Sundar Sethuraman
All 10 stocks of Adani Group fell on Tuesday after media reports triggered fresh concerns about the embattled conglomerate’s debt levels.
Shares of Adani Enterprises, the group’s flagship company, fell the most with 7.1 per cent to close at Rs 1,602 apiece, followed by Adani Ports & SEZ, which declined 5.7 per cent to end the day at Rs 594 per share. Six other group companies finished at their 5 per cent lower trading limit while shares of ACC and Ambuja Cements fell by 4.2 per cent and 2.9 per cent, respectively.
As a result, the combined market capitalization (m-cap) of the group firms declined by over Rs 50,000 crore.
“Despite the Adani Group’s claim of “complete” repayment of $2.15 billion in share-backed debt, regulatory filings show that banks have not released a significant portion of the promoters’ shares held as collateral, indicating that the debt has not been fully paid off,” said a report by website The Ken.
“The exchange has sought clarification from Adani Enterprises with respect to a recent news item captioned ‘The Adani Group wants you to believe it has repaid all its loans against promoters’. The response from the company is awaited, the NSE said.
Following the report, the group’s m-cap had plummeted by over Rs 12 trillion ($150 billion). To assuage investor concerns the Adani promoters took a series of measures — which included sale of over Rs 15,000 crore worth of shares in four group firms to firm GQG Partners. The US-based investment firm’s backing saw Adani Group stocks rebound sharply from their lows. Still, the 10 group stocks are down between 22 per cent and 77 per cent since the Hindenburg report came out on January 24.
“Even now, the valuations are on the expensive side. They are facing difficulties in raising growth capital. Whatever money they have raised by selling stakes is a stop-gap arrangement which has helped them to pay off debt and assuage concerns to some extent. But none of this money is going for growth. Releasing pledged shares becomes complicated when your stocks are falling. To justify their high P/E, they have to show that growth is happening,” said Ambareesh Baliga, an independent equity analyst.
Baliga added that unless valuations moderate, the group stocks will be susceptible to volatility induced by negative news flows.