Following the founders of the company paying off some debt and speculators covering short positions, Adani Enterprises Ltd. soared, driving increases in the group’s stocks.
When compared to three of its competitors, the flagship’s shares increased by as much as 25% in early trading. By the end of the day, it came down to 15%. Since US-based Hindenburg Research published a study on Jan. 24 claiming market manipulation and accounting fraud—claims Adani has repeatedly denied—that has helped stem the decline in the group’s market valuation to $112 billion. As of Monday, the loss was $118 billion.
The relief came as Gautam Adani and his family paid off debt totaling $1.11 billion in an effort to stop a selloff that had generated concerns about a contagion across India’s markets and economy.
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According to Deven Choksey, managing director at KRChoksey Holdings in Mumbai, “The prepayment, short covering, and technical are all driving the recovery. Going forward, the group is likely to take more corrective actions.”
On Tuesday, Adani Ports & Special Economic Zone Ltd. announced third-quarter net income that fell short of average analyst expectations and stated it may repay loans totaling 50 billion rupees ($604 million).
Results are also expected to be announced on the same day by Adani Green Energy Ltd., Ambuja Cements Ltd., and New Delhi Television Ltd. After announcing a 78% increase in third-quarter profit on Monday, Adani Transmission Ltd. surged above its limit.
The allegations made by Hindenburg have brought long-standing worries about the Adani Group’s debt-fueled expansion to the fore, and opposition legislators have forced the adjournment of parliamentary sessions for three days in order to get answers.
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Following the comments, some of Adani’s dollar bonds entered the distressed category, prompting debt investors to have preliminary discussions with financial advisors and attorneys to consider their options. Nitin Chanduka, a strategist at Bloomberg Intelligence, stated that the rebound in Adani group shares “seems more of a tactical bounce from oversold levels” amid reports of loan prepayments.
