NEW DELHI, (Reuters) – Both houses of India’s parliament were adjourned yesterday amid chaotic scenes as some lawmakers demanded an inquiry following the meltdown of shares in billionaire Gautam Adani’s group companies, which some fear could spark wider financial turmoil.
Shares in Adani companies recovered after sharp falls earlier in the day, but the seven listed firms have still lost about half their market value – or more than $100 billion combined – since U.S. short-seller Hindenburg Research last week accused the group of stock manipulation and unsustainable debt.
Adani Group, one of India’s top conglomerates, has rejected the criticism and denied wrongdoing in detailed rebuttals, but that has failed to arrest the unabated fall in its shares.
For Adani, a former school drop-out from Gujarat, the western home state of Indian Prime Minister Narendra Modi, the crisis presents the biggest reputational and business challenge of his life, as his firm struggles to assuage investor concerns.
Credit ratings agency Moody’s warned today the share plunge could hit the group’s ability to raise capital, although peer Fitch saw no immediate impact on its ratings.
“These adverse developments are likely to reduce the group’s ability to raise capital to fund committed capex or refinance maturing debt over the next 1-2 years. We recognise that a portion of the capex is deferrable,” Moody’s said.
Amid fears the turmoil could spill over into the broader financial system, some Indian politicians have called for a wider investigation into the matter, and sources have told Reuters the central bank has asked lenders for details of exposure to the group.
The speakers of both houses of parliament adjourned proceedings on Friday as some lawmakers disrupted business by shouting slogans such as: “We want a joint parliamentary committee (to investigate)” and “Stop looting the poor!”
On Thursday, S&P Dow Jones Indices said it would drop the conglomerate’s flagship Adani Enterprises ADEL.NS from widely used sustainability indexes on Feb. 7, which would blunt their appeal for environment-conscious investors.
“Contagion concerns are widening, but still limited to the banking sector,” said Charu Chanana, a market strategist with Saxo Markets in Singapore.
“One of the big risk factors to watch for now is if more indices remove Adani stocks … This can result in foreign outflows as funds sell Adani stocks, further aggravating confidence issues,” Chanana said.
