Adani loses $13 billion in four days in worst wealth rout

The U-turn in shares started Monday after the Economic Times reported that India’s national share depository froze the accounts of three Mauritius-based funds because of insufficient information on the owners. The bulk of the holdings of Albula Investment Fund, Cresta Fund and APMS Investment Fund — about $6 billion — are shares of Adani’s firms.

Although the Adani group called the report “blatantly erroneous” and said it was “done to deliberately mislead the investing community,” investors concerned over transparency rushed for the exit.

The Mauritius offshore funds hold more than 90% of their assets under management in Adani group companies, according to Bloomberg Intelligence.

“There should be greater clarity to ensure who the final owners of the shares are,” said Hemindra Hazari, an independent research analyst in Mumbai.

A spokesperson for the Adani Group declined to comment beyond the exchange filings sent this week. These overseas funds “have been investors in Adani Enterprises Ltd. for more than a decade,” Adani Group said in a June 14 statement. “We urge all our stakeholders not to be perturbed by market speculations.”

In identical exchange filings the same day, Adani group companies said that they had written confirmation from the Registrar and Transfer Agent that the offshore funds’ demat accounts in which Adani shares were held “are not frozen.”

Albula and APMS, in separate statements dated June 14 emailed via their management company IQ EQ Fund Services (Mauritius) Ltd. on Thursday, said the funds are fully operational. “Fact is that the relevant NSDL entry for APMS Investment Fund Ltd. shows a technical ‘account level freeze’ only that has absolutely NO relevance to its normal FPI trading activities,” APMS said. The funds didn’t answer questions about why they hold such concentrated positions in Adani stock, nor did they share names of their investors.

Shares of Adani Green Energy Ltd., the mogul’s most valuable asset, slipped almost 13% this week in Mumbai. Adani Ports & Special Economic Zone Ltd. tumbled 17%, Adani Power Ltd., Adani Total Gas Ltd. and Adani Transmission Ltd. plunged at least 22% this week, while flagship Adani Enterprises fell about 7%. Adani Ports and Adani Enterprises closed higher on Friday, paring some of the week’s losses.

Excitement around the Adani empire spanning ports, mines and power plants had been building up over the past couple of years as the coal magnate looks beyond the dirtiest fossil fuel for expansion, seeking to dovetail his business interests with infrastructure priorities set by Prime Minister Narendra Modi.

Big push

Investors had sent some of the group’s stocks soaring more than 500% since the start of 2020, betting the first-generation entrepreneur’s big push into sectors such as renewable energy, airports, data centers and defense contracting will pay off. Earlier this month, Adani’s wealth was close to $80 billion.

Adding to the tailwind was MSCI Inc.’s decision to include more Adani stocks to its India benchmark index despite scant analyst coverage. Three of Adani’s listed companies were included in May, taking the group’s total to five. The inclusion also led to more mandated buying by investors that track the indexes.

The quick surge combined with equity largely held by overseas funds with very little public float is a risk for Adani shares, BI analysts wrote last week. This week’s events have also brought the opacity around the group and its key non-founder shareholders into focus.

“I expect the speculative cycle in Adani Group company shares has probably reached its term,” Travis Lundy, an analyst at Smartkarma wrote in a note.

(By Alex Sazonov, with assistance from Jack Witzig, Abhishek Vishnoi, Nupur Acharya, P R Sanjai and Kamlesh Bhuckory)