Why Are Adani Shares Falling?

In 2023, the Adani Group has faced significant challenges and controversies, leading to a decline in their stocks and investor dissatisfaction. These issues stemmed from allegations of misgovernance and corporate fraud made by Hindenburg Research, a U.S. based short-seller group. The Adani Group’s stocks reached their lowest point in nearly five months and have since been fluctuating.

As the Group works to regain stability, it has been formulating plans to raise funds. However, the stock market has not yet responded positively to these developments, as evidenced by a 2.5 percent drop in Adani Enterprises’ stocks when the news of two of the Group’s companies seeking capital was announced.

Despite the ongoing challenges, the Adani Group continues to navigate the situation and work towards addressing the concerns raised. The year 2023 has been marked by turbulence and uncertainties for the group, and its efforts to rebuild investor confidence and stabilize its stocks are ongoing.

Adani Plans to Raise Once Again

On May 13, two companies of the Adani Group, namely Adani Enterprises Ltd and Adani Transmission Ltd, announced their plans to raise capital through qualified institutional placements (QIPs). Adani Enterprises aims to raise INR 12,500 crore, while Adani Transmission aims to raise INR 8,500 crore. The companies have not yet disclosed whether they will issue shares or bonds for this purpose.

In addition to these announcements, there have been reports suggesting that Adani Green Energy is also considering raising funds. However, no official confirmation has been provided regarding this matter.

This planned fundraise marks the Adani Group’s first attempt to raise money since the controversy surrounding the cancelled follow-on offer (FPO) following the Hindenburg Report.

These fundraising efforts indicate the Adani Group’s ongoing efforts to secure capital and rebuild investor confidence after the previous setbacks.

What is the status of the investigation of Adani’s companies?

Following the emergence of the Adani controversy, India’s Finance Minister, Nirmala Sitharaman, made it clear that the government maintains a distance from corporate affairs and that the Adani issue would be handled by the market regulator.

As a result, a probe into the Adani Group’s companies has been initiated by the Securities and Exchange Board of India (SEBI), which serves as the market regulator in India. Additionally, the Supreme Court of India has been examining the affidavits pertaining to the Adani Group.

The exact status and progress of these investigations and examinations are not provided in the information available. However, it indicates that regulatory bodies and the judicial system in India are actively involved in assessing the allegations and concerns related to the Adani Group.

Mauritius Government Gives Clean Chit to Adani

Earlier this month, Mahen Kumar Seeruttun, the Financial Services Minister of Mauritius, addressed the Mauritius Parliament and dismissed the allegations made by Hindenburg Research against the Adani Group. He stated that the accusations were baseless and false. The minister emphasized that Mauritius complies with all the regulations set forth by the Organisation for Economic Co-operation and Development (OECD).

In response to questions from other parliamentarians, Seeruttun clarified that it is not possible for any country to establish shell accounts in Mauritius. He explained that in order to establish a company in Mauritius, the entity must have a main account that provides the government with access to all transactions associated with the company. These companies cannot be considered shell companies as they are required to engage in income-generating activities in Mauritius, and two principal board directors must permanently reside there.

The statement from Mauritius’ Financial Services Minister defends the country’s regulatory framework and counters the allegations made against the Adani Group, asserting that the necessary measures are in place to prevent the establishment of shell companies in Mauritius.

What the Indian Supreme Court Has Said About the Adani Case?

The statement made by the Mauritius’ Minister provides significant relief to the Adani Group, and it is expected to be presented as evidence in the Supreme Court of India. In March, the Supreme Court directed the Securities and Exchange Board of India (SEBI) to conduct an investigation into the allegations raised by Hindenburg Research.

The involvement of the Supreme Court in ordering the SEBI investigation indicates the seriousness with which the allegations against the Adani Group are being treated. The court’s decision demonstrates its commitment to ensuring a thorough examination of the matter and seeking clarity on the issues raised by Hindenburg Research.

As the legal proceedings continue, the statement by the Mauritius’ Minister may have a positive impact on the Adani Group’s case in the Supreme Court, potentially providing support to counter the allegations made against them. However, the specific actions or rulings of the Supreme Court in response to this statement are not provided in the information available.

SEBI’s Stance on Investigation of Adani’s Companies

Previously, the Supreme Court of India had directed the Securities and Exchange Board of India (SEBI) to conduct an investigation into the Adani Group’s companies and submit a report within a two-month timeframe. However, SEBI has requested additional time to gather and present further details related to the investigation. They have stated that two months is insufficient, and they may need at least six months to complete their investigation.

In response to SEBI’s request, the apex court has granted a three-month extension, rather than the requested six months. This extension allows SEBI more time to carry out their investigation and provide a comprehensive report to the court.

The decision to grant a three-month extension reflects the court’s understanding of the complexities involved in conducting a thorough investigation and the need to ensure a fair and comprehensive examination of the allegations against the Adani Group. The outcome of SEBI’s investigation and the subsequent report will likely have a significant impact on the ongoing legal proceedings and the overall assessment of the Adani controversy.

Adani Group Companies’ Performance at the Stock Market

Here is an overview of the stock performance of major Adani Group companies following the publication of the Hindenburg report on January 24, 2023:

Name of the Company	Stock Price Came Down to After the Hindenburg Report (INR)	Current Stock Price (INR)
Adani Enterprises	1,017.45	1,910.00
Adani Green Energy	439.10	869.00
Adani Ports & SEZ	395.10	693.00
Adani Power	132.4	235.65
Adani Total Gas	650	777.45
Adani Transmission	631.5	840.60
Adani Wilmar	327.25	386.55
ACC	1,592.35	1,804.95

The Adani Group released its Q4 results and here’s how the quarter-on-quarter profit after taxes looked like:

Name of the Company	Profit (PAT) Q4 2022-23	Profit (PAT) Q3 2022-23
Adani Enterprises	440.88	269.71
Adani Green Energy	-240	-127
Adani Ports & SEZ	11.4	-298.18
Adani Power	4,850.88	-109.9
Adani Total Gas	104.25	148.39
Adani Transmission	99.1	32.21
Adani Wilmar	97.7	277.07
ACC	236.57	110.45

Bottom Line

As the investigations by the Supreme Court and SEBI continue, the fluctuating stock prices indicate that the Adani Group has not fully regained the confidence of investors. The market still exhibits a lack of strong confidence in the group’s stocks, and the future direction of prices remains uncertain.

Given this situation, investors are advised to exercise caution and make informed decisions by conducting thorough research and consulting market experts. Monitoring the progress of the investigations and staying updated with reliable information can help investors navigate the Adani Group’s stocks in a more informed manner.

FAQs

Why are Adani shares falling?

The shares of Adani Group companies are experiencing a decline due to various factors such as negative market sentiment, regulatory concerns, weak financial performance, global economic factors, and investor reactions.

Are regulatory concerns contributing to the fall in Adani shares?

Ongoing investigations and legal proceedings by regulatory bodies, such as SEBI, can create uncertainty and negatively impact investor confidence, leading to a decline in Adani shares.

How does market sentiment affect Adani shares?

Market sentiment plays a significant role in influencing stock prices. If there is negative sentiment surrounding the Adani Group or the broader market, it can lead to a sell-off and a decline in share prices.

Could weak financial performance be a reason for the fall in Adani shares?

Yes, weak financial results, missed expectations, or concerns about the profitability and growth prospects of the Adani Group companies can contribute to a decline in share prices.

Are global economic factors affecting Adani shares?

Yes, as Adani Group operates in various sectors, global economic factors such as geopolitical tensions, trade disputes, or changes in commodity prices can impact investor sentiment and subsequently lead to a decline in share prices.

Could investor reactions be influencing the fall in Adani shares?

Yes, market participants, including institutional investors or large shareholders, may be adjusting their positions or taking profit, which can trigger a downward movement in share prices.