Adani groups’ rating was cut to negative by S&P, out of Dow Jones Sustainability Indices too amid allegations of fraud.

The allegations of fraud made against the Adani Group owned by billionaire Gautam Adani by a US research firm, Hindenburg, has turned the whole country into a chaos – starting from allegations to the stock rout deepening – the company’s stocks in the market have lost substantial traction in the last few days. 

The situation involving Indian tycoon Gautam Adani got worse today as the value of his indebted enterprise lost over $100 billion as a result of its abrupt cancellation of a stock offering.

The billionaire’s corporation lost more than a third of its value as a result of claims of accounting fraud made by US short-seller Hindenburg Research.

Most of the Adani Group firms’ shares fell once more. As the chaos surrounding one of the largest industrial enterprises in the country grew worse, the Indian parliament was adjourned amidst turbulent scenes.

The company has been in turmoil ever since Hindenburg Research accused Gautam Adani’s ports-to-power company of fraud and stock market manipulation in January. The research has been denounced by The Adani Group as being “baseless” and “malicious.” It claims the firmness of the company’s foundation. Analysts contend that the company has not convincingly addressed the report’s questions.

After all the fraud allegations, problems for Adani didn’t stop there.

S&P Dow Jones to Adani Group

The renowned sustainability indices of S&P Dow Jones Indices will no longer contain Adani Enterprises, the parent firm of the Adani Group, as of February 7, according to a statement. Adani Enterprises (XBOM: 512599) was informed that the company would no longer be included in the Dow Jones Sustainability Indices due to allegations of stock manipulation and accounting fraud.

The key stock exchanges BSE and NSE now include Adani Enterprises, Adani Ports and Special Economic Zone, and Ambuja Cements in its short-term other surveillance measures (ASM) framework.

In yet another setback for the Adani Group, S&P Global Ratings announced that it had changed the rating outlook for Adani Electricity Mumbai and Adani Ports from “stable” to “negative,” citing worries about rising capital costs and dwindling funding options.

After Hindenburg Research produced a study with multiple unfavorable remarks, this is the first rating action by a worldwide rating agency.

The decision was made under examination by the media and other stakeholders, according to a statement issued by S&P Dow Jones Indices. Due to suspicions of share rigging and corruption, Dy Jones announced that Adani Enterprises would be dropped from the index.

Other disappointments for the Adani Group

The ten listed Adani Group companies collectively saw depreciation during the last six trading days totaling more than Rs 8.76 lakh crore.

Adani Enterprises decided to cancel its Rs 20,000 crore Follow-on Public Offer (FPO) and refund the money to investors. After US-based Hindenburg Research published a study detailing a large range of allegations, including Unlawful Operations and share price manipulation, the stock value of the Gautam Adani-led company was reduced on the exchanges.

The Adani Group has refuted the accusations and asserted that it complies with all legal and disclosure requirements.

Following a stock drop by the daily limitations of 5% and 10%, the Indian stock exchanges stopped trading in five additional listed Adani companies. Included in them were the businesses TotalEnergies (TTFNF) of France has invested in: Adani Total Gas and Adani Green Energy.

The French energy juggernaut said in a statement on Friday that its $3 billion exposure to Adani was “minimal,” and it welcomed Adani’s plan to select one of the Big Four international accounting firms to carry out a “general assessment.” The Adani Group refused to respond.

Adani trying to overcome the situation

Adani Group Chairman Gautam Adani is reportedly in talks with lenders to prepay and release pledged shares to regain confidence in the stability of his conglomerate’s finances.

Adani, the founder of Adani Enterprises, suffers a surprising withdrawal of the share sale a week after a damaging research study by US-based short-seller Hindenburg Research, which is a major setback.

The markets, the political system, and the business sector were all surprised by the share sale cancellation. As Adani’s stock price dropped and opposition MPs called for an expanded investigation, the Reserve Bank of India (RBI) moved swiftly to look into banks’ exposure to the company.

In the meanwhile, the wealth business of Citigroup stopped providing customers with margin loans backed by securities of the Adani Group.

Shares of Adani Enterprises Ltd., the group’s main company, returned in the green after falling 35% and hitting a new 52-week low of Rs. 1,017.10 in early trade. Additionally, three other Adani group companies—Adani Ports and Special Economic Zone Ltd, Ambuja Cement Ltd, and ACC Ltd—overcame an early setback to finish the week in the black.

Seven of the ten Adani Group companies saw a reduction in circuits. Following a 35% decline to a new 52-week low of Rs1,017.10, Adani Enterprises bounced back and ended the day 1.25% higher at Rs1,584.20 on the BSE. The 30-share Sensex rose by 1.52% to 60,841.88 points at the end of the week. From its 52-week high of Rs4,189.55, set on December 20, 2022, Adani Enterprises has decreased by almost 62%.

Gautam Adani asserts in a regulatory filing “Since the market has been unusually volatile, our stock price has fluctuated all day. Due to these particular circumstances, the company’s board opted against pursuing the issue further since it would not be morally appropriate. Since the interests of the investors are of paramount importance and to safeguard them from any potential financial harm, the board has decided not to move forward with the FPO.”

The RHP that Adani Enterprises submitted to RoC in Gujarat has also been determined to be withdrawn. In a regulatory filing, the company states that it “decided not to proceed with the offer and withdraw the RHP on account of the prevailing market conditions, as a result of which there has been extreme volatility in the stock price of the company, other commercial and strategic considerations, and to protect the interest of the investors.”

Additionally, the business opted to end its contracts with the FPO’s book-running lead managers. “We also want to let you know that, in compliance with current law, the business will immediately return to the bidders all application bid amounts or subscription fees paid for the offer. The corporation shall pay the required interest to the bidders in the offer at the rate stipulated under applicable law if reimbursements are delayed for a longer period than that allowed by applicable law.”

edited and proofread by nikita sharma