Adani stocks crash as India election results show weaker Modi mandate

Shares in companies owned by powerful Indian billionaire Gautam Adani, who has tied his infrastructure empire to Prime Minister Narendra Modi’s development plans, plunged after early election results pointed to a diminished mandate for the premier.

The eponymous conglomerate’s two flagship companies, Adani Enterprises and Adani Ports and Special Economic Zone, were down 19 per cent and 21 per cent, respectively, by the close of trading on Tuesday.

The companies were the biggest decliners on India’s benchmark Nifty 50 index, leading a wider sell-off in public sector companies and firms tied to government-promoted infrastructure growth that were termed “Modi stocks” by brokerage and investment group CLSA.

The reversal came after a massive rally in Adani Group shares the previous day driven by exit polls over the weekend that indicated Modi, a fellow Gujarati with long-standing ties to the tycoon, secured a landslide win.

The early lower house results suggested “a compromise situation” in parliament, said Deven Choksey, managing director of Mumbai-based investment advisory DRChoksey FinServ.

However, Choksey added that he did not think most economic policies would change overnight, even if the next government was a coalition.

“Adani’s growth programme won’t get altered . . . what will get altered is the narrative, the narrative that these companies deserve premium valuations,” Choksey said.

India’s opposition parties have accused Modi of crony capitalism for his perceived closeness towards Adani, who has developed a large portion of India’s airports, power and ports capacity.

Both the prime minister and tycoon deny any favouritism, though Adani has been supportive of Modi since his earlier tenure as chief minister of Gujarat. Modi flew to New Delhi in an Adani private jet when he first came to national power a decade ago.

During this year’s election campaign Modi sought to distance himself from Adani. During one event in May, he accused the billionaire, along with the country’s richest man, Mukesh Ambani, of funding the opposition Indian National Congress.

The Adani Group did not immediately respond to a request for comment.

Adani was on the back foot for much of last year after damaging corporate fraud claims were levelled against his conglomerate by US short seller Hindenburg Research, wiping more than $140bn from the conglomerate’s market value at one point.

The conglomerate has repeatedly denied any wrongdoing and many of the group’s stocks have staged a recovery. Adani companies in May announced plans to raise up to $3.5bn in new funding.

Adani, which is furthering its reach into new sectors including consumer finance, is back on an “expansion spree” and is expected to spend $90bn on capital projects in the next decade, according to US investment bank Jefferies.

On Monday, Adani Ports announced it would operate and manage a terminal container in Tanzania’s Dar es Salaam — its third overseas foray after Israel and Sri Lanka.

“Being close to the prime minister, I think, does not mean they have got anything to worry about, frankly,” Choksey said. “The businesses have been happening largely on their fundamental merits.”