Hindenburg effect: Adani group’s m-cap below $100 billion; gas arm most affected

Adani group stocks fell again on Monday, with the cumulative market capitalisation of Gautam Adani-controlled listed entities slipping below $100 billion in intraday trade, eroding more than $135 billion in market value since the release of the Hindenberg report on January 24. The conglomerate, which surpassed the Tata group to become India's most valuable business house in terms of market value of its listed companies six months ago, has lost around $200 billion in m-cap from the peak of $290 billion in September 2022, when it had acquired ACC and Ambuja Cement.

Among the nine listed group entities, Adani Total Gas, which runs city gas distribution (CGD) networks, has been the most impacted, with its share price falling 76% in the last eighteen sessions, from ₹3,892 on January 24 to ₹925 today. The shares of Adani Total Gas Ltd (ATGL), a joint venture between Adani Group and France-based TotalEnergies, has been hitting lower circuit limits for the seventeenth straight sessions following allegations against Adani group by the U.S.-based Hindenburg Research. The stock fall continued even after French energy major TotalEnergies clarified that the investments in Adani’s entities were undertaken in full compliance with applicable Indian laws, and its own internal governance processes. TotalEnergies’ exposure to the crisis-ridden Adani group stands at $3.1 billion as of December 31, 2022, representing 2.4% of the company’s capital employed and only $180 million of net operating income in 2022.

On Monday, Adani group stocks extended fall, with most of the listed firms ending in red, barring Adani Power, ACC, and Adani Ports. The group's flagship company Adani Enterprises was the top laggard with a 5.9% fall, followed by Adani Green Energy and Adani Transmission, which hit their 5% lower limit on the BSE. Adani Total Gas shares were also locked in a 5% circuit limit for the twelve consecutive sessions. Since January 24, Adani Enterprises shares have fallen nearly 53%, while Adani Transmission and Adani Green Energy shed 69% each.

Bucking the trend, Adani Power ended at 5% upper circuit limit, ACC rose 0.6%, while Adani Ports & SEZ settled with marginal gain of 0.2% on the BSE.

The Hindenburg report on January 24 spooked investors’ sentiments and led to sharp volatility in the group companies' share prices, forcing the conglomerate to withdraw its ₹20,000-crore follow-on public offer (FPO) despite successful completion. In a bid to restore investors’ confidence, the promoters of Adani group companies announced they will prepay over $1.1 billion of loans to release some pledged shares in Adani Ports & Special Economic Zone, Adani Green Energy, and Adani Transmission.

Following the Hindenburg report, index provider Morgan Stanley Capital International (MSCI) cut the free float designations of four Gautam Adani-controlled securities - Adani Enterprises, Adani Total Gas, Adani Transmission, and ACC - while free floats of remaining companies have been kept unchanged. The move  will be effective from March 1. Besides, global ratings agency Moody's Investors Service changed the outlook on four issuers to 'negative' from 'stable', while it maintained the 'stable outlook' on the other four companies. According to Moody's, these ratings actions follow the significant and rapid decline in the market equity values of the Adani Group companies since the release of the adverse report.