Adani share update: What’s behind the fall?

Adani share update: What’s behind the fall?

Last updated: 18 Jun, 2021 | 04:08 pm

Adani share update: What’s behind the fall?

Adani Group stocks including Adani Power, Adani Gas, Adani Ports and Adani Green ended the week up to 24% lower, after media reports said that NSDL has frozen accounts of certain FPI investors who have a stake in the Adani Group companies. Here’s a timeline of events which serve as a recap of all that transpired in Adani Group stocks in the week:

The timeline

  • On 14th June Monday, news reports said that accounts of three Mauritius-based funds which are among the top foreign investors in Adani group companies, had been frozen by the National Securities Depository Ltd (NSDL).  These three groups Albula Investment Fund, Cresta Fund, and APMS Investment Fund together hold Rs 43,500 crore in Adani Group Companies
  • Following the reports, all Adani Group shares hit the lower circuit - Adani Ports, Adani Enterprises, Adani Green, Adani Power and Adani Gas.
  • However, the stock recovered some ground after Adani Enterprises released a strong statement, rejecting media reports about action against the foreign funds. The Adani Group companies have strongly rejected the report stating that the news was 'blatantly erroneous and is done to deliberately mislead the investing community'
  • NSDL also came out with a statement the next day, clarifying that no new action has been taken against the Mauritius-based investors and that the accounts remain active. 

Why are the shares falling despite clarifications?

Despite the clarifications, media reports have highlighted a few irregularities:

  • The three foreign funds - Albula Investment Fund, Cresta Fund and APMS Investment Fund - are all registered at the same address, according to the Mauritius financial regulator.
  • The funds cumulatively control 2.7% of all shares in the Adani Group companies as on June 11, according to a Reuters report citing calculations based on an email sent by an Adani executive to NSDL.
  • Two other Mauritius-based funds that are also investors in Adani companies - LTS Investment Fund and Asia Investment Corp - have the same registered address
  • The agency said that it was unable to find a website for all five funds, and calls to the phone numbers provided to Mauritius regulators remained unanswered.
  • The five funds have deployed 94.4%-97.9% of their total capital in Adani companies' shares. 
  • Four of the six Adani stocks have a public shareholding of just about 25%. This is the bare minimum level mandated by SEBI for companies listed on Indian exchanges.

INDmoney Analysis

  • Some of Adani group’s listed stocks have gained nearly 700% since the beginning of 2020. MSCI’s decision to include three more Adani stocks to its India benchmark index, also came as a great booster for the group shares. 

  • Given such a massive rally in the shares, a correction on such negative news was imminent. The names of these Mauritius-based companies are little known and the extremely concentrated position in Adani companies is leading to concerns among investors in the market. 
  • The holding pattern of Adani Group shares shows that promoters have a large holding along with FPIs. The shares have very limited free-float. This is a concern from a corporate governance perspective, as interest of minority shareholders can be compromised.
  • Given that a lot of questions still remain unanswered, the stock market investors will await for more clarifications from the Adani Group. Adani Enterprise and Adani Ports recovered on Friday, to end the week on a positive note. 
  • Given the possibility of further clarifications and recovery, we advise you against any panic selling in these Adani Group shares. However, a fresh entry in these shares should still be avoided. Existing investors can hold on to their investment.