What Went Wrong With Adani Group & Its Share Price?
The Adani Group is a conglomerate of companies that operates across a diverse range of industries such as ports, power, mining, and renewable energy. It is one of the largest companies in India, and its stock price has been on a rollercoaster ride over the past few years. In this article, we will explore what went wrong with the Adani Group and its share price.
Background
The Adani Group was founded in 1988 by Gautam Adani, who started as a commodity trader and gradually expanded into various industries. The group has grown rapidly over the years, and by 2021, it had a market capitalization of over $120 billion.
The Adani Group’s shares were performing well until recently. The share price of Adani Enterprises, the flagship company of the group, increased by over 1,000% between March 2020 and June 2021, making it one of the best-performing stocks in the Indian market during this period.
What Went Wrong?
The Adani Group’s shares started to decline in June 2021, and this decline was attributed to a few key factors:
- Negative Media Coverage: The Adani Group has been in the news for all the wrong reasons lately. In June 2021, a report by the Economic Times alleged that the group had evaded taxes and duties worth thousands of crores of rupees. This report was followed by other negative reports that alleged environmental violations and other irregularities by the group. These reports led to a significant erosion of investor confidence in the group.
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Regulatory Scrutiny: The Adani Group has been under regulatory scrutiny from various agencies, including the Securities and Exchange Board of India (SEBI) and the National Stock Exchange (NSE). In June 2021, SEBI conducted a probe into Adani Ports and Special Economic Zone (APSEZ) over alleged non-disclosure of certain material information to investors. This led to a sharp decline in the share price of APSEZ and other Adani Group companies.
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Global Factors: The Adani Group’s shares were also impacted by global factors such as the rise in crude oil prices and concerns over inflation. The rise in crude oil prices led to a decline in the share price of Adani Gas, the group’s city gas distribution business. Concerns over inflation led to a sell-off in the broader market, which also impacted the Adani Group’s shares.
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Sudden Wealth: The rapid rise in the Adani Group’s share price between March 2020 and June 2021 attracted a lot of retail investors who were looking to make a quick profit. Many of these investors bought the shares at inflated prices and were caught off guard by the sudden decline in the share price.
Conclusion
The Adani Group’s share price decline can be attributed to a combination of factors such as negative media coverage, regulatory scrutiny, global factors, and sudden wealth. The group has taken steps to address some of these concerns by improving transparency and governance practices. However, it remains to be seen whether these steps will be enough to restore investor confidence in the group.
