The Adani Group has sought to reassure investors by saying it has strong cash flows and its business plans are fully funded, as an Indian regulator confirmed it was investigating a critical report by a short-seller that has battered the group's stocks.
Led by billionaire businessman Gautam Adani, the group's seven listed stocks have together lost about $120 billion in market value since a January 24 report by US short-seller Hindenburg Research accused it of improper use of offshore tax havens and stock manipulation, allegations it has denied.
The turmoil continued on Monday, with shares in the listed companies extending their losses.
Seeking to calm investors, the conglomerate said the balance sheet of each of its independent portfolio companies was “very healthy”, adding it had secure assets and strong cash flows, with its business plans “fully funded”.
“We are confident in the continued ability of our portfolio to deliver superior returns to shareholders,” the Adani Group said on Monday.
Bloomberg News reported on Monday that the group had halved its revenue growth target and planned to scale down capital spending. A company representative told Reuters the report was “baseless, speculative”, without elaborating.
The Adani crisis has sparked worries of financial contagion in India, protests in parliament where politicians have demanded an investigation, ratings outlook downgrades of some Adani units and cast a shadow on the group's capital-raising plans. Mr Adani has also lost his crown as Asia's richest person.
The group said “once the current market stabilises, each entity will review its own capital market strategy”.
The Securities and Exchange Board of India (Sebi) has been probing the market rout, including examining trade patterns and any potential irregularities in the $2.5 billion secondary sale of shares in flagship company Adani Enterprises that the group was forced to cancel due to the stock's plunge.
The regulator confirmed the existence of the investigation for the first time in a Supreme Court filing.
“Sebi is already inquiring into both the allegations made in the Hindenburg report, as well as the market activity immediately preceding and post the publication of the report,” the regulator said in the filing, adding that the matter was in early stages of examination.
During a court hearing on Monday where the Supreme Court heard public interest petitions that raise concerns about steep investor losses, India’s solicitor general Tushar Mehta, arguing on behalf of the government and Sebi, said there was no objection if a panel was set up to examine protection mechanisms for investors.
The judges told him to come back with the remit of such a panel, and scheduled a further hearing for Friday.
Sebi is set to brief federal finance ministry officials on February 15 on its investigation into the shelved share sale, two sources said on Monday. Sebi and the Finance Ministry did not respond immediately to requests for comment.
Last week, Moody's downgraded the ratings outlook for some Adani companies while index provider MSCI said it would cut the weightings of some in its stock indexes.
On Monday, all stocks within the Adani group were under pressure. Adani Enterprises fell 7 per cent while Adani Total Gas, Adani Power and Adani Transmission lost 5 per cent each.
Adani Total, a joint venture with France's TotalEnergies, has lost 70 per cent since the Hindenburg report, while Adani Enterprises is down 50 per cent.
Since the Hindenburg report's release, Adani Group has prepaid some of its $25 billion debt and pledged to independently review the short-seller's claims, but the retreat by its securities has continued.
“The effects of management's attempts to reassure investors will take at least three to six months to start reflecting in share prices. Price damage has been significant,” said Avinash Gorakshakar, head of research at Profitmart Securities.
In recent days, concerns have also arisen about the exposure of Indian and foreign lenders to the Adani Group. In its rebuttal of Hindenburg's allegations, the conglomerate had pointed to its international banking relationships as a sign of its strength.
Singapore's DBS Group said on Monday it had a S$1.3 billion ($976 million) exposure to Adani group companies, out of which S$1 billion was to finance its cement business.
DBS said it was not concerned about its exposure to the group.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
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Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
More on animal trafficking
Company%20profile
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Mohammed bin Zayed Majlis
'Cheb%20Khaled'
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Disability on screen
Empire — neuromuscular disease myasthenia gravis; bipolar disorder; post-traumatic stress disorder (PTSD)
Rosewood and Transparent — heart issues
24: Legacy — PTSD;
Superstore and NCIS: New Orleans — wheelchair-bound
Taken and This Is Us — cancer
Trial & Error — cognitive disorder prosopagnosia (facial blindness and dyslexia)
Grey’s Anatomy — prosthetic leg
Scorpion — obsessive compulsive disorder and anxiety
Switched at Birth — deafness
One Mississippi, Wentworth and Transparent — double mastectomy
Dragons — double amputee
Race card:
6.30pm: Baniyas (PA) Group 2 Dh195,000 1,400m.
7.05pm: Maiden (TB) Dh165,000 1,400m.
7.40pm: Handicap (TB) Dh190,000 1,200m.
8.15pm: Maiden (TB) Dh165,000 1,200m.
8.50pm: Rated Conditions (TB) Dh240,000 1,600m.
9.20pm: Handicap (TB) Dh165,000 1,400m.
10pm: Handicap (TB) Dh175,000 2,000m.
Warlight,
Michael Ondaatje, Knopf
