Adani Stock Prices Plunge 50% in 7 Days: Hindenburg Short Report
In the past 10 days, since Hindenburg Research made a short report accusing Adani Group of stock manipulation and financial fraud, the ports-to-power conglomerate has gone through remarkable changes. Here are the ten most relevant updates regarding stock prices.
1.How it started
On January 24, Hindenburg Research, a short-seller based in New York City, released a report accusing the Adani Group of firms of financial fraud and stock manipulation over many years.
2. Highlights short reports
The report, conducted by Nathan Anderson, claimed that the key-listed companies of the Adani Group were facing “significant debt”, leading to a potential downfall in their stock prices.
3. Adani Group response
In its 413 page answer, the Adani Group maintained that the research was an intentional fraud aimed at damaging India’s economic story and stock prices.
4. Hindenburg’s curt response
The US short seller accused Adani Group of fraud and stated the Group’s response did not address the main arguments in their short report. Hindenburg voiced that Adani has been utilizing a nationalist narrative and challenged them to legally defend their position in the US if they have substantial evidence to prove their innocence.
5. FPO cancellation
Adani Enterprises had announced a Follow-On Public Offering (FPO) of Rs 20,000 crore (USD 2.5 billion). However, after the release of the Hindenburg report which uncovered fraud, the business suspended the FPO a day later. Gautam Adani, Chairman of Adani Enterprises, stated that this decision was due to the day’s fluctuating stock prices.
6. Market crash
The stocks of Adani Group drastically dropped in value after a fraud was exposed in a short report. Over the seven exchange trading sessions until February 3, the companies of the Adani Group lost Rs 9 lakh crore in market capitalization. On February 3, the market valuation of the group fell to Rs 10 lakh crore, a decrease from Rs 19.2 lakh crore on January 24, when Hindenburg Research released its analysis.
The RBI has requested banks to publicly share their Adani Group exposure, which was revealed to be 0.88 percent of the book, or Rs 27,000 crore, by SBI- India’s largest bank. PNB and BOB reported Rs 7,000 crore and Rs 4,000 crore of exposure respectively. This comes as stock prices are falling and a fraud investigation is taking place.
8. LIC’s risk
By December 31, 2022, LIC had Rs 35,917.31 crore invested in the Adani group, which was done steadily. The debt instruments of LIC in Adani have good credit ratings as per the investment standards of IRDA, making them reliable and free from any fraud or stock price risks.
S&P Global Ratings confirmed the rating, but unexpectedly downgraded Adani Ports and Adani Electricity from stable to negative on Friday. This caused a decrease in stock prices due to potential fraud.
10. Government response
Finance Minister Nirmala Sitharaman said LIC and SBI have not been over-invested in Adani Group shares and investors’ trust will last. She added that India is well-regulated and has a highly controlled financial industry. The Reserve Bank of India further reported that the banking sector is secure and steady, guarding against any potential fraud or drops in stock prices.
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