Ministry of Corporate Affairs monitoring the situation
The Ministry of Corporate Affairs has taken steps to check the accounts of Adani Group, which is in crisis after the fraud in the share transaction came to light.
News agencies report that the Director General of Corporate Affairs has ordered an inspection of Adani Group’s financial records under Section 206 of the Indian Companies Act. The Securities and Exchange Board of India (SEBI) has written to various banks seeking details about beneficial owners of offshore funds and foreign portfolio investors (FPIs). The Ministry of Corporate Affairs is also closely monitoring the situation.
Foreign Investors dumped Indian stocks worth Rs 288.52 billion ($3.51 billion) in January, Sebi estimates 11000 foreign funds are registered with SEBI in India. Sources said last week SEBI asked 7 foreign banks, which regulate outflows from FPIs, to contact these investors by March and share details of their findings by September-end.
LIC also lost
LIC, a public sector firm, suffered a loss of Rs 42,759 crore in one week following the fall in the share prices of Adani Group companies.
Finance Minister Nirmala Sitharaman responded that Adani Group’s crisis will not affect LIC and banks. Before the Hindenburg report, the value of LIC’s stake in various Adani companies was Rs 81,268 crore. But now, within a week, the value of LIC’s shares has plunged to Rs 38,509 crore.
This is how the shares of Adani Group companies fell
- LIC’s stake in Adani total Gas reduced from Rs 25,484 crore to Rs 10,664 crore
- 15029 crore in Adani Ports to Rs 9854 crore
- 6261 crore in Ambuja Cement to Rs 4692 crore
- 11211 crore in Adani Transmission has been reduced to Rs 5701 crore
- 16,585 crore in Adani Enterprises plunged to Rs 7,632 crore
- Mutual funds lost 8282 crore as Adani Group shares fell
- 1.44 lakh crore loss to foreign financial institutions
The Hindenburg Crisis
Adani Group had borrowed around 40000 crore rupees from 14 foreign financial institutions like Deutsche, Barclays, Standard Chartered and others to buy Ambuja and ACC companies for 52000 crore rupees. Borrowing was done by pledging own shares in cement companies. Adani Group’s share value increased by 4000 percent in three years. After the New York-based Hindenburg Research revealed that it was a fraud, the stock value fell sharply in the market. Adani Group faced a loss of Rs 9 lakh crore in one week. Last August, the American insurance firm Fitch also warned about Adani Group’s huge debt burden.
Gautam Adani’s financial meltdown may also affect projects in foreign countries. The Adani Group has several projects in the neighbouring countries of Bangladesh, Sri Lanka, Myanmar and Nepal, as well as in countries like Indonesia and Australia. With the release of the Hindenburg Report, all these are in crisis.
Retreat to where?
Adani Group, which withdrew its Rs 20,000-crore FPO following a fall in share prices, has been signalled to withdraw from planned bonds in overseas domestic markets. It is reported that the Adani Group has withdrawn from the overseas bond of Rs 4000 crore. And the move to raise 1,000 crores from the domestic market by issuing bonds has also been abandoned
