Adani row rocks India’s parliament amid contagion fears

Both houses of India’s parliament have been adjourned in chaotic scenes as some MPs demand an inquiry following a meltdown of shares in billionaire Gautam Adani’s group companies amid fears of wider financial turmoil.

Shares in Adani companies recovered after sharp falls earlier in the day but the seven listed firms have still lost about half their market value – or more than $US100 billion ($A142 billion) combined – since United States short-seller Hindenburg Research last week accused the group of stock manipulation and unsustainable debt.

Adani Group, one of India’s top conglomerates, rejects the criticism and denies wrongdoing.

Credit ratings agency Moody’s warned on Friday the share plunge could hit the group’s ability to raise capital, although peer Fitch saw no immediate impact on its ratings.

“These adverse developments are likely to reduce the group’s ability to raise capital to fund committed capex or refinance maturing debt over the next one to two years,” Moody’s said.

Amid fears the turmoil could spill over into the broader financial system, some Indian politicians have called for a wider investigation into the matter and sources have told Reuters the central bank has asked lenders for details of exposure to the group.

The speakers of both houses of parliament adjourned proceedings on Friday as some MPs disrupted business by shouting slogans such as “we want a joint parliamentary committee (to investigate)” and “stop looting the poor”.

On Thursday, S&P Dow Jones Indices said it would drop the conglomerate’s flagship Adani Enterprises from widely used sustainability indexes on Tuesday, which would blunt their appeal to environment-conscious investors.

“Contagion concerns are widening but still limited to the banking sector,” Charu Chanana, a market strategist with Saxo Markets in Singapore, said.

“One of the big risk factors to watch for now is if more indices remove Adani stocks … This can result in foreign outflows as funds sell Adani stocks, further aggravating confidence issues,” Chanana said.

Adani Enterprises shares were trading about flat after earlier slumping 35 per cent to hit their lowest since March 2021. 

The stock’s new low took its losses to almost $US33.6 billion ($A47.6 billion) since last week, for a decline of 70 per cent.

Adani Ports and Special Economic Zone Ltd was up  five per cent, while Adani Transmission Ltd and Adani Green Energy Ltd were both down 10 per cent.

Adani Total Gas Ltd , a joint venture with France’s TotalEnergies SE, fell five per cent. 

In a statement, TotalEnergies said it had limited exposure to stakes in Adani companies and had not re-evaluated them.

For Gautam Adani, a former school drop-out from Gujarat, the western home state of Indian prime minister Narendra Modi, the crisis presents the biggest reputational and business challenge of his life.

The share meltdown is a dramatic turn of fortune for the 60-year-old, who in recent years forged partnerships with, and attracted investment from, foreign giants as he pursued global expansion in industries from ports to power.

In its report, Hindenburg said key listed Adani companies had “substantial debt” and shares in the seven listed firms had a downside of 85 per cent due to what it called sky-high valuations. 

It also alleged stock manipulation.

The Adani group said the allegation of stock manipulation had “no basis” and stemmed from ignorance of Indian law. 

It added that in the past decade, group companies have “consistently de-levered”.

The listed Adani firms now have a combined market value of $US108 billion ($A153 billion), versus $US218 billion ($A309 billion) before Hindenburg’s report.