Seven listed companies of the Adani Group suffered a bloodbath this week after American short-seller Hindenburg Research said that it held short positions in the Indian group through US-traded bonds and non-Indian-traded derivative instruments.
Its research report accused the conglomerate of participating in brazen stock manipulation and accounting fraud schemes over decades. Following the news, the shares of Adani group companies were mired in bear markets.
Adani Transmission (down 20.00%), Adani Total Gas (down 20.00%), Adani Enterprises (down 18.31%), Ambuja Cements (down 16.67%), Adani Ports and Special Economic Zone (down 15.24%), ACC (down 12.27%), New Delhi Television (down 5.00%), Adani Power (down 5.00) and Adani Wilmar (down 5.00%) were deep in the red, as losses intensified on Friday.
While the group is fending off the attack from the short seller, it is important to know that banks will get affected if they are exposed to the Adani Group’s loans, and Hindenburg’s claim turns out to be true.
Brokerage houses CLSA and Jefferies said that Indian banks’ exposure to the Adani Group is within manageable limits. Jefferies in a note on January 26, 2023, said that while they are watching for developments, they do not see material risk arising to the Indian Banking sector.
According to the brokerage, the Adani group’s debt accounts for 0.5% of the total loans across the Indian banking sector. The debt is at 0.7% of the total loans for PSU Banks, while it is at 0.3% for private banks.
“Our recent conversation with industry participants also indicated that cash-flows and repayment timelines of debt have been conservatively planned,” Jefferies said.
CLSA estimates the consolidated debt of the companies at 2.1 trillion rupees ($25.73 billion) or at 1.9 trillion rupees, excluding intra-group lending. It said that Indian banks have exposure to less than 40% of the group’s debt.
“Within this, private banks’ exposure is below 10% of total group debt and most banks have indicated that they have largely financed assets with strong cash flows, such as airports/ports,” said CLSA.
PSU banks have material exposure at 30% of the group debt, however, this level has not increased in the past three years. Most of the funding to the group for new businesses and acquisitions has come via overseas sources.
Jatin Jalundhwala, Group Head – Legal, Adani Group, said that they are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research.
Meanwhile, the Congress on January 27 demanded SEBI’s investigation into Hindenberg Research’s report on the Adani Group of companies.
Written by Simran Bafna
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