Adani Group's meltdown: Lenders, stock exchanges put conglomerate on notice
What's the story
Gautam Adani's business empire is in the midst of a meltdown, the scale of which no one could have predicted.
Once a favorite of investors, both domestic and global, the conglomerate's stocks are now being looked at with suspicious eyes.
Adani Group is under intense scrutiny from different sides. Investors, financial institutions, regulators, and stock exchanges have become wary of the group's fall.
Context
Why does this story matter?
A report by US-based short seller Hindenburg Research accusing Adani Group of stock manipulation and accounting fraud has caused mayhem in the conglomerate's once impenetrable fortress.
The hasty withdrawal of Adani Enterprises' FPO only added more fuel to the fire surrounding the conglomerate.
Investor confidence is at an all-time low, and the company's assurances about its financial health have fallen on deaf ears.
Dow Jones
Dow Jones Indices has removed Adani Enterprises from Sustainability Index
Adani Group's struggles haven't gone unnoticed by stock exchanges. S&P Dow Jones has decided to remove Adani Enterprises, the flagship company of Adani Group, from its Sustainability Index.
"Adani Enterprises will be removed from Dow Jones Sustainability Indices," said S&P Dow Jones Indices in a note.
The decision was reached after a media and stakeholder analysis triggered by allegations against the conglomerate.
Information
What is Dow Jones Sustainability Index?
The Dow Jones Sustainability World Index comprises the world's top companies identified by S&P Global through corporate sustainability assessment (CSA). It includes 10% of the largest companies in the S&P Global BMI based on "long-term economic, environmental and social criteria."
BSE & NSE
BSE and NSE have placed Adani Enterprises under surveillance
It is not just Dow Jones that has taken action against Adani Group. Indian stock exchanges BSE and NSE have also taken note of the rout the conglomerate's companies are undergoing in the market.
The stock exchanges have placed Adani Enterprises, Adani Ports and Special Economic Zone, and Ambuja Cements under short-term additional surveillance measure (ASM) framework.
ASM
Placing stocks under ASM is based on market surveillance: Exchanges
Companies are placed under ASM to prevent speculative trading and short-selling. It is part of an initiative by SEBI and exchanges to enhance market integrity and protect investor interests.
The parameters for moving a stock under ASM include high-low variation, client concentration, number of price band hits, close-to-close price variation, and price-earning ratio.
The decision is purely based on market surveillance, said the exchanges.
Twitter Post
TMC MP calls for reevaluating index membership of Adani stocks
S&P Dow Jones removes Adani Enterprises from Dow Jones indices due to charges of stock manipulation & accounting fraud.
— Mahua Moitra (@MahuaMoitra) February 3, 2023
Why is @NSEIndia not reevaluating index membership of Adani stocks when international ones are? pic.twitter.com/nnL3WK1esM
Backers
Various financial institutions are trying to reduce their exposure
Adani Group's backers around the world are trying to gauge their exposure to the conglomerate led by Gautam Adani, Asia's former richest man.
Financial institutions that have backed the conglomerate, including Citigroup, Credit Suisse, and Barclays, are looking at ways to reduce their exposure to the group.
Back home, RBI is also looking into Indian banks' exposure to the Adani Group.
Collateral
Global lenders have stopped accepting Adani securities as collateral
Global lenders such as the wealth arm of Citigroup and Credit Suisse AG have stopped accepting Adani Group securities as collateral for margin loans.
The conglomerate recently topped up collateral on a $1 billion loan to maintain the collateral cover. It added around $300 million worth of shares as collateral for a loan granted by a group of banks, including Barclays Plc.
Market cap
Market capitalization of Adani Group companies is down $110bn
Adani Group stocks have been witnessing a bloodbath on Dalal Street. In six trading sessions since the Hindenburg report was published, the market capitalization of the listed companies of the conglomerate has eroded by $110 billion (Rs. 8.79 lakh crore).
On Thursday, following the withdrawal of the Rs. 20,000 core FPO (follow-up public offer), Adani Enterprises' stocks fell 26.70%.
Current status
Adani Group stocks are trading in red even today
Adani Group stocks continue their downward trajectory in today's intra-day trading. At the time of publishing, Adani Enterprises was down 15%.
The stocks of Adani Green Energy and Adani Transmission have declined by 10%. Adani Ports is down by 6.60%, while Adani Total Gas, Adani Power, and Adani Wilmar have gone down by 5%.
Ambuja Cements and ACC are also trading in the red.