Dubai: Shares of Adani Group entities predictably crashed after the US court announcement – but India’s general index Sensex seems to have weathered the worst of it so far. The index dropped 477 points by 12:30pm, as investors were trying to come to terms with what the US decision would mean for Adani entities.
All eyes are on the official statement the Adani Group is expected to put out as its reaction to the US court move, which said that the Indian conglomerate had paid hundreds of millions of dollars as bribe to land deals from the Indian government.
The Sensex closed 422 points lower to 77,155.79, which given the magnitude of the charges against Adani and investor reaction directed at listed Group stocks comes across as a moderate drop.
Statement from Adani Group
The Adani Group issued a statement: "The allegations made by the US Department of Justice and US Securities and Exchange Commission against directors of Adani Green are baseless and denied.
"As stated by the US Department of Justice itself, "the charges in the indictment are allegations and the defendants are presumed innocent unless and until proven guilty". All possible legal recourses will be sought."
A renewable energy entity, Adani Green's other major shareholder is TotalEnergies.
There are 11 Adani entities listed on the leading Indian exchanges, with a combined market cap of nearly Rs14.25 trillion. Today's crash wiped out Rs2.25 trillion as of now.
Did Adani statement cool down market?
After the Group announced its response to the US court verdict, stocks like Adani Power, ACC and Ambuja Cement are off their day's lows - but 'key stocks continue to remain painfully down anywhere from 9% to 20%'.
The New York court’s jurisdictional reach over an Indian company comes from Adani entities having tapped debt funds from the US.
How foreign institutional funds with exposures to Adani Group companies will be decisive in the coming days. Investors are hopeful that a further headlong divestment can still be averted, if the group responds forcefully to the bribery charges.
Adani withdraws debt fund plans
“The Group has withdrawn their proposed 20-year debt fund raise of $600 million after this action by the US courts,” said an analyst in Dubai. “While the markets have reacted negatively to the news, it is widely expected the Adani Group to refute the US charges and file an appropriate appeal."
Hindenburg report - $150b wipeout
This is the second time in as many years that the Group and its listed businesses have come under intense pressure. There was the Hindenburg report alleging that Adani entities had used tax havens and had high debt levels. This led to a $150 billion wipe out in Adani group’s market cap of its listed companies. It had over the recent past been making a recovery from those levels when the latest turn of events happened.
"When Hindenburg happened, there was a section that defended the Adani Group by sayng this was more a campaign targetted at India," said a trader. "This time, with the US court having its say, this is being taken seriously by all stakeholders, be it funds, HNIs (high networth investors), etc."
"In fact, Indian stocks fared quite well during Hindenburg phase. The decline and price damage was limited to the Adani stocks while the broader markets stayed resilient. Even banking, public or private, did not react in panic either."
FIIs cut India exposure
Milan Vaishnav is an India-based technical analyst and he reckons if this Adani crisis drags on, this would have a bearing on the wider stock market universe in the country.
“Indian equities had been largely on a downtrend given the sustained FII (foreign institutional investor) selling after Trump’s election,” said Vaishnav. “The key indices , Nifty and Sensex have been down just over 4% since the November 5 election date.
“Adani Enterprises isn’t the only one dragging the Sensex down. The decline is much broader and top losers include SBI, Indusind Bank, NTPC, ITC, Reliance, etc.”
Will Indian banks feel the pain?
India’s banks are feeling the heat from all the events that transpired around the Adani stocks. The ones with exposure to the Group - SBI, PNB and Bank of Baroda - are trading with cuts.
