Amid Market Rout for Adani, Major Indian Banks Say Exposure to Group is Within Central Bank Limits

India's Adani Enterprises, led by Asia's richest man Gautam Adani, suffered another day of intense sell-off on Friday, with the seven listed companies in his sprawling business empire losing a combined $48 billion in market capitalisation.

The stock rout, which triggered panic selling in the Indian market, stemmed from a highly damaging report by US short-seller Hindenburg Research. The report had accused the Adani conglomerate of using tax havens and running up a huge and unsustainable debt.

Adani Group
Adani Group Wikimedia Commons

Indian Banks' Take

One of the charges made by the research group is that some listed Adani companies had substantial debt that puts the group on a precarious financial footing. The group has dismissed the claims saying no one has raised concerns about the group's debt.

Meanwhile, India's leading public sector bank, the State Bank of India, clarified that its exposure to the Adani Group had not crossed the limits set by the country's central bank, the Rserve bank of INdia (RBI).

"There is nothing alarming about our Adani exposure and we don't have any concerns as of now," bank chairman Dinesh Kumar Khara told Reuters News. As per the RBI stipulations, no more than 25 percent of a bank's available eligible capital base should be exposed to any one business conglomerate.

Another state-run bank, the Bank of India, also said its exposure to the Adani Enterprises was within permissible limits. "Our exposure to the Adani Group is below the large exposure framework of the Reserve Bank of India ...Till last month, the Adani Group's interest payment on loans has been intact," a senior executive told the Economic Times.

Adani Group's Mundra port
Adani Group's Mundra port Wikimedia Commons

Adani Empire

Adani Group is a sprawling conglomerate that controls huge companies engaged in varied businesses ranging from energy to ports and from utilities, transport and logistics to airports. The Group is a diversified organisation with market cap of over $166.5 billion comprising seven publicly listed companies.

The Group is headquartered in Ahmedabad in the industrialized western Indian state of Gujarat. The Group's website says it employs 23,000 people. Gautam Adani is a first-generation businessman and has a net worth of $120 billion, according to the Bloomberg Billionaires Index.

The Crisis

While the shares of Adani Enterprises fell more than 9 percent on Friday, Adani Transmission and Adani Green Energy plunged nearly 20 percent each. Adani Power lost 5 percent and Adani Port's shares dropped 13.8 percent.

The Adani group said the damaging report was an "intentional and reckless attempt by a foreign entity to mislead the investor community and the general public.

"We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hidenburg Research," the group's statement for the media said.