Stocks that are bearing the brunt of Adani Rout are at risk of further losses

(Bloomberg) – Adani Group shares have lost more than $132 billion in market value since Hindenburg Research’s explosive report, but none have been hit as badly as Adani Total Gas Ltd.

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The stock has lost more than three-quarters of its value since the short seller report was released on Jan. 24. Before that, it was the group’s highest-valued stock and also has relatively little liquidity. Hindenburg had calculated that, on average, seven shares in the conglomerate were overvalued by 85%.

Adani Total was below its limit in early trading on Monday. This has been the case every day since Jan. 27, data compiled by Bloomberg shows. Indian bourses adjusted the daily limit on the stock from 20% to 5% as the sell-off worsened.

Adani Total Gas “is under both fundamental and technical pressures which has led to its demise,” said Abhay Agarwal, fund manager at Piper Serica Advisors Pvt. A drop in European gas prices is adding to the company’s specific woes and “will put pressure on profitability,” he added.

Concerns over Adani Group’s access to foreign financing remain, even as the stock market shock from Hindenburg’s allegations of stock manipulation and accounting fraud begins to fade.

Billionaire Gautam Adani and his companies have taken steps ranging from paying down loans to pledging to reduce debt ratios, but the levels of debt and cash flow continue to worry investors.

Following the Hindenburg report, French energy giant TotalEnergies SE has shelved a multi-billion-dollar green hydrogen production plan with Adani Group, in a setback for the gas entity. Another concern is Adani Total Gas’ debt.

The company faces combined debt payments due in the fourth quarter of its fiscal 2023 and fiscal 2024 that exceed its cash balance, according to an IPO. However, it also has a cash flow from assets of 9.32 billion rupees.

The stock’s float, or amount available for trading on the public market, is about 19%, according to data from Bloomberg. This is the lowest in the group after Adani Wilmar Ltd. MSCI Inc. trimmed the company’s freely traded shares in its most recent quarterly index review, but has since delayed implementation.

–With the support of Bhuma Shrivastava and Divya Patil.

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