With the devastating impact of Hindenburg Research's report—including a $2.5 billion fundraising, future IPOs, and crucial infrastructure projects, Adani stands in a precarious position.
What is happening: Recently, the US short-seller Hindenburg Research published a report on the Adani group accusing the company of stock price manipulation as well as accounting fraud.
Two days after the publishing of the report the company stock price have fallen by over 70%.
Why it matters: India's largest operator of ports, airports and other clean energy projects, Adani enterprises is a name unfamiliar to very few.
The success of the group's share sale has a huge role in the fate of the group's new businesses and future fund raising plans.
Further, it matters because a 50% reduction in Adani companies’ weightage in one of the major indices being the MSCI India Index could result in passive funds pulling US$1.5 billion out of those stocks.
Backdrop: Adani is India’s largest operator of ports, airports, and clean-energy projects.
Investors in Adani Group, the ports-to-data-centers conglomerate owned by Indian billionaire Gautam Adani, have grown accustomed to huge gains since 2020 following which the Hindenburg put its position in a mess.
The big picture: Post the publication of the Hindenburg report, Adani Enterprises Ltd’s failure to pull off its ongoing Rs 20,000 crore share sale will impede its efforts to bankroll its new businesses, including roads, metals, and green hydrogen.
The numbers: Public-sector banks have enormous exposure to Adani companies, and state-owned Life Insurance Corporation of India Ltd’s (LIC’s) investments in Adani companies were worth Rs 72,270 crore as of 24 January.
As of March 2022, according to a recent report by global brokerage CLSA, banks had lent over Rs 81,000 crores to the top five Adani companies.
What else: Despite this, the group still has a few projects in its basket like the greenfield airport in Navi Mumbai.
Further, SBI has agreed to lend nearly Rs 12,800 crore for the project.
Read in short: Hindenburg report makes the Adani empire come crumbling down.