Adani’s battle with Hindenburg leaves investors sizing up exposure to the global banking sector

While Gautam Adani received a ballot of assurance from investors successful his latest $2.5 nationalist offering Tuesday, Wall Street is inactive sizing up his vulnerability to the planetary fiscal sector.

As Adani's empire has grown, his radical has established caller relationships with overseas banks. At the aforesaid time, it's reduced the stock of Indian banks successful its borrowing figures — from 86% successful fiscal 2016 to 33% successful 2022, according to analysts.

Indeed, Indian banks marque up 0.6% of the group's assemblage loans, according to JPMorgan. This whitethorn look debased but the full vulnerability to the Adani Group is inactive astir $9 billion, wrote Saurabh Kumar, an expert astatine JPMorgan.

"While Adani's boatloads of indebtedness is not caller news, the Hindenburg study has pushed investors to reexamine the Indian billionaire's narration with banks," said Ravi Ahuja, a prof astatine DeSales University, to CNBC.

Activist capitalist Bill Ackman, laminitis of hedge money Pershing Square, tweeted Sunday: "There is conscionable excessively overmuch liability vulnerability for the banks." Ackman was refencing this week's stock merchantability for its flagship Adani Enterprises, which crucially achieved a afloat subscription Tuesday.

A spokesperson for the Adani Group was not instantly disposable for remark erstwhile contacted by CNBC.

Jefferies expert Prakhar Sharma writes that, for now, the hazard to Indian banks is low, saying, "we don't spot worldly hazard to the Indian banking sector."

Indian banks with vulnerability to the Adani Group see the State Bank of India, Life Insurance Corp., Union Bank of India, ICICI and Axis as good arsenic others.

"We're not expecting a tally connected the banks, but if the concern gets worse, extracurricular assistance volition beryllium needed," said 1 authoritative astatine an Indian state-run bank, who preferred to stay anonymous owed to the sensitivity of the topic, to CNBC.

While Adani's reliance connected Indian banks has fallen implicit time, the superior utilized to motorboat caller infrastructure projects funded by overseas banks has risen dramatically — from zero to 18% of its full indebtedness successful the past six years, according to Jefferies' India team.

"Most of the incremental backing to the radical for caller businesses and acquisitions has travel via overseas sources," according to Adarsh Parasrampuria, an expert astatine concern radical CLSA.

That includes 1 of Adani's astir caller deals to get the cement concern of Switzerland's Holcim for $10.6 cardinal successful mid-2022. The woody was underwritten by Barclays, Deutsche Bank, Standard Chartered and Mizuho, arsenic good arsenic different planetary banks.

Private equity has besides played a salient role. In 2021, Warburg Pincus paid much than $100 cardinal to acquisition a tiny involvement successful Adani Ports and Special Economic Zones Ltd. A spokesperson for Warburg Pincus was not instantly disposable for comment.

Last year, Apollo's recognition money provided a $750 cardinal indebtedness to the Mumbai International Airport, a public-private concern betwixt Adani Airport Holdings Ltd. (74% ownership) and Airports Authority of India (26% of ownership). A spokesperson for Apollo was not instantly disposable for remark erstwhile contacted by CNBC.

Outside of banks, existing capitalist Abu Dhabi's International Holding Co. announced plans connected Monday to put $381 cardinal successful Adani's conglomerate, though did not uncover astatine what valuation.

In a institution release, IHC CEO Syed Basar Shueb, who is besides an capitalist successful SpaceX, said, "Our involvement successful Adani Group is driven by our assurance and judge successful the fundamentals of Adani Enterprises Ltd; we spot a beardown imaginable for maturation from a semipermanent position and added worth to our shareholders."

Abu Dhabi's concern on with the oversubscribed $2.5 nationalist offering halted the downward diminution successful Adani Group's stocks connected Tuesday.

Of the 7 companies operated by the Adani Group: Adani Green Energy, Adani Power and Adani Ports are sitting connected the astir nett debt, according to analysts.

"If the stock terms autumn doesn't stop, Adani whitethorn request look astatine financing options, including conversations with investors successful the Middle East that are anxious to diversify," said a banker successful Mumbai, India, who besides preferred to stay anonymous owed to the sensitivity of the topic, to CNBC.

In a 413-page study Sunday, Adani attacked abbreviated seller Hindenburg and its allegations of fraud and banal terms manipulation. In an effort to changeable nationalist fervor, Adani went connected to reason that Hindenburg's appraisal is simply a "calculated onslaught connected India."

Hindenburg on Monday greeting described the group's effect arsenic "bloated" and claimed it "ignores each cardinal allegation" against the conglomerate that it raised.

Gautam Adani, the richest idiosyncratic successful Asia and once second lone to Elon Musk, fell retired of the world's apical 10 richest to 11th spot connected the Bloomberg's Billionaires Index, arsenic of Monday's close.

— CNBC's Jihye Lee contributed to this article.