Hindenburg Effect: Four out of nine Adani group stocks hit lower circuits as sell-off continues

• Four out of nine Adani group stocks hit their respective lower circuits on Wednesday.
  
• The combined market capitalization of the nine Adani group companies fell below ₹10 lakh crore again today after recovering in the second half of Tuesday.
  
• Overall, the Adani group’s combined market capitalization has declined by ₹12.08 lakh crore since the Hindenburg report was released on January 24.
  

Adani group stocks continued to witness a sell-off on Wednesday. Four of the nine group companies saw their stocks hitting lower circuits in the first half of trade during the day.

As a result, the group’s combined market capitalization fell below the ₹10 lakh crore mark once again, after recovering marginally on Tuesday.

Adani group’s market capitalisation declined by ₹14,273 crore on Wednesday, taking the total decline to ₹12.08 lakh crore since the Hindenburg report was released on January 24, alleging stock manipulation and accounting fraud.

As a result, the Adani group’s current market capitalization stands at ₹9.87 lakh crore, which is just 45% of what it was on January 24.

Earlier today, the Supreme Court agreed to hear a fresh public interest litigation (PIL) in the Adani-Hindenburg row, with the hearing date set to February 17. The Apex court has started hearing another PIL filed on the issue, last week.

Adani Enterprises, the group’s flagship, reported a net profit of ₹820 crore in Q3, as compared to a loss of ₹12 crore a year ago. Its revenue and margins also witnessed an improvement – while revenue surged 42% YoY to ₹26,612 crore, its margin stood at 3.1%, improving on both YoY as well as sequential basis. This helped the stock hit a day high of 4.3% on Wednesday.

Last week, ratings agency Moody’s cut the outlook for four group companies, citing a rapid decline in the market value.

The rout in Adani group stocks has also resulted in Gautam Adani going from being third to the 24th richest person in the world on the Bloomberg Billionaires Index. His wealth stands at $51.5 billion now, down by $67.5 billion since January 24, when the Hindenburg report was published.


Source: NSE, as of 3:30 p.m., February 15, 2023

Among the nine group companies, Adani Total Gas has lost the most value at 72%, while cement maker ACC has been the most resilient, losing only 21% of its value since the Hindenburg report was released.

Moody’s cites rapid market cap decline in its outlook cut

Last week, the rating agency announced a change in its outlook on Adani group companies following the rout in the group’s stocks.

Moody’s downgraded its outlook to ‘negative’ from ‘stable’ for Adani Green Energy, Adani Green Energy Restricted group, and two subsidiaries of Adani Transmission.

“These rating actions follow the significant and rapid decline in the market equity values of the Adani group companies following the recent release of a report from a short-seller highlighting governance concerns in the group,” Moody's said in its note.

However, Moody’s retained its outlook for Adani Ports & SEZ, Adani International Container Terminal and two other companies.

RBI governor says Indian banks compliant with regulations on Adani group exposure

In a press conference following the Reserve Bank of India’s monetary policy meeting last Wednesday, RBI governor Shaktikanta Das said that Indian banks are in compliance with its regulations as far as exposure to the Adani group is concerned.

"The RBI has made its own assessments. The large exposure guidelines prescribed by the RBI are fully complied with by all the banks,” Das said.

"When banks lend money to a company or a group of companies, the banks do not lend on the basis of market capitalisation of that particular company," he added.

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