Why Adani Group Stocks Are Falling?

18 Jun 2021by Pradeep U

Why Adani Group Stocks Are Falling?

Have you heard the popular song “What goes up must come down? Falling feels like flying till you hit the ground” by American rock band Hinder.

As an investor, one can probably relate the same to what's happening currently with Adani Group stocks.

After a dream run in Adani Group stocks like Adani Power, Adani Total Gas, Adani Enterprises, Adani Ports, and Adani Transmission over the last 12-month period which catapulted chairman and founder of the Adani Group, Gautam Adani to the position of the 2nd richest man in Asia, Adani Group stocks have hit a major roadblock.

Before we proceed to take a look at the reason behind the fall in Adani Group stocks let’s take a brief look at the different companies in the group and their past performance.                       

Adani Enterprises Ltd.

Adani Enterprises is a primary holding company that is mainly engaged in the mining and trading of coal and iron ore on a standalone basis. The company has three main subsidiaries such as Adani Wilmar, Adani Airport Holdings, and Adani Road Transport. While  Adani Wilmar is engaged in the business of manufacturing and distribution of edible oil and food processing, Adani Airport Holdings is into operations, management, and development of airports. Business activities of Adani Road Transport include construction, operations, and maintenance of roads, highways, Expressways, and tollways.                                                                  

Adani Green Energy

Adani Green Energy Limited (AGEL) is one of the largest renewable companies in India specializing in building, operating and maintaining utility-scale grid-connected solar and wind farm projects. The company has entered into long-term purchase agreements for power with central and state government entities and has a presence across 11 states in India.

Adani Power

Adani Power Ltd. is the largest private producer of thermal power in India with a capacity of 12,450 MW from plants in Gujarat, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh.

Adani Total Gas

Adani Total Gas Ltd. is a leading provider of Piped Natural Gas (PNG) to the customers in residential, industrial, commercial segments and Compressed Natural Gas (CNG) to the transport industry.

The company has a well established city gas distribution network in some cities in Gujarat, Haryana, and Uttar Pradesh. Additionally, the company has also won bids for the development of gas distribution networks in several other cities in a JV with Indian Oil Corporation Ltd.

Adani Transmission

Adani Transmission Ltd. is the largest private transmission company and operates more than 12,350 ckt kms of transmission lines and around 18,000 MVA of power transformation capacity. The company has further set an ambitious target to setting up 20,000 circuit km of transmission lines by 2022.

Adani Ports and SEZ

Adani Ports & Special Economic Zone Ltd. (APSEZ) is the largest commercial ports operator in India with three verticals, i.e. Ports, Logistics, and SEZ presence spread across 12 domestic ports in seven states in the country.

Reasons for the recent fall in Adani Group Stocks

Stocks of Adani Group companies went into a free fall earlier this week after media reports emerged stating that the National Securities Depository Limited (NSDL) had frozen accounts of three foreign portfolio investors (FPIs), who held huge stakes in Adani Group Stocks. The reports also mentioned that FPIs had flouted SEBI’s KYC norms.

According to the media report three foreign funds, Albula Investment Fund, Cresta Fund, and APMS Investment Fund, together owned shares worth Rs. 43,500 crore in some Adani Group Stocks. All 3 entities are registered at the same address in Port Louis, Mauritius, and lack websites. These funds together hold 6.82 percent in Adani Enterprises, 8.03 percent in Adani Transmission, 5.92 percent in Adani Total Gas, and 3.58 percent in Adani Green.

This led to panic among investors leading to a correction in prices of Adani Group Stocks. However, Adani Group was quick to issue a clarification that the accounts had not been frozen.

“We regret to mention that these reports are blatantly erroneous & are done to deliberately mislead the investing community. This is causing irreparable loss of economic value to the investors at large & reputation of the group,” Adani Enterprises said in a statement.

Most Adani Group stocks have risen significantly over the past year. Hoping to cash in on the ride many short-term investors had joined the bandwagon. However, the sudden unexpected news in terms of a freeze on FPI investors holding the group's stock affected the prices of Adani Group stocks severely with many hitting lower circuits except Adani Enterprises and Adani Ports. Fearing a further correction in the Adani Group stocks, most investors dumped the stocks leading to a vicious cycle.

What should investors do with Adani Group Stocks?

Four of Adani Group stocks have been moved to the T2T (Trade 2 Trade) category where intraday trading is not permitted. As of now, it would be advisable for investors to remain cautious. Experts are suggesting that investors should avoid bottom fishing or averaging their position in Adani Group stocks as despite the recent correction many stocks in the group are appearing overvalued.

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