Explained: Why did Adani shares crash on the stock exchanges?

Explained: Why did Adani shares crash on the stock exchanges?

Shares of the Adani Group plunged on Monday (June 14) following reports that the National Securities Depository Ltd (NSDL) had frozen the accounts of three foreign funds that own sizeable stakes in Adani Group companies.

By how much did Adani shares fall?

Many of the Adani Group shares, which were the toast of the stock market bulls, hit the lower circuit in the opening session on Monday.

Adani Total Gas fell 5 per cent to Rs 1,544.55, Adani Green Energy by 5 per cent to Rs 1,165.35, Adani Transmission by 5 per cent to Rs 1,517.25, Adani Power by 5 per cent to Rs 140.90, and Adani Enterprises by 11.28 per cent to Rs 1,420.80 as of 11.45 IST.

What triggered the fall in Adani shares?

The fall was triggered by reports that NSDL had frozen the accounts of three foreign funds that hold around $ 6 billion worth of stock in Adani companies.

Details of the “freeze” are not yet known, and market reports have pointed to a possible insufficient disclosure of information regarding beneficial ownershipAccording to a circular issued by market regulator Securities and Exchange Board of India (SEBI), all overseas investors have to furnish details of their end-beneficiaries and sources of funds.

However, some FPIs have not revealed these details.

How have Adani shares fared in the last one year?

The market capitalisation of Adani Group shares was Rs 9.5 lakh crore until last Friday.

Adani Port shares have surged by 145 per cent in the last one year. Adani Transmission shot up by 697 per cent, Adani Green Energy by 280 per cent, Adani Power by 310 per cent, and Adani Enterprises by 906 per cent.

Adani Total Gas shares moved up from Rs 125 to Rs 1544.55 in the last 12 months. As the promoter holds a sizeable stake in Adani companies, promoter wealth has skyrocketed accordingly. The promoter holds nearly 75 per cent in Adani Transmission, Adani Power and Adani Enterprises.

New Delhi: Adani Group shares today dropped between 5 per cent and 18 per cent. The big drop in the shares of Asia’s second Richest man Gautam Adani’s group fell in the wake of a report by Economic Times that stated accounts of three foreign funds were frozen by the National Securities Depository (NSDL). These three foreign funds have a staggering investment of 435 billion rupees in Adani Group companies. 

The top laggards among the Adani group shares in today’s share market are Adani Enterprises, Adani Ports and special economic zone, which is Nifty-50 listed. The shares of these entities fell by more than 15 per cent each with a loss of around Rs 1,28 crore and Rs 681 crore respectively. Meanwhile, shares of Adani Power, Adani Green Energy, Adani Transmission, and Adani Total Gas fell by 5 per cent each. 

Three foreign funds that were frozen are APMS Investment Fund, Albula Investment, and Cresta Fund purchased shares worth Rs 43,500 crore in four companies of Adani Group. Accounts of these three overseas funds were frozen around May 31, the Economic Times report said. 

One of the plausible reasons behind the NSDL’s move to freeze the accounts of these foreign accounts is there were not sufficient details about beneficial ownership under the Prevention of Money Laundering Act (PMLA), the Economic Times report said.

Gautam Adani has become Asia’s second richest man after dethroning the Chinese businessmen, powered by exponential surge in shares of Adani Group’s companies. Meanwhile, Adani is the 14th richest man in the world.

So what is the main issue here?

The main issue is whether such investments have flouted the Prevention of Money Laundering Act (PMLA) rules.

SEBI had earlier said that FPIs have to comply with the beneficial ownership criterion under PMLA provisions, and should be made applicable for the purpose of know-your-customer (KYC).