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Gautam Adani loses over $7 billion after questions over rise in group stocks

EconomyGautam Adani loses over $7 billion after questions over rise in group stocks

Gautam Adani loses over $7 billion in net value after questions in a swift rise in group stocks with doubts of round-trip money or hoarding.

Accounts of three foreign funds with over ₹43,000 crores in Adani Group shares have been suspended.  SEBI, the market regulator is also reportedly investigating if the Adani Group companies’ share price has been manipulated.

An investigation is ongoing.  Notably, the market capitalization of the Adani Group companies has zoomed up over the last year, and the Gujarat, Ahmedabad-based group shot up from a medium-sized one to one of the richest family-based businesses in India, leaving behind Tatas, Birlas, Wadias among others.

Reportedly, shares of all the six listed Adani Group companies hit their respective lower circuits in the first hour of trading in the opening session on Monday morning (June 14). Adani Ports and Adani Transmission share prices were down by 15% each, while those of the other four companies were down by 5% each.

The descent in the share price of these groups has wiped out over $7.6 billion (approx. ₹55,000 crores) net worth of Gautam Adani, according to Forbes’ real-time billionaires’ list, as of 10:00 a.m., on Monday.

The crash was precipitated by reports that the National Securities Depository Limited (NSDL) suspended the accounts of three foreign funds ⁠— all reportedly based on the same address ⁠— that have over ₹43,000 crores invested in the Adani Group.

The three accounts in question are Cresta Fund, Albula Investment Fund, and APMS Investment Fund, all frozen on or before May 31.  According to a report, the three funds obtain more than 95% of their net worth from their investments in the Adani Group companies.

According to an Economic Times report, the suspension could be due to insufficient disclosures under the Prevention of Money Laundering Act (PMLA).

The stocks had time till 2020 to disclose details on common ownership and personal details of key employees, but they did not.  A report said, “Custodians typically warn their clients before such action but if the fund doesn’t respond or fails to comply, accounts can be frozen.”

The rules for Indian funds investing in the stock market do not allow managers to invest in any one stock or group beyond a certain limit. But the same rule does not apply to foreign portfolio investors.

There are two worries arising from this. One, the funds hoarding Adani group shares to reduce the number of the tradable shares in the market enabling the value of the shares to inflate. Secondly, this could be a case as in the context of black money, leaving the country through various channels to make its way back into the country often as foreign investment, to become black money allegedly often used for stock price manipulation whereby Indian investors may be investing via another country, to skirt the rules.  These have yet to be proven.

In total, the six Adani Group companies had a market cap of ₹1.64 lakh crore at the end of May last year. This has now surged to over ₹8.5 lakh crore – an increase of over 420%.
Presently, Gautam Adani lost over $7 billion in net worth after inquiries over the sudden rise in group stocks.

On an update, Adani Ports and Logistics, part of the Adani Group, has issued the following statement.
“We regret to mention that these reports are blatantly erroneous and is done to deliberately mislead the investing community. This is causing irreparable loss of economic value to the investors at large and the reputation of the group.
Given the seriousness of the article and its consequential adverse impact on minority investors, we requested Registrar and Transfer Agent, with respect to the status of the Demat Account of the aforesaid funds and have their written confirmation vide its email dated 14th June, 2021, clarifying that the Demat Account in which the aforesaid funds hold the shares of the Company are not frozen.”

Gautam Shantilal Adani (born 24 June 1962) is an Indian billionaire industrialist and philanthropist who is the chairman and founder of the Adani Group — an Ahmedabad-based multinational conglomerate involved in port development and operations in India. He is the president of the Adani Foundation, which is primarily led by his wife, Priti Adani.

He founded the Adani Group in 1988 expanded his business into logistics, resources, energy, agriculture, defence and aerospace, amongst others. According to Forbes, his family’s net worth is estimated to be around US$78.6 billion as of 9 June 2021. He is the second richest man in Asia and 13th richest man in the world according to Forbes.

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