Shares in Gautam Adani's flagship Adani Enterprises (NSE:ADANIENT) enjoyed an afternoon to remember on Wednesday, after so many days the company would like to forget. A late rally took their advance to the 20% one-day trade limit in India, technically closing with a 23.1% gain.
Still, the impact crater from short seller Hindenburg Research's salvo continues to widen, with opposition politicians calling for an investigation into the Adani Group's ties to the administration of Prime Minister Narendra Modi. Protestors from opposition parties have this week engaged in pieces of political performance art, burning effigies of Gautam Adani and Modi, and throwing fake money in the streets.
There are signs of share-price stability this week, and Wednesday has seen general gains across the Adani Group. Attempting to restore confidence in Adani companies, the group said insiders would pay back US$1.11 billion in loans made against company stock ahead of their maturity in 2024.
Despite today's jump, Adani Enterprises shares remain down 35.5% from their levels before Hindenburg released its report three weeks ago alleging financial irregularities, stock-parking shenanigans involving offshore shell companies, and overleverage, in the "largest con in corporate history." Adani denies the allegations and released a rebuttal.
Foodstuffs manufacturer Adani Wilmar (NSE:AWL) rose by its daily limit of 5.0% today ahead of earnings, announcing that profits for the December quarter rose 16%. Thermal-power producer Adani Power (NSE:ADANIPOWER) also rose 5.0% today ahead of its own earnings.
That broke a string of limit-down declines for Adani Power, which has descended its daily 5.0% maximum for nine straight trading days prior to today. Wilmar was limit-down for eight days in a row before gaining ground yesterday and today.
After results released yesterday, Adani Ports and Special Economic Zone (NSE:ADANIPORTS) shares rose 9.0% today. That's despite net profits that were down 16% for the December quarter.
Members of the Adani family will prepay loans equivalent to 12% of the ports company's shares as part of this week's announcement, with investors also paying early on lending equivalent to 3% of wind-and-solar generator Adani Green Energy (NSE:ADANIGREEN) and 1.4% of electric utility Adani Transmission (NSE:ADANITRANS).
All three companies have seen heavy losses. Today, Adani Transmission shares rose their daily 5.0% limit, but they have still lost 52.3% of their value since the "Adani episode" began on January 24.
Adani Green Energy was an outlier today, falling another 5.0%, taking its total losses in the last three weeks to 58.1%, as did Adani Total Gas. The gas company's shares are down 64.2% since the Hindenburg research report.
While shares are generally limited to a 20% move in either direction in India, utilities and other public-sector companies have smaller daily limits on fluctuation.
Listed Indian companies must maintain limits on inside investors, ensuring they do not hold more than 75% of the shares. Hindenburg says Adani Enterprises, Transmission, Power and Total Gas are all very close to that threshold.
But Hindenburg paints a picture of the round-tripping of capital from Adani companies into offshore, often Mauritius-based shell companies controlled by Gautam Adani's brother Vinod, and then allegedly round-tripped back into Adani companies.
If those allegations are correct, the process would help inflate the share price, and also means insiders would own well above 75% of those entities.
Gautam Adani, as chairman of Adani Green Energy, signed off on an earnings statement that says Adani Group management is "evaluating an independent assessment" to look into the short seller's claims and compliance issues at the group's companies. The renewables operator on Tuesday reported earnings that doubled to US$12.5 million for the December quarter.
The central Reserve Bank of India, which has asked Indian banks to assess their exposure to Adani, raised interest rates by 25 basis points today, as expected. A poll by Reuters suggests that'll be the extent of the rate hikes in India, which if so is reaching the end of its rate-rising cycle faster than almost any other major economy.
The most-recent figures show a one-year low for Indian inflation, down to 5.7% in December from a peak of 7.8% last April.
Ratings agencies Fitch Group and Moody's Investors Service say public banks have a greater exposure to Adani than private ones. But they expect the loan risk to be manageable, noting that many of the Adani businesses are linked to utilities and public services, so are unlikely to see dramatic write-offs.
Since Indian markets are difficult to access for international investors, it's not clear how Hindenburg built its short positions against Adani Group companies. It said it bet against Adani corporate bonds and offshore-traded derivatives. That suggests Hindenburg, which has declined to elaborate on its exact investment play, placed its positions via participatory notes, or P-notes, which can trade internationally.