Shares of Adani group companies, promoted by India’s second richest man, Gautam Adani, suffered reverses on Monday following media reports of freezing of the accounts of three foreign portfolio investors that had invested heavily in the infrastructure conglomerate.
The National Securities Depository has frozen the accounts of Albula Investment Fund, Crest Fund and APMS Investment Fund. The three companies own shares worth around 435 billion rupees ($5.94 billion) in the Adani Group companies and are based out of Mauritius.
As per the depository website, the accounts were frozen on or before May 31 and no reasons were given. The freeze could be because of insufficient disclosure of information regarding beneficial ownership, Economic Times reports. If an account is frozen, the funds can neither sell existing securities nor buy new ones.
Shares of all six companies – Adani Enterprises, Adani Green Energy, Adani Ports, Adani Power, Adani Total Gas and Adani Transmission – hit their respective lower circuits in intra-day trade on Monday, down between 5 and 15%. Adani Enterprises, the conglomerate’s flagship company, plunged as much as 25%, its steepest fall in nearly a decade. Nifty 50-listed Adani Ports fell as much as 19% before paring some losses.
However, later in the day, Adani Group clarified that the report was “blatantly erroneous” and misleading the investors. In a Bombay Stock Exchange filing, Adani Ports said, “With respect to the status of the Demat Account of the aforesaid funds and have their written confirmation vide its e-mail dated 14th June 2021, clarifying that the Demat Account in which the aforesaid funds hold the shares of the Company are not frozen.”
The capital markets regulator had reworked the know your customer documentation for foreign portfolio investors. Funds had been given until 2020 to comply with the new norms. If they failed, their Demat accounts were to be frozen.
As per some media reports the three portfolio investors have reportedly put more than 95% of their assets in Adani group firms. Together, these funds hold 6.82% in Adani Enterprises, 8.03% in Adani Transmission, 5.92% in Adani Total Gas and 3.58% in Adani Green Energy.
Shares of Adani Group companies have risen meteorically in the past one year. Adani Total Gas has zoomed over 1,100% while flagship firm Adani Enterprises has provided 950% returns to investors. Others have added between 140-680%. This sharp rally has also made Gautam Adani the second richest man in Asia, next to Mukesh Ambani.
According to the Bloomberg Billionaires Index, Adani amid the Covid-19 pandemic has recorded the largest gain of wealth in the world, beating Elon Musk and Warren Buffet. The Adani Group has been rapidly expanding its footprint in diversified sectors, including the airports business and data centers. One of his recent big-ticket purchases is a 74% stake in the Mumbai international airport he acquired in September 2020.