Adani Group Share Prices Crash: 5 Things You Need To Know
Six companies of the Adani group that trade on Indian exchanges have clarified through filings to the bourses stating that they possess written confirmation that the demat (dematerialised) accounts of three foreign funds have not been frozen.
"Given the seriousness of the article and its consequential adverse impact on minority investors, we requested Registrar and Transfer Agent, with respect to the status of the Demat Account of the aforesaid funds and have their written confirmation vide its e-mail dated 14th June, 2021, clarifying that the Demat Account in which the aforesaid funds hold the shares of the Company are not frozen", say these filings.
This is a response to the shares of the Adani group companies witnessed a massive fall on June 14, collectively eroding Rs. 1 lakh crore in market capitalisation (m-cap) (according to Moneycontrol) as an article in the Economic Times reported that National Depository Services Limited (NSDL) froze these accounts that held ₹43,500 crores as investments in these entities.
The three firms - Albula Investment Fund, Cresta Fund and APMS Investment Fund - are all Mauritius based funds and are registered with the Securities and Exchange Board of India (SEBI) as foreign portfolio investors (FPIs).
The crash in some of the shares have been more than 10%, according to live data across the Bombay Stock Exchange and National Stock Exchange. Four of the six scrips - Adani Transmission, Adani Total Gas and Adani Green - have hit the lower circuit of 5%. Adani Ports and Special Economic Zones, a NIFTY50 constituent, hit the lower circuit of 20% but has since recovered, currently trading 14% lower. The sixth stock, Adani Enterprises, is trading lower at Rs. 1409, down 12.19%.
Here's five things you need to know about today's crash.
1. How much have the shares crashed?
Here are the values of the six scrips (as of 2.35 PM, on the NSE).
2. Why have they crashed?
They have crashed since the NSDL has frozen the accounts of the above mentioned three foreign portfolio investors (FPIs) who have substantial investments in a bouquet of Adani group shares, according to news reports.
A freeze implies that they will not be able to amend their existing holdings. Together, these funds account for Rs. 43,500 crores worth of holding in this group.
According to NSDL, these accounts were frozen on or before May 31.
Journalist Sucheta Dalal had also tweeted a few days ago regarding rigging in the prices of the stocks of a certain group. Users of social media are interpreting this to be stocks of the Adani companies.
Another scandal hard to prove outside the black box of information available with SEBI tracking systems is the return of an operator of the past who is relentlessly rigging prices of one group. All through foreign entities! His speciality & that of a former FM. Nothing changes!— Sucheta Dalal (@suchetadalal) June 12, 2021
3. Why were their accounts frozen?
Though NSDL did not put out a reason, their accounts were frozen most likely due to insufficient disclosure under the Prevention of Money Laundering Act, according to an unnamed source with the NSDL to the Economic Times.
The source also said that the custodian (NSDL) gives prior warnings before resorting to such a step, and could take action if there is no response or non-compliance.
4. What do we know about these three funds?
The three funds are based on the same address in St. Louis, the capital of Mauritius. All three of them also do not have websites, according to a report.
But an April coverage of the holdings done by the Morning Context shows that these firms have more than 95% of their holding in Adani companies. According to the report, such a heavily skewed investment in a single set of stocks is not illegal, but highly unusual.
Also, in the wake of the hot market rally that took place in 2020, in which the market broadly rallied including Adani stocks, these funds kept their holdings steady without booking profits or reducing their holdings.
5. Why is this freezing significant?
The freezing comes on the heels of Adani venturing into the cement business, according to filings with the bourses. Adani Enterprises - his flagship business - said in the filing on June 12 that they were entering the cement business by incorporating a new wholly owned subsidiary, Adani Cement.
The freeze also comes as Gautam Adani became the 14th richest man in the world, valued at $43.2 billion, according to Bloomberg data, as reported on June 13, after Mukesh Ambani, who is valued at over $84 billion.
This story has been updated with a statement from the Adani Group