Adani Group’s long road ahead for recovery

India-based Adani Group has suffered a $150bn erosion in market value since the involvement of US watchdog Hindenburg Research last month, in alleged stock manipulation, financial irregularities and misuse of offshore tax havens. The conglomerate regained investor interest following a fresh injection of foreign investment from GQG Partners, an American investment group, and investor roadshows, albeit analysts warn it faces a long journey ahead to regain trust from the investor community. Despite shares in Adani Enterprises and Adani Ports rebounding, shedding 43% and 20% respectively, after the Hindenburg allegations release alone, Kotak Institutional Equities and Stoxbox believe that it is premature to conclude reversal of fortunes for the group.

Investor reassurances

Adani Group confirmed meetings with port and power investors in Singapore and Hong Kong last week, as well as planning to meet investors in Dubai, London and America between 7 and 15 March. While stockbroking platform, Stoxbox, welcomes this move as a step towards alleviating investor concerns towards the group and presenting its side of the story to the investment community, others remain sceptical, as the reassurances reportedly focus on the group’s cash flow and assets, rather than addressing governance, disclosures or funds in Mauritius. The roadshow will help to present these outlined measures to investors: promoter-level deleveraging, refinancing plans, business viability, creditworthiness of the group, planned capital expenditure, debt structure and other measures.

Reinstating Trust

The Supreme Court of India set up a panel on 22 February to investigate Hindenburg Research’s allegations against Adani Group, however, whether its report will reinstate investor sentiment in the group is debatable, although Niranjan Shastri, associate professor of finance at NMIMS University in Indore, believes that “transparency will prevail”. Meanwhile, Indian authorities are taking steps in response to the situation. India’s markets regulator, the Securities Exchange Board of India (SEBI) is to investigate claims of stock manipulation and report with its findings within two months. Adani said on Twitter that he welcomes the Supreme Court move and believes the “truth will prevail”. Notably, the allegations have raised questions about India’s businesses practices and government policy, with Adani being closely associated with Indian Prime Minister Narendra Modi.