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.