More than 2 months since Hindenburg hit Adani: A look at the performance of Adani Group’s stocks

By: Yash Gupte

The Adani group had termed all the allegations as baseless and said that the accusations are a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.

A report released by the Hindenburg Research, a New York based investment research firm with a focus on activist short selling founded by Nathan Anderson in 2017 shook the whole nation as it accused Asia’s then richest man Mr. Gautam Adani of several financial irregularities. It had accused Indian conglomerate Adani Group of a brazen stock manipulation and accounting fraud scheme. It cited two years of research, including talks and meetings with former Adani senior executive and reviews of thousands of documents. Hindenburg Research is a forensic financial research company that examines equity, credit, and derivatives. It was founded in 2017 by Nathan Anderson. It has a history of exposing corporate misconduct and betting against the corporations. Hindenburg revealed that it has short holdings in Adani companies through derivatives traded outside of India and U.S.-traded bonds. Together with the disclosure, a report was made public that alleged inappropriate use of tax havens and raised red flags regarding debt levels.

The Adani group had termed all the allegations as baseless and said that the accusations are a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts. But how did the Hindenburg report affected the Adani Group?

How did the report affect Adani Group?

The ripple effects of the Hindenburg report prompted Adani Enterprises to cancel a Rs. 20,000 crore Follow-on Public Offering (FPO). On February 1, 2023, Adani Enterprises stock saw a significant loss of 28.45 percent, ending at Rs. 2,128.70. After the occurrence, the Adani Group declared that it will cancel its Rs. 20,000 crore FPO and reimburse investors' money. They said that they took this action to protect the interests of investors. The wealth division of Citibank Inc. indicated that it would no longer accept bonds issued by the Adani Group as collateral for margin loans and increased its inspection of the company's financial standing.

One of the main investors in the Adani Group, LIC also claimed to have been in touch with the company to ask about the claims contained in the Hindenburg report. LIC was quoted as saying that as an investor, it has every right to inquire about the said fraud. The market value of seven listed Adani Group firms fell by roughly $10.73 billion on January 25, 2023 the day following the publication of the Hindenburg report. This shows that initially, the investors and partners of the Adani Group lost their confidence in the company and majority of them pulled their money back.

The effect on Stocks

The above paragraphs have already discussed about the effects of the Hindenburg report on the Adani Group. In this paragraph and through the following chart, India Tracker takes a look at the effect of the report on the price of shares before and after the release of the report. Adani's market losses have increased by nearly USD 100 billion as a result of the research. The listed Adani companies now have a total market value of USD 108 billion, down from USD 218 billion prior to Hindenburg's analysis, according to a Reuters article. According to Bloomberg News, senior executives told investors at a meeting in London that billionaire Gautam Adani and his family have paid off all borrowings secured by the shares of his conglomerate Adani Group. The company held the investor conference as a part of a global roadshow to reassure investors that the group's finances are under control.

Source: National Stock Exchange

One of the common trend visible among the performance of the Shares of the Adani Group is ‘recovery.’ The price of different shares of the conglomerate shows that the shares are on the recovering side. Talking about the ‘Adani Enterprises,’ the price per share on January 19 was Rs. 3,456. This was the price of the share before the release of Hindenburg report. The price of the share drastically dropped to Rs. 2,135 on January 27. It further dropped to Rs. 1,317 on February 26 before recovering to Rs. 1,940 on March 10. A similar trend was visible for ‘Adani Green Energy.’ The price of share of Adani Green Energy was Rs. 1,975 on January 19 and it drastically dropped to Rs. 1,115 on January 29, just a few days after the release of the report by Hindenburg. It further dropped to Rs. 802 on February 6 and to Rs. 486 on February 26 before making a small recovery on March 10. The price of share on March 10, 2023 stands at Rs. 682. The data clearly indicates that this share i.e. Adani Green Energy has been most severely hit by the Hindenburg report. Among the most stable ones, Adani Wilmar and Adani Power have topped the chart. Talking about Adani Wilmar, the price of share on January 19 was Rs. 554. The report didn’t have any significant impact on this particular share as it merely dropped to Rs. 516 on January 27. A similar trend was witnessed in the performance of ‘Adani Power.’

After stating that Adani Enterprises would leave the short-term ASM framework on March 8, the NSE added Adani Enterprises, Adani Power, and Adani Wilmar to the short-term additional surveillance mechanism (ASM) framework as of Thursday, March 9.

The short-term stock price of the corporation could still be impacted by the Hindenburg report and any pending legal actions. The Adani Group's stock price could rebound and perform well going forward, though, if it can successfully rebut the claims made in the report. Adani's long-term growth prospects and investment potential will be influenced by a variety of variables, such as its capacity to carry out its business plan, its financial performance, and the success of the stock market as a whole. In the future, a number of things could affect the share price of Adani. For instance, persistent political and economic unpredictability as well as market turbulence may cause future changes in the company's stock price. Adani, however, has demonstrated solid financial performance, a broad portfolio of companies, and development potential, which point to the possibility of continued success for the business. As a result, a lot of market analysts think Adani's stock price will increase going forward, providing investors with an exciting investment opportunity.