Retail investor base shrinks in most Adani firms

The retail investor base in nine out of 11 of the group’s listed stocks shrunk sequentially during the period, following a surge in April-June, according to a Mint analysis of data sourced from Capitaline.

This drop follows fresh allegations by Hindenburg Research in August, accusing Securities and Exchange Board of India (Sebi) chair Madhabi Puri Buch of conflicts of interest, which allegedly hindered a thorough investigation into previous claims of stock manipulation and fraud involving the group. Adani group and Buch have repeatedly rejected the allegations.

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Retail investors in Adani Green Energy dropped from 0.73 million in June to 0.61 million by September. Adani Ports SEZ and Adani Wilmar also saw their retail bases shrink by over 80,000.

Retail participation in equities so far has been mixed in Nifty50 and Nifty 500 companies (excluding Adani stocks). While five of 10 Nifty50 companies that have disclosed data saw a decline in retail ownership, 34% of the 157 Nifty 500 companies experienced a similar trend.

On 24 January 2023, when the US short seller released its critical report, Adani group’s market cap plunged 5% to ₹18.23 trillion in a day. It eroded by more than half in that quarter. Still, individual investors had shown resilience, as their numbers rose between December 2022 and March 2023.

Have the fresh allegations now shaken that confidence?

“The combination of declining retail participation and serious accusations against Sebi's leadership has indeed shattered retail sentiments toward Adani-listed firms to some extent," said Atul Parakh, CEO of online trading firm Bigul. “Investors appear increasingly wary as they navigate the implications of these allegations on market integrity and regulatory oversight. Investors should maintain caution and conduct through due diligence before investing."

Profit-taking or jittery investors?

Not everyone is convinced that the fresh allegations are the primary cause behind the decline in retail participation.

“The fall in retail shareholding in some Adani group companies is not material and may have happened due to normal profit taking and diverting those funds to other more attractive opportunities available in the markets," said Deepak Jasani, head of retail research at HDFC Securities.

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For instance, retail investors in Adani Total Gas shrunk by nearly 30,000, while the stock dropped 12.2% quarter-on-quarter. In Adani Power, retail participation fell by 48,000 as the stock fell nearly 9%.

Shift in retail shareholdings

This decline is further evidenced by falling retail shareholdings across most Adani group companies. The latest shareholding patterns show a drop in retail ownership by those holding nominal share capital of up to ₹2 lakh in most group firms. Adani Enterprises saw a 21 basis-point sequential decline, with retail holdings falling from 2.99% in June to 2.78% in September.

A similar trend was observed across the group: Adani Ports’ retail stake fell by 0.27 percentage points, Adani Power's by 0.1 percentage points, and Adani Green Energy's and Adani Energy Solutions' by 0.41 and 0.23 percentage points, respectively. However, three companies—ACC Ltd, NDTV, and Sanghi Industries—bucked the trend, witnessing an increase in their retail shareholding.

Institutional investors buck the trend

While retail investors have scaled back, institutional players are showing resilience. Institutional interest in Adani Group stocks remains steady, with some even increasing their stakes, reflecting confidence in the conglomerate's long-term prospects.

Only four companies saw a reduction in overseas investor stakes, while mutual funds trimmed their holdings in five. 

G. Chokkalingam, founder and managing director of Equinomics Research, believes that the rise in mutual fund and foreign holdings in Adani group companies signals sustained confidence in the stock.

Kranthi Bathini, director of equity strategy at WealthMills Securities, said institutional investors, including both domestic and foreign portfolio investors (FPIs), are drawn to the group’s robust infrastructure projects, data centres, and other incubating businesses. 

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“Additionally, Adani group's regular interactions with analysts contributed to this institutional interest," he said. “As a result, we're seeing buying interest emerge from institutional investors."