After Adani Enterprises cancelled its fully subscribed follow-on public offering (FPO), the price of its stock dropped by 27% to Rs 1,565.30 the next day. Currently, it’s at a price that’s around 50% lower than the FPO floor. Since January 24th, the market value of the seven Adani listed firms has dropped by more over $100 billion.
As a result of these changes, authorities and politicians in India took swift action. The problem was sufficiently pressing that Parliament had to adjourn. Banks have been questioned about their exposure to Adani companies by the Reserve Bank of India, the Securities and Exchange Board of India (SEBI), and the National Stock Exchange (NSE).
There are now commercial and financial ties between international markets and Indian businesses. The global financial crisis of 2008 taught us that these connections may manifest in unexpected places far from the crisis’s epicentre. Companies within the Adani group have gone abroad to secure financing.
The value of several of these debt securities has plummeted in recent days. So, as the media has reported, certain of the Adani group’s debt securities are no longer tradeable as collateral. Firms in the group will feel the effects of this environment as it will have an impact on both the availability and cost of financing. Furthermore, other Indian companies that have raised loans outside may be affected by the widespread unfavourable publicity.
The role of conglomerates in connecting various financial systems is essential. As a result, it would be naïve to think that issues with the Adani group’s international debts wouldn’t affect India. One of the most pervasive features of the 2008 crisis was the ripple effect it had on other markets; as the money markets froze, the fear quickly extended to other sorts of financial markets throughout the globe, catching American regulators by surprise.
Before election season politicking has unforeseen repercussions, Indian officials need to bring the Adani issue under control. Financial security is jeopardised by panic. The longer this situation persists on a political level, the more likely it is that ill-considered measures will be made to mitigate the consequences. This predicament is a litmus test for both the regulatory system and the Adani corporation.