For multi-billionaire Gautam Adani, Monday will be a critical day with his flagship company’s $2.5 billion share sale’s second day of bidding overshadowed by a $48 billion rout in his stocks which was sparked by a US short seller Hindenburg Research’s report.
Bloomberg reported that a plunge in dollar bonds of Adani Group companies quickened on Monday after a rebuttal by the Indian conglomerate failed to ease concerns following Hindenburg Research’s report.
Adani Group hit back at Hindenburg issuing a detailed response late on Sunday. It said the group complies with all local laws and had made necessary regulatory disclosures. It has called the report baseless and said it was considering taking action against Hindenburg.
Meanwhile, Indian shares are set to open higher on Monday tracking gains in global equities on hopes of the US Federal Reserve easing its aggressive monetary policy stance, erasing some of the losses over the previous two sessions due to a sell-off in Adani Group stocks.
Why Monday’s trade will be critical?
> The group faces a critical session on Monday with the secondary share sale of the flagship Adani Enterprises seeing only 1 per cent subscription on Friday.
> Seven listed companies belonging to the Adani conglomerate, which is led by Asia’s richest man, saw sharp falls in their values after Hindenburg Research report last week flagged concerns about high debt levels and the use of tax havens.
> Adani Group told Reuters that the sale remains on schedule at the planned issue price, even as sources said bankers on the country’s largest secondary share sale were considering extending the timeline beyond January 31, or tweaking the price due to the fall in its share price.
> The rupee is expected to open little changed to the dollar on Monday, with the focus on the Union budget and the fallout of the Adani Group episode.
> There has so far been limited impact on the rupee of the slump in Indian equities due to the report on Adani Group. Still, analysts said the Adani development poses a challenge for the rupee, with foreign outflows from Indian equities picking up in wake of Hindenburg Research’s report, Reuters reported.
> The secondary share sale by Adani Enterprises opened for retail and institutional investors on Friday, but saw only 1 per cent subscriptions as the company’s stock fell 11 per cent below the minimum offer price.
> “It is important for the Adani Group to ensure the share sale goes through – If they stick to the price and don’t reduce it, and the stock doesn’t bounce back, nobody will be keen to apply,” said Mumbai-based market analyst Ambareesh Baliga, told Reuters.
> Indian equities tumbled in the previous two sessions and closed at a three-month low on Friday, dragged by a short-seller attack on Adani Group companies, which triggered a sell-off in banks.
> Adani Ports & Special Economic Zone Ltd.’s 2027 note dropped 7.1 cents on the dollar to 72 cents as of 9:57 am in Hong Kong, hitting a fresh low following an 11 cent drop last week, Bloomberg-compiled data show.
> The selloff in Adani’s corporate empire had already erased more than $50 billion of market value as Asia’s richest man struggles to contain the fallout.
> The Adani Group published a 413-page rebuttal of allegations of fraud by Hindenburg on Sunday, but the attempt to assuage investors as the group’s flagship company seeks to complete a share sale is failing to stem concerns.
> Hindenburg Research said on Sunday Adani Group’s response to its report “largely confirmed” the short-seller’s findings. Hindenburg continues to short Adani Group through its US-traded bonds and non-Indian-traded derivative instruments.
(With inputs from Reuter, Bloomberg)