Adani loses Asia’s richest crown as stock meltdown hits $86 billion

BENGALURU, Feb 1 (Reuters) – Shares in Indian tycoon Gautam Adani’s conglomerate tumbled again on Wednesday after the rout of his companies deepened to $86 billion following a report of short sellers in the U.S., with the billionaire also losing his title as the most – the richest man in Asia.

Share losses on Wednesday saw Adani drop to 15th place on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, chairman of Reliance Industries Ltd (RELI.NS) who ranks ninth with a net worth of $83.7 billion.

Prior to the critical report by US short seller Hindenburg, Adani was in third place.

The losses mark a dramatic setback for Adani, the billionaire school dropout whose fortunes have risen rapidly in recent years in line with the share value of his businesses, which include ports, airports, mining, cement and power. Now the tycoon is struggling to stabilize his companies and protect his reputation.

The share falls come just a day after Adani Group managed to raise $2.5 billion in investor backing sale of shares for the leading company Adani Enterprises (ADEL.NS)in what some saw as a stamp of investor confidence at a time of crisis.

The Hindenburg Research report last week supposed improper use by the group of offshore tax havens and stock manipulation. It also raised concerns about the high debt and valuations of seven Adani-listed companies.

The group has denied the allegations, saying the short seller’s account of stock manipulation had “no basis” and stemmed from ignorance of Indian law. It has always made the required regulatory disclosures, he added.

Shares in Adani Enterprises, often described as the incubator of Adani’s business, tumbled 28 percent on Wednesday, taking its losses since the Hindenburg report to more than $18 billion. Adani Ports and Special Economic Zone (APSE.NS) fell by 19%. Both stocks had their worst day ever.

“The decline we are seeing in Adani shares is frightening,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.

Adani Power (ADAN.NS) and Adani Willmar (ADAW.NS) fell by 5% each, and Adani Total Gas (ADAG.NS) fell 10%, with all three falling to their daily price limits. Adani transmission (ADAI.NS) fell 3% and Adani Green Energy (ADNA.NS) 5.6%.

Adani Total Gas, a joint venture with France’s Total (TTEF.PA)was the biggest casualty in the report for short sellers, losing about $27 billion.

Dollar bonds issued by Adani entities also resumed their slide on Wednesday. Adani Ports’ dollar-denominated bonds due February 2031 led the losses, falling 3.59 cents to 67.58 cents.

Underscoring the nervousness in some quarters, Bloomberg reported that Credit Suisse (CSGN.S) stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients.

Devon Choksey, managing director of KRChoksey Shares and Securities, said that was a big factor in the stock’s decline on Wednesday.

Credit Suisse had no immediate comment.

After losing $86 billion in recent days – equivalent to 16 percent of India’s $550 billion in annual budget spending announced on Wednesday – Adani Group’s seven listed companies now have a combined market capitalization of about $131 billion.

BREACH OF TRUST

“Yesterday there was a slight bounce after the sell-off in stocks went through after it looked unlikely at one point, but now weak market sentiment has become visible again after the bombshell Hindenburg report,” said Ambareesh Baliga, a Mumbai-based independent market analyst.

“Since the stock has declined despite Adani’s rebuttal, it clearly shows some damage to investor sentiment. It will take some time to stabilise,” Baliga added.

Asked if he was concerned about more losses in Indian capital markets due to the fall in Adani Group shares, Economic Affairs Minister Ajay Seth said the government “does not comment on company-specific issues”.

India’s benchmark Nifty fell 2.7% after the Hindenburg report. The data also showed that foreign investors sold Indian stocks worth a net $1.5 billion after the Hindenburg report, the biggest outflow in four consecutive days since September 30.

Scrutiny of the conglomerate is stepping up, with an Australian regulator saying on Wednesday it will review Hindenburg’s claims to see if further inquiries are required.

India’s market regulator, which is probing the conglomerate’s deals, will add Hindenburg’s report before its own preliminary investigation, sources told Reuters. The regulator has not commented on the Adani-Hindenburg saga.

Indian credit rating agency ICRA Ltd, a division of Moody’s Investors Service, said on Wednesday it was monitoring the impact of the changes on its rated portfolio at Adani Group. It added that while the group’s large debt-funded capital expenditure plan was a “key challenge”, some of it was discretionary and could be delayed depending on the liquidity position.

State Life Insurance Corporation of India (LIC) (LIFI.NS)said on Monday will seek clarification from Adani management on the short sellers report. LIC holds a 4.23% stake in Adani Enterprises as of December-end and more than 9% in Adani Ports and the Special Economic Zone. The insurance giant was also a key investor in Adani’s recent share sale.

Shares in cement companies ACC (ACC.NS) and Ambuja cements (ABUJ.NS)which Adani Group bought from Switzerland’s Holcim (HOLN.S) to $10.5 billion last year, down 6.2% and 16.7%, respectively.

Hindenburg said in his report that he had shorted US bonds and non-Indian traded derivatives of the Adani Group.

Reporting by Chris Thomas in Bengaluru and Aditya Kalra and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran, Nikunj Ohri, and Sethuraman NR; Editing by Edwina Gibbs and Mark Potter

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