Why Adani group shares crashed

The story: In June, suddenly the shares of companies controlled by Indian billionaire Gautam Adani recorded their biggest weekly losses ever. The six

Why Adani group shares crashed

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• The story: In June, suddenly the shares of companies controlled by Indian billionaire Gautam Adani recorded their biggest weekly losses ever. The six stocks cumulatively lost nearly 2 trillion Indian rupees ($26.98 billion) of value in four days. It started when the Economic Times reported that the accounts of three Mauritius-based funds, among the top foreign investors in Adani group companies, were frozen by the National Securities Depository Ltd (NSDL).
• Details: The NSDL website showed accounts held by the three funds frozen as of May 31, among thousands of others, without citing a reason. The Adani Group firms, in identical statements issued to stock exchanges, rejected the media reports as "blatantly erroneous." The companies are in the businesses of operating airports and ports, power generation and transmission, coal and gas trading. Despite clarifications, the shares of the Adani companies continued to fall.
• Which funds: The three foreign funds - Albula Investment Fund, Cresta Fund and APMS Investment Fund - are registered at the same address, according to the Mauritius financial regulator. They cumulatively control 2.7% of all shares in the Adani Group companies as on June 11. Two other Mauritius-based funds that are also investors in Adani companies - LTS Investment Fund and Asia Investment Corp - are also registered at the same address.

1. The five funds deployed 94.4%-97.9% of their total capital in Adani companies' shares, data by analysts showed
2. Four of the six Adani stocks have a public shareholding of about 25% - the minimum level mandated by regulators for companies listed on Indian exchanges
3. Indian stock exchange data shows most shares of Adani Group companies are held by trusts controlled by Adani. Foreign portfolio investors are the next largest shareholders, while retail and domestic investors typically control about 5%.

• Market cap drops: The decline saw the firms' cumulative market capitalisation decline by over a sixth. It clearly showed that the market wasn't convinced by the clarifications issue by the Adani group.
• History: Excitement around the Adani empire spanning ports, mines and power plants had been building up over the past couple of years as the coal magnate looked beyond the dirtiest fossil fuel for expansion, seeking to change his group priorities in line with PM Modi's priorities. Investors had sent some of the group’s stocks soaring more than 500% since the start of 2020, betting on the big push into sectors such as renewable energy, airports, data centers and defense contracting.  Adding to the push was MSCI Inc.’s decision to include more Adani stocks to its India benchmark index despite scant analyst coverage. Three of Adani’s listed companies were included in May 2021, taking the group’s total to five.
• Summary: More and transparent public shareholding may be the road ahead for Adani group.

 

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