Shares in companies linked to Indian tycoon Gautam Adani, one of Asia’s richest men, fell sharply on Monday after a report that the country’s largest securities depository had frozen accounts held by foreign funds holding stakes worth billions of dollars.
Four of the six listed Adani Group companies fell by the maximum amount permitted by exchange rules, while the billionaire’s flagship Adani Ports & Special Economic Zone plunged as much as 19 per cent.
The drops came after Indian newspaper The Economic Times reported that the country’s National Securities Depository had frozen the accounts of Mauritius-based Albula Investment Fund, Cresta Fund and APMS Investment Fund.
Adani’s net wealth had surged by $44bn to as much as $78bn this year based on a rally in stocks 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 within touching distance of Reliance Industries’ chair Mukesh Ambani.
Monday’s stock falls wiped more than $6bn off Adani’s net worth, according to Bloomberg figures, putting it at just under $71bn.
The three funds, whose accounts were listed as frozen on NSDL’s website as of May 31, could not immediately be reached for comment. However, CNBC TV18 reported Albula as saying on Monday it was “not blocked by any means” and was “fully operational”.
Adani Ports said on Monday that reports about the freeze were “blatantly erroneous” and done “to deliberately mislead the investing community”.
Adani Group shared an email sent from NDSL saying the accounts were active as of June 11, adding that those it had frozen did not hold Adani shares.
NSDL confirmed the funds held “different” accounts but declined to comment on the funds linked to Adani. “In general, these kinds of actions are taken because of certain non-compliance” or an order from the Securities and Exchange Board of India, it said.
It said its web page listing frozen accounts was updated every two weeks, and that “maybe on the day after tomorrow, we will be publishing fresh data; if there has been any change in the intervening period, it will be reflected on that website”.
Sebi did not respond to a request for comment.
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.
Analysts have raised concerns about the stocks being held by a handful of overseas funds with only a small public float.
The three Mauritius-based funds held stakes in 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. Before Monday’s sell-off, the market value of the funds’ stakes had risen about $2bn in the second quarter.
Analysts at Citigroup reiterated their “buy” call on Monday for Adani Ports, saying 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.
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.