Indian opposition lawmakers have demanded an investigation into Adani Group, as the crisis surrounding tycoon Gautam Adani’s embattled empire deepened, with market losses topping $100bn after a United States short seller accused it of pulling “the largest con in corporate history”.
A session of the lower house of India’s Parliament was adjourned amid loud protests on Thursday, a day after Adani Group’s flagship company abandoned a $2.5bn stock offering meant to help reduce debt levels, restore confidence and broaden its shareholder base.
Keep readinglist of 3 items
The opposition Congress party has demanded the setting up of a Joint Parliamentary Committee or a Supreme Court-monitored investigation into the matter and has called on Prime Minister Narendra Modi to speak on the issue.
“Keeping public interest in mind, we want a thorough probe into the Adani issue either by a Joint Parliamentary Committee or a Supreme Court-monitored panel,” opposition leader Mallikarjun Kharge said. “There should also be day-to-day reporting of the investigation on the issue.”
In a report last week, New York-based investment research firm Hindenburg Research accused Adani Group of a “brazen stock manipulation and accounting fraud scheme over the course of decades”. It also raised concerns about high debt and the valuations of seven listed Adani companies.
Since Hindenburg’s report on January 24, group companies have lost nearly half their combined market value. Adani Enterprises – described as an incubator of Adani’s businesses – has lost $24bn in market capitalisation.
Adani Group has denied the allegations, with its finance chief calling the Hindenburg report a “malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts”.
Meanwhile, Gautam Adani released a video message to investors insisting that the fundamentals of his group are “strong” and that its record on paying back debt was “impeccable”.
The “interest of my investors is paramount and everything is secondary”, he said. “Hence, to insulate the investors from potential losses we have withdrawn” the share sale.
Foreign investors, many of them already weary of what they consider an overpriced stock market, are reducing exposure.
Adani Enterprises shares plunged by nearly 23 percent on Thursday, trading at its lowest since March 2022. Other group companies were also under pressure – Adani Ports and Special Economic Zone was down 5 percent, while Adani Total Gas, Adani Green Energy and Adani Transmission lost about 10 percent each.
“I think there is absolutely no limit as to how bad this can be because confidence has absolutely been shaken, the stock is plummeting like there is no tomorrow,” Naeem Aslam, chief market analyst at Avatrade, told Al Jazeera.
Adani, 60, is also no longer Asia’s richest person, having slid in the rankings of the world’s wealthiest to 16th, as per Forbes’ list, from third last week.
“Unless Adani is able to regain the confidence of institutional investors, stocks will be in freefall,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.
Adani’s wipeout has the potential to broaden if it drives a bigger mood shift, said Sat Duhra, who manages a $1bn Asian dividend income fund at Janus Henderson Investors.
“The Indian stock market indices are driven in large part by a small group of companies and any change in sentiment and flows will have a disproportionate impact on indices as more liquid names are sold first,” he said.
“We own less than 2 percent in Indian equities and would need to see a serious correction before we considered adding, especially in light of the recent issues.”
As regulators step in, banks too are distancing themselves, with Citigroup’s wealth unit saying it has stopped extending margin loans to its clients against Adani securities, and Bloomberg News reporting that Credit Suisse had done likewise.
While the Adani Group has total gross debt of 2.2 trillion rupees ($26.86bn), top banks have said their credit exposures to the group are small. Shares of the firm are closely held, and mutual funds have low exposure too.
“Everybody’s keeping a very close eye on those debts,” said Pankaj Pathak, a fund manager at Quantum Asset Management in Mumbai. “But on the domestic debt side, we hardly see any impact on the broader corporate bond market because of what is happening in Adani,” he said, pointing to the limited ownership of those bonds.
David Chao, a global market strategist at Invesco, expects a spell of market fluctuation and volatility.
“We don’t think that there’s going to be a default anytime soon, although I don’t expect any kind of near-term resolution between Adani Group and Hindenburg,” Chao said.
Yet Chao expects the selloff to help bring Indian stock valuations to more “palatable levels” for investors.
“The impact on India’s broader macro picture is limited. I think, ultimately, this is a fight between two business people.”