Probe by US regulators into Adani statements drags shares lower

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Shares of Adani Group companies were in the red in early trading on a report by Bloomberg that said US regulators were inquiring about statements the group made to investors who hold significant holdings in the group.

Shares were trading down 2.5-7.8 percent, with Adani companies the hardest hit. It was also the worst performing stock on the Nifty50, trading down 7.8 percent, while the benchmark index was trading flat with a negative bias.

The Bloomberg report said that the US Securities and Exchange Commission as well as the US Attorney’s Office in Brooklyn, New York, are conducting investigations along the same lines. They were inquiring with investors about what Adani Group executives had told them during their interaction

In the wake of some devastating allegations of a Hindenburg short sale in January, including accusations of defaults by group companies and a lapse in corporate governance, shares of Adani Group companies have seen significant erosion in value. The group had to drop a public subsidiary bid of Rs 20,000 crore by Adani Enterprises, after very little interest from retail investors. It had to postpone several expansion plans that were supposed to be funded by the FPO.

Then, as an exercise in damage control, the group’s senior management made several road shows in the United States, Hong Kong, Singapore and India to refute Hindenburg’s claims and showcase the strength of its operations.

It also paid off several short-term debts, including a small portion of the bridging loan taken out to fund the acquisition of ACC and Ambuja Cement, while also redeeming pledges made by the promoting entities.

It managed to raise more than Rs 15,000 crore by selling small portions of shares in four group companies to GQG Partnersreinforcing its listing as a group with stable operations that investors can rely on.

In recent weeks, the group has regained enough confidence to reconsider its expansion plans and negotiate loans with Indian and foreign banks.