Adani scrambles to reassure creditors as market rout enters third week

New Delhi

Indian billionaire Gautam Adani is paying off some debt early as he struggles to reverse a slide in his embattled conglomerate’s shares that entered a third week on Monday.

In a statement on Monday, Adani Group said its promoters, or controlling shareholders, will repay the $1.11 billion in loans ahead of their scheduled maturity in September 2024. The loans were backed by stakes in Adani Ports, Adani Green Energy and Adani Transmission. , which have fallen in value.

The statement said the move was taken “in light of the recent market volatility” and “in continuation of the promoters’ assurance of prepayment of all share-backed financing.”

A brutal stock market slump has wiped more than $110 billion off the combined market value of firms belonging to India’s ports-powered conglomerate in recent weeks. The group’s founder, Adani, accused in a Jan. 24 report of pulling off “the biggest conspiracy in corporate history” after a US short-seller cost him more than $60 billion. .

While Adani Group has vehemently denied the allegation made by Hindenburg Research as “baseless” and “malicious”, investors are not convinced.

In its first statement on the market turmoil, India’s market regulator, the Securities and Exchange Board of India, said on Saturday that it had seen “abnormal price movements in the stocks of the business group”. It said that if any information comes to the notice of SEBI, it will be examined and “appropriate action” will be taken.

The regulator added that it is “committed to ensuring the integrity of the market.”

A day earlier, the Reserve Bank of India said the banking sector is “resilient and stable” based on its latest assessment and pledged to continue monitoring the situation.

It is feared that the sale results may not include Adani. Indian banks holding group assets may also be affected if the value of these holdings continues to decline.

Comments from regulators have done little to appease investors.

On Monday, the group’s flagship firm, Adani Enterprises, was down 2 percent in Mumbai. Its stock price has fallen nearly 55 percent since the Hindenburg report was published.

“I still think the company is overvalued, given its fundamentals and before any potential losses. [been] The company’s reputation and long-term value were damaged by this short-selling episode,” Aswath Damodaran, who teaches corporate finance and valuation at New York University, wrote in a blog over the weekend.

Trading in shares of five listed Adani firms was suspended. After Monday they fell below the daily limit set by Indian stock exchanges. The same five companies were also suspended on Friday for hitting these limits.

Meanwhile, shares of Adani Ports, India’s largest private port operator, rose 9 percent. The company operates Mundra Port, often referred to as the group’s “crown jewel” and is located in the western Indian state of Gujarat.

Most of the companies in the Adani empire are owned by the billionaire, his family and associated firms, and investors are looking for an ownership model.

“I liken buying shares in a family group company to getting married, and then getting all your in-laws into the bedroom with you,” Damodaran wrote. “These risks are magnified, if family group companies are built around political connections, where you remove your biggest competitive advantage from a political electoral disadvantage.”

The billionaire is seen as a close ally of Prime Minister Narendra Modi, and the saga surrounding his business empire has caused growing political turmoil in New Delhi.

Both men hail from Gujarat, and the businessman has expanded his empire into sectors whose development has been prioritized by the prime minister. Rivals have also questioned Modi’s use of Adani aircraft when he was campaigning to become prime minister in 2014.

Opposition lawmakers in India have demanded an inquiry into the Hindenburg Report. They protested in Parliament on Wednesday when the country’s finance minister presented the annual budget.

Since that day, both houses of Parliament have been repeatedly adjourned as lawmakers clamored for no debate on the riots.

“Yet for the third day in a row, the opposition has not been allowed to even mention its legitimate demand in Parliament,” opposition lawmaker Jairam Ramesh wrote in an inquiry into the Adani dispute. Twitter. Modi government is just running!

In its report, Hindenburg Research questioned the “skyrocketing valuations” of Adani firms and said their “substantial debt” had put the entire group “on a precarious financial footing”.

Analysts have long feared that the rapid expansion of Adani’s business has come with great risk. The group is fueled by $30 billion in debt, making it one of India’s most indebted companies.

Adani companies will report quarterly results this week. Investors will look to these reports for more clues about the group’s debt situation.

Ratings agencies warned investors last week of growing risks related to the company’s future fundraising.

Moody’s said on Friday that the drop in shares of Adani companies is likely to reduce the group’s ability to raise capital. Another agency, S&P, downgraded its rating outlook on two companies, Adani Ports and Adani Electricity, from stable to negative, citing the risk of higher funding costs or reduced access to capital.

— Kay Minwena Suri, and Julia Horowitz contributed reporting.

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