Adani tops up collateral on $1 billion loan after stock rout

Hindenburg Research has accused Adani of stock manipulation and accounting fraud

Adani Group put up millions of dollars worth of shares to maintain its collateral cover on a $1 billion loan after a steep selloff in shares across the conglomerate, according to people familiar with the matter.

Adani on Friday, January 27, added about $300 million worth of shares for a loan made by a group of banks including Barclays Plc, one of the people said, asking not to be named discussing internal matters.

The conglomerate has a dedicated basket of $2.5 billion in shares of different units that’s set aside in case they’re needed for such top-ups during price fluctuations, the people said. The loan was extended with shares pledged at 2.5 times the borrowed amount and the trigger for top-up was 2 times, the people added.

A Barclays spokesperson in Mumbai declined to comment. Adani representatives didn’t respond to requests for comment.

The corporate empire of Gautam Adani, Asia’s richest man, was last week thrown into turmoil after short-selling firm Hindenburg Research issued an investigation alleging fraud. The group, which includes a wide-range of firms such as flagship Adani Enterprises Ltd., on Sunday rebutted the allegations in a 413-page report.

The top up illustrates the importance of Adani Group stabilizing the share prices of its various units. The risk would be a downward spiral where more shares are needed as collateral to meet loan agreements.

The group on Tuesday sold $2.5 billion worth of shares in a fully subscribed follow-on offering by Adani Enterprises Ltd., potentially easing some of the pressure.

The top up of the loan covenant came as the shares of its flagship firms including Adani Enterprises, Adani Transmission, and Adani Ports plunged between 16% to 20% on Friday. The firms have since recovered some of those losses.

Adani, who founded India’s largest conglomerate, holds the majority control in all his listed companies ranging from 60.75% to 87.94% as of Dec. 31, according to the rebuttal report to Hindenburg. The group has used shares in its firms, including 6.62% in Adani Transmission, as collateral for loans. The top up forced by the loan agreement was an automated process, according to the people.