Adani-Hindenburg Saga – how things have unfolded further

date 10  February,  2023
time 2 mins read

Indian markets have been under extreme volatility in the recent past thanks to the Adani Fiasco which has left the market participants under some worries as the allegations made by the Hindenburg research report alleged about the stock manipulation and accounting frauds in the Adani Group. “Even if you ignore our findings and investigations and analyze the financials of Adani Group at face value, its seven key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations,” the report said.

The said report has created havoc in the overall market sentiment, especially in the Adani group followed by the overall big bang banking sector which had witnessed deep cuts. The start of the year 2023 hasn’t been well for Asia’s richest man, who lost his crown just in a matter of few days. In December’22, Mr. Gautam Adani was on the third spot in Forbes Richest List, with a Net worth of $125 Billion.

It was on 25th January when a dramatic turnaround took place when US-based Short Seller “ Hindenburg Research published a report on Adani Group alleging stock manipulation and accounting fraud. The report was published just 2 days before Adani Enterprises, The flagship company of Adani Group’s 20,000cr FPO.

Adani Group in a statement issued on January 29th on the allegations made by Hindenburg Research called the accusations a “calculated attack” on India and its Institutions and growth story and stated that 68 out of 88 questions raised were already addressed in its Annual Report.

The response by the company wasn’t adequate enough to calm the investor fears and what followed later was a total rout. Adani Group lost over $100 Billion in its Market Capitalization just in a matter of few days. Here’s a series of events that followed:

The company could manage to sail through the 20,000 cr FPO getting fully subscribed on the last day with the help of HNI and Institutional Investors. The price band for the FPO was ₹3112 to ₹3276 per share. But the problems of the company didn’t end there. The next day on reports Credit Suisse stopped accepting the group’s bonds as collateral for margin loans and had assigned zero lending value to the bonds. Adani group stocks led by Adani Ent crashed 35% after the report. Adani Ent script on that day closed at 2128.70/share, down 28.45% against the FPO Floor price of 3112. This forced the company to call off its FPO and return the money to the investors.

In the latest developments, MSCI has decided to review the free float of some of the Adani securities and also review the eligibility of the Adani companies for some of its indices. Changes for Adani Securities in MSCI GIMI for the month of February are due to be announced today after the market close.

Adani group to regain investor confidence has already prepaid a $1.1 billion loan borrowed on shares and has plans to repay a further $500 Million loan due next month. The Adani group shares rallied up to 30% from the recent lows after this news. With all the aforesaid developments, now the market participants will keep each small and big development in their mind as it may impact the group’s prospects and the market direction in the near term. Apart from this, we expect the market to stabilize further till no negative news comes with respect to the Adani group on the other hand other sectors are looking strong and any major corrections will be good opportunities to accumulate for the long term perspective.