 1200 points after budget 2023 as a couple of announcements related to income tax, infrastructure spending and capital expenditure lifted the market mood. However, the euphoria fizzled out and Sensex was down over 700 points at one point in time.
The BSE Sensex, which has no Adani group stock as constituent, ended at 59,708.08, up 158.18 points or 0.27 per cent on the Budget day.
However, Nifty closed at 17,616.30, down 45.85 points or 0.26 per cent due to selling pressure in two of its constituents (Adani Enterprises and Adani Ports & SEZ).
