Adani row rocks India's parliament following share meltdown

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Both houses of India’s parliament were adjourned on Friday amid chaotic scenes as some lawmakers demanded an inquiry following the meltdown of shares in billionaire Gautam Adani’s group companies, which some fear could spark wider financial turmoil.

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Shares in Adani companies recovered after sharp falls earlier in the day, but the seven listed firms have still lost about half their market value - or more than $100 billion combined - since US short-seller Hindenburg Research last week accused the group of stock manipulation and unsustainable debt.

Adani Group, one of India's top conglomerates, rejects the criticism and denies wrongdoing.

Credit ratings agency Moody's warned on Friday the share plunge could hit the group's ability to raise capital, although peer Fitch saw no immediate impact on its ratings.

“These adverse developments are likely to reduce the group’s ability to raise capital to fund committed capex or refinance maturing debt over the next 1-2 years,” Moody’s said.

Amid fears the turmoil could spill over into the broader financial system, some Indian politicians have called for a wider investigation into the matter, and sources have told Reuters the central bank has asked lenders for details of exposure to the group.

The speakers of both houses of parliament adjourned proceedings on Friday as some lawmakers disrupted business by shouting slogans such as: “We want a joint parliamentary committee (to investigate)” and “Stop looting the poor!”

On Thursday, S&P Dow Jones Indices said it would drop the conglomerate’s flagship Adani Enterprises from widely used sustainability indexes on February 7, which would blunt their appeal for environment-conscious investors.

“Contagion concerns are widening, but still limited to the banking sector,” said Charu Chanana, a market strategist with Saxo Markets in Singapore.

“One of the big risk factors to watch for now is if more indices remove Adani stocks ... This can result in foreign outflows as funds sell Adani stocks, further aggravating confidence issues,” Chanana said.

Foreign investors, many already underweight on India as they consider its stock market overpriced, are reducing exposure.

Adani Enterprises shares were trading around flat, after earlier slumping 35 percent to hit their lowest since March 2021. The stock’s new low took its losses to nearly $33.6 billion since last week, for a decline of 70 percent.

Adani Ports and Special Economic Zone Ltd was up 5 percent, while Adani Transmission Ltd and Adani Green Energy Ltd were both down 10 percent.

Adani Total Gas Ltd , a joint venture with France’s TotalEnergies SE, fell 5 percent. In a statement, TotalEnergies said it had limited exposure to stakes in Adani companies and had not re-evaluated them.

Biggest challenge

For Gautam Adani, a former school drop-out from Gujarat, the western home state of Indian prime minister Narendra Modi, the crisis presents the biggest reputational and business challenge of his life.

The share meltdown is a dramatic turn of fortune for the 60-year-old, who in recent years forged partnerships with, and attracted investment from, foreign giants as he pursued global expansion in industries from ports to power.
In its report, Hindenburg said key listed Adani companies had “substantial debt” and shares in the seven listed firms had a downside of 85 percent due to what it called sky-high valuations. It also alleged stock manipulation.

The Adani group said the allegation of stock manipulation had “no basis” and stemmed from ignorance of Indian law. It added that over the past decade, group companies have “consistently de-levered.”

The listed Adani firms now have a combined market value of $108 billion, versus $218 billion before Hindenburg’s report.

The plunge has forced Adani to cede the crown of Asia’s richest person to Indian rival Mukesh Ambani of Reliance Industries Ltd, as he has slid to 17th in Forbes’ ranking of the world's wealthiest people. He had been third, after Elon Musk and Bernard Arnault.

The prices of US dollar bonds issued by group members edged higher on Friday after diving the previous day.

Adani Green’s bonds maturing in September 2024 gained about 7 cents to 69.69 cents, off Thursday's record low of 60.56 cents.

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