Indian billionaire Gautam Adani’s dream of climbing the global wealth rankings falters after a media article raising questions about some offshore investors sparked a rout in his conglomerate’s six listed stocks.
The 58-year-old mogul has lost more money this week than anyone else in the world, with his personal fortune falling from around $ 9 billion to $ 67.6 billion, according to the Bloomberg Billionaires Index based on closing prices Wednesday. Just days ago, he was closing the gap with Mukesh Ambani as Asia’s richest man. Shares of the Adani group continued to decline on Thursday.
The turnaround in stocks began on Monday after the Economic Times reported that India’s national stock custodian froze the accounts of three Mauritius-based funds due to insufficient owner information. The bulk of the holdings of the Albula Investment Fund, Cresta Fund and APMS Investment Fund – around $ 6 billion – are shares of Adani companies.
Although the Adani Group called the report “patently flawed” and said it was “made to deliberately mislead the investment community,” investors concerned about transparency rushed to the exit.
Mauritius offshore funds hold more than 90% of their assets under management in companies of the Adani group, according to Bloomberg Intelligence.
“There should be more clarity to ensure who the final owners of the shares are,” said Hemindra Hazari, independent research analyst in Mumbai.
Forbidden or not? Adani investors worried about three Mauritian funds
A spokesperson for the Adani group declined to comment beyond the exchange documents sent out this week. These foreign funds “have been investing in Adani Enterprises Ltd. for more than a decade,” the Adani Group said in a June 14 statement. “We urge all of our stakeholders not to be confused by market speculation. “
In identical exchange documents the same day, the Adani group companies said they had received written confirmation from the registrar and transfer agent that the offshore fund deposit accounts in which Adani shares were detained “are not frozen”.
Albula and APMS, in separate statements dated June 14, emailed through their management company IQ EQ Fund Services (Mauritius) Ltd. Thursday, said the funds were fully operational. “The point is that the relevant NSDL entry for APMS Investment Fund Ltd. only shows a technical ‘account level freeze’ that has absolutely NO connection to its normal REIT trading activities,” APMS said. The funds did not answer questions about why they held such concentrated positions in Adani stocks, nor did they share the names of their investors.
Shares of Adani Green Energy Ltd., the tycoon’s most valuable asset, fell 7.7% this week. Adani Ports & Special Economic Zone Ltd. plunged 23% in four days, Adani Power Ltd., Adani Total Gas Ltd. and Adani Transmission Ltd. fell at least 18%, while flagship Adani Enterprises fell almost 15%.
Excitement around the Adani Empire spanning ports, mines and power plants had built up over the past two years as the coal tycoon looks past the dirtiest fossil fuel for expansion, seeking to reconcile its business interests with the infrastructure priorities set by Prime Minister Narendra Modi.
Investors have pushed some of the group’s shares to more than 500% since the start of 2020, betting that the first-generation entrepreneur’s big push into sectors such as renewables, airports, data centers and defense contracts will pay off. Earlier this month, Adani’s wealth stood at nearly $ 80 billion.
MSCI Inc.’s decision to include more Adani shares in its Indian benchmark, despite poor analyst coverage, added to the tailwind. Three of Adani’s listed companies were included in May, bringing the group’s total to five. The inclusion has also led to more mandatory purchases by investors who follow the indices.
The rapid surge combined with stocks largely held by foreign funds with very little public float is a risk for Adani stocks, BI analysts wrote last week. The events of this week also shed light on the opacity surrounding the group and its main non-founding shareholders.
“I think the speculative cycle in Adani Group stocks has probably come to an end,” Travis Lundy, analyst at Smartkarma wrote in a note.
(Updates with comments from Albula, APMS fonds in ninth paragraph)
–With help from Jack Witzig, Abhishek Vishnoi, Nupur Acharya, PR Sanjai and Kamlesh Bhuckory.