"Hindenburg report reduces market value of Adani companies by Rs 7 lakh crore"

Business

"Hindenburg report reduces market value of Adani companies by Rs 7 lakh crore"

23-Nov-2024 778

The investor wealth of $82.91 billon wiped out in Adani companies since Hindenburg report

Investors have suffered a huge loss of Rs 7,00,000 crore ($ 82.9 billion) in ten Adani group companies after the US based short seller Hindenburg Research came out with a report alleging the group of “brazen stock manipulation and accounting fraud scheme over the course of decades” in January 2023 and culminating in the US court indictment of Rs 2,000 crore bribery charge to secure energy contracts earlier this week.

According to exchange data, the market capitalisation, or total market value, of ten listed companies plunged from Rs 19.24 lakh crore ($ 227.78 billion) on January 23, 2023 – a day before the Hindenburg report came out to Rs 12.24 lakh crore ($ 144.87 billion) on November 21 when the US court filings on bribery charges surfaced. On November 21, investors wealth plummeted by 2.22 lakh crore as investors dumped Adani stocks, leading to a loss of up to 23 per cent in these stocks, following the development in the US court.

Adani stocks were battered for over a month leading to a fall of $140.1 billion to $80.67 billion in market capitalisation of Adani companies by February 27, 2023. However, it recovered gradually even as GQG invested over Rs 15,000 crore in Adani companies and the total investor wealth rose to a high of $ 229.87 billion (Rs 19.42 lakh crore) by June 3, 2024. However, a fresh set of allegations was raised by Hindenburg involving Sebi Chairperson Madhabi Puri Buch led to a decline in share prices.

Quoting “whistleblower documents”, Hindenburg alleged on Saturday that Sebi chief Madhabi Puri Buch and her husband, Dhaval Buch, had stakes in offshore funds used in the alleged Adani money siphoning scandal. The Buchs denied the allegation and Sebi said that it has adequate internal mechanisms for addressing issues relating to conflict of interest, including a disclosure framework and provisions for recusal.

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Market capitalisation of Adani companies declined to Rs 14.49 lakh crore by November 19, 2024 amid the general weakness in the market that led to an 8,800-point fall in the benchmark Sensex since September 27 this year. “The rise and fall in Adani shares over various issues has created uncertainty about investing in these stocks. High volatility in stocks is not a good sign for retail investors and funds,” said a market participant.

While mutual funds, insurance companies have exposure to several Adani group companies, financial institutions led by LIC are significant shareholders in Adani companies. While retail holding is below 10 per cent except for Adani Wilmar, retail investors hold 2.78 per cent stake in Adani Enterprises, the flag ship of the group. They also hold 9.2 per cent in ACC, 5.46 per cent in Adani Total, 4.8 per cent in Adani Power and 4.6 per cent in Ambuja Cement.

Experts say that since the group has been very volatile over the last two years and several adverse reports have led to sharp decline in share prices of the group companies, investors should look for exposure in more stable entities. When considering investing in Adani group companies, market participants recommend retail investors to focus on those businesses that are stable and are generating good cash flows. (Agency)