By Abdullah Shah
Adani Group stocks were hit hard by the Hindenburg report, whose explosive allegations made headlines on January 25. The report said that the Adani Group had engaged in stock manipulation, insider trading via companies based out of Mauritius, and accounting fraud. In reaction to the report, Adani Group stocks lost more than half their value over just 30 days.
The controversy pushed Group Chairman Gautam Adani several ranks down in the Bloomberg Billionaires list, where he had overtaken Amazon’s Jeff Bezos and Microsoft’s Bill Gates in December 2022 with a $120 billion+ fortune.
Four months later, Adani stocks are on the road to recovery, with two stocks (Adani Ports and Adani Power) just 6% lower than their pre-Hindenburg levels. But other group stocks still have a lot of lost ground to cover.
In this edition of the Chart of the Week, we take a look at the conglomerate’s journey since the report’s release. Adani Enterprises, the conglomerate's premier stock, has recovered 79.1% in the past three months, while Adani Wilmar, the newest addition to the group, has seen a gain of approximately 29% over the same period. However, these two stocks are still 28% and 15% below their Pre-Hindenburg levels, respectively.
The Hindenburg report's release on January 25 caused Adani Group stocks to lose Rs 12 lakh crore in market cap. On January 31, the Group launched a follow-on public offer (FPO), which was fully subscribed with the help of qualified institutional buyers (QIBs). However, in the late hours of the day, Adani called off the FPO, causing the stock to plunge 28% on February 1.
Pressure on the conglomerate increased further as Credit Suisse’s private bank ceased margin loans on Adani Group bonds on February 2, causing the stock to fall by 26%. The decline in stock prices continued until February 14 when the Q3FY23 results of Adani Enterprises were declared. The positive results provided some Valentine’s Day relief, and the stocks began to recover.
But on February 16, Adani Enterprises froze the capex on new road projects, causing the stocks to fall 4.1% in the next session. On the same day, in an attempt to restore confidence, Adani Enterprises unpledged 1.4% of its shares and clarified rumours about Grant Thornton being their independent auditor. However, the stocks continued declines due to allegations of the Adani Group’s PR team trying to manipulate Wikipedia articles.
Following the fall in stock prices, reports emerged that Adani was planning to repay share-backed loans worth $690-790 million on February 28. On the same day, 8 of 10 Adani stocks in the market rose, with Adani Enterprises gaining nearly 9%.
GQG partners, a US-based asset management firm, engaged in talks to invest $1.87 billion into the conglomerate on March 13. This news provided a two-week relief rally and led to a gain of approximately 40-45% across all Adani stocks.
Later, on March 29, the group repaid $2.15 billion in margin-linked share-backed loans, and another $200 million loan related to Holcim's Indian stake. These repayments contributed to the rise in stock prices for various subsidiaries. Moreover, on May 13, Adani’s board of directors approved another round of fundraising worth Rs 12,500 crore through Qualified Institutional Placements (QIPs).
On May 19, the Supreme Court panel said that it could not find price manipulation in Adani group stocks (although the panel noted that it could not follow the money trail of the Mauritius companies identified in the Hindenburg report, and the investment bankers that it invited for testimony turned the panel down). This news resulted in a gain of 3.5-7% across all Adani stocks.
However, on the same Sunday, the MSCI announced the removal of two of the group's stocks, namely Adani Transmission and Adani Total Gas, from its index. This news did not have a significant impact on the stocks as GQG Partners was in talks with the group to increase their stake in the conglomerate by 10%, amounting to $3.5 billion.
GQG Partners also plans to inject an additional $1 billion into the group, as they have already received returns of Rs 10,000 crore from their holdings in Adani stocks in less than three months.
Adani stocks have witnessed a QoQ reduction in promoter-pledged shares over the past quarter, with the highest decline observed in Adani Ports at 12.65 percentage points. Adani Transmission followed with a reduction of 2.87 percentage points, and Adani Enterprises decreased by 2.02 percentage points.
Though Adani Group stocks have been on the rise over the past three months, major stocks still need to recover significantly to reach their pre-Hindenburg levels.