Explainer: Mystery behind slump in Adani Group shares in India

Chennai: Shares in companies controlled by Indian billionaire Gautam Adani recorded their biggest weekly losses ever. The six stocks lost a cumulative 1.91 billion Indian rupee ($ 25.83 billion) value over five days to Friday. The Indian newspaper Economic Times reported on Monday that the accounts of three funds in Mauritius, which are among the leading foreign investors in Adani group companies, have been frozen by the National Securities Depository Ltd (NSDL). According to a review by Reuters, the NSDL website kept among thousands of other accounts held by the three funds frozen on May 31st. The exact date of the freezing point is unknown and according to the website, the accounts remained frozen on Friday.

Denials, contradictions

In identical statements issued to stock exchanges, the Adani Group companies rejected media reports, including in the Economic Times, as ‘blatantly erroneous’. According to the companies that operate airports and ports, power generation and transmission, coal and gas trading, the accounts in which Adani shares are owned are not frozen. NSDL and SEBI’s security regulator SEBI did not respond to requests for comment from Reuters. But a senior NSDL official, who did not want to be identified, told Reuters on Monday that the funds had multiple accounts and that the Adani shares were being held in other accounts that were not frozen, adding that the freeze was not new. ‘was not. However, the shares of the Adani companies continued to fall.

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The funds

The three foreign funds – Albula Investment Fund, Cresta Fund and APMS Investment Fund – are registered at the same address, according to the Mauritius financial regulator. The funds had cumulative control of 2.7% of all shares in the Adani Group companies on June 11, according to calculations based on an email sent by Adani’s manager to NSDL and reviewed by Reuters. Two other Mauritius funds that are also investors in Adani companies – LTS Investment Fund and Asia Investment Corp – are also registered at the same address. Reuters could not find a website for all five funds, and calls to the phone numbers provided to Mauritius regulators went unanswered. The five funds deployed 94.4% -97.9% of their total capital in shares of Adani companies, the Indian equities research firm Trendlines showed. Reuters was unable to independently verify Trendline data. Four of the six Adani shares have a public shareholding of around 25% – the minimum level required by regulators for companies listed on Indian stock exchanges. According to the Indian Stock Exchange, most shares of Adani Group companies are held by trusts controlled by Adani. Foreign portfolio investors are the second largest shareholders, while small and domestic investors usually control around 5%.

The impact

After shares in the Adani Group fell 0.4-8.5% on Monday, the day of the Economic Times report, it fell by 7.1% -22.6% during the week compared to the close of last Friday, which wiped out nearly 22% of profits in the year preceding this week. . The decline reduced the cumulative market capitalization of the enterprises by more than a sixth. The flagship Adani Enterprises rose 8.76% on Friday and Adani Ports rose 7.33%, but the four other Adani shares closed 5% lower each. Jimeet Modi, founder of Samco Securities in Mumbai, said the rise in the two shares was due to the fact that some investors bought the shares after the sharp drop in prices this week, but added that the shares “are still in a bear market is “. “I do not think the market is convinced of the quality of the Adani group’s clarification,” Modi told Reuters.