Hindenburg Row: Adani Group Reassures Investors As Stocks Plunge Further

Adani group stocks declined on Monday amid reports that the conglomerate is planning to cut down its revenue target by half and hold fresh capital expenditure. All 10 Adani stocks declined between 3 per cent and 7 per cent; six group stocks were locked in the lower circuit.

The group sought to reassure investors, saying it had strong cashflows and its business plans were fully funded. Group stocks are under pressure since January 24 following a critical report by American short-seller Hindenburg Research.

The group in a statement to Reuters said the balance sheet of each of its independent portfolio companies was "very healthy", adding it had secure assets and strong cashflows, with its business plans "fully funded". "We are confident in the continued ability of our portfolio to deliver superior returns to shareholders," the Adani group stated.

Earlier in the day, Bloomberg reported that the group had halved its revenue growth target and planned to scale down capital spending. But a company spokesperson told Reuters the report was "baseless" and, "speculative".

The share price of group flagship Adani Enterprises fell as much as 10 per cent intraday, before recouping some of the losses and ending the session at Rs 1,717 -- down 7.03 per cent. The share prices of Adani Ports and Ambuja Cements declined 5 per cent and ACC 3 per cent. The rest of the group stocks fell 5 per cent and were locked in the lower circuit.

Hindenburg Research has accused the Adani group of indulging in stock price manipulation and fraud. Its report said seven key listed companies of the group had as much as 85 per cent downside purely on a fundamental basis owing to high valuations.

Hindenburg also alleged that key listed Adani companies had taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. The group has denied the allegations.

The market capitalisation of Adani stocks has declined by Rs 10.2 trillion since the report came out.

Last week rating firm Moody's downgraded the outlook of some Adani firms. And index provider MSCI said it would reduce the weighting of four Adani firms. MSCI's changes will come into effect by the end of February and are expected to increase the selling pressure. The rout in the group stocks forced the group to withdraw the Rs 20,000-crore follow-on offer of Adani Enterprises despite the issue of getting fully subscribed.

To allay investor concerns, Adani group promoters prepaid loans worth $ 1.1 billion ahead of their maturity in September next year and released the pledged shares in three companies -- Adani Green Energy, Adani Ports, and Adani Transmission.

The group's attempts to reduce debt helped the stocks to recoup some of their losses last week before MSCI's decision led to another bout of selling.

Market experts said volatility in Adani stocks is likely to continue until negative newsflows ebb or the embattled group gets a clean chit from the market regulator.

"Any incremental negative flow will affect the stocks. But most of it has been priced in. Some of the group stocks are reasonably valued after the correction, especially those of the ports and cement business. There can be some buying in these stocks going forward," said UR Bhat, co-founder of Alphaniti Fintech.

Deven Choksey, founder and promoter, KR Choksey Holdings, said the key thing to watch would be the market regulator's statement. The Securities and Exchange Board of India (Sebi), according to a Reuters report, has informed the Supreme Court that it was looking into the allegations made against the Adani group by Hindenburg Research.

"Sentiment is negative. And there is no statement coming from any corner, including the regulator that nothing is wrong with the company. This is an unprecedented situation where investor wealth is eroded," Choksey added.

Inputs from Reuters and Bloomberg