Shares linked to Indian tycoon Adani tumble as foreign funds frozen

Shares in companies linked to Indian tycoon Gautam Adani, one of Asia’s richest men, fell sharply after the country’s largest securities depository froze accounts of foreign funds holding stakes worth billions of dollars.

Four of the six listed Adani Group companies fell the maximum amount permitted by exchange rules on Monday, while the billionaire’s flagship Adani Ports & Special Economic Zone plunged as much as 19 per cent.

The drop followed an announcement by India’s National Securities Depository that it had frozen the accounts of Mauritius-based Albula Investment Fund, Cresta Fund and APMS Investment Fund. Indian newspaper The Economic Times reported that the move, which prevents the funds from trading shares, was due to a lack of documentation over the entities’ beneficial ownership.

Adani’s net wealth had surged $44bn to as much as $78bn this year based on a rally in the share prices of companies linked to his energy-to-apples conglomerate. That had propelled him to the position of Asia’s second-richest man, sweeping past Chinese technology titans such as Alibaba’s Jack Ma and ByteDance founder Zhang Yiming and within touching distance of Reliance Industries’ chair Mukesh Ambani.

The falls in Adani-linked stocks on Monday wiped more than $6bn off the tycoon’s net worth, according to Bloomberg figures, putting it at just under $71bn.

In the past year, Adani Transmission shares have risen 640 per cent, Adani Enterprises 860 per cent and Adani Total Gas 1,030 per cent.

But analysts have raised concerns about the stocks being held by a small handful of overseas funds and having a small public float.

The three Mauritius-based investment funds held stakes Adani Total Gas, Adani Transmission, Adani Enterprises and Adani Green Energy worth about $5.7bn as of Friday, according to FT calculations based on Bloomberg data. Prior to Monday’s sell-off, the market value of the funds’ stakes had risen about $2bn in the second quarter.

Bloomberg Intelligence analysts wrote in a note last week that the share rally in Adani Total Gas, Adani Enterprises and Adani Transmission looked “extended”.

“Among the biggest foreign investors are a few Mauritius-based funds holding over 95 per cent of assets in these companies,” said the analysts. “Such concentrated positions, along with negligible onshore ownership, create asymmetric risk-reward as large investors conspicuously avoid Adani.”

Analysts at Citi reiterated their “buy” call on Monday for Adani Pors, shares of which fell about 17 per cent, saying that developments related to insufficient disclosure were unlikely to have an impact on the company’s prospects.

The company “remains well-positioned to grow its already high market share in [the] port industry in India and [its] valuation . . . is attractive”, the analysts wrote. The three Mauritius-based funds do not hold stakes in Adani Ports.

Adani Group declined to comment. NSD did not immediately respond to a request for comment.

India’s stock market has recently hit record highs even as the economy struggles to recover from a severe second wave of coronavirus infections.

Indices provider MSCI added three Adani stocks to its India index in May.

Adani has attracted international partners in its push to become one of the world’s largest renewable energy companies. Total in January bought a 20 per cent stake in Adani Green Energy, which last month acquired the India energy unit of Japanese technology group SoftBank.

The infrastructure mogul has faced criticism for his controversial Carmichael coal mine in Australia, which has been the subject of global environmental protests.