 "Bears attack Adani stocks on rumours of NSEL exposure")
Adani Group shares lost market capitalisation of Rs 6,000 crore in just a few hours as panicky investors dumped the shares. Group flagship Adani Enterprises fell 14 per cent to Rs 150 a share by afternoon trade but recovered to close 10.5 per cent down, to Rs 158 a share. Adani Ports was also down 10.7 per cent, to close at Rs 126 a share, while Adani Power was down seven per cent, to Rs 32.
Adani Agro has a business relationship with NK Industries, a Gujarat castor oil manufacturing company. The latter was rumoured to be involved in the castor seed price manipulation in the NSEL and owes money to investors. This allegation could not be verified by this newspaper. An email sent to NK Industries did not get a response.
An Adani Agro official said reports of its exposure were baseless rumours, spread by vested interests. “We are not members of NSEL and have not dealt with the exchange ever. We have absolutely no relation whatsoever in the entire NSEL issue,” said Atul Chaturvedi, chief executive.
NK supplies castor seed oil to Adani and brokers say it has kept a sizable stock of castor seed in its single warehouse in Kadi, Gujarat. The scrip has been suspended from the stock markets for failing to meet the listing agreement.
The company filed its last annual report with the stock exchanges in 2011. It had set up a joint venture with Advani Wilmar Ltd, called AWN Agro Pvt Ltd. This JV was to make refined castor oil and the castor oil plants of both companies were transferred to this JV. This JV was dissolved in February this year.
Brokers say NK owns money to the exchange and had defaulted to pay for its contracts. NK Industries was holding huge stocks of around 109,000 tonnes of castor seed at Kadi as on July 13. On the same day, the total unsettled positions on both delivery and current storage of castor was nearly 150,000 tonnes in NSEL warehouses.
According to a study by the Solvent Extractors’ Association of India, castor seed production in 2013 is estimated at 1.14 million tonnes. Thus, NSEL’s Kadi unit was keeping almost 10 per cent of India’s castor seed stock in one place. In contrast, the castor seed stock of closest rival exchange NCDEX was 98,000 tonnes as on July 17 and spread over as many as 65 accredited warehouses.
It may be noted that as per industry estimates, NK Industries and Adani Agro are among the top four castor oil exporters in India. Sources maintained that AWN Agro controlled over 50% of India’s castor oil exports, surpassing the other two leaders – Jayant Agro and Gokul Refoils. The three entities put together controlled over 90% of India’s castor oil exports.
Adani rubbished the reports claiming their exposure to NSEL, as the company uses its own leased-out warehouses at Kadi.
“We have our own leased warehouses at Kadi nearby our plant. We don’t use NSEL warehouses or any other warehouses,” Chaturvedi claimed adding that the he hardly heard the name of the troubled spot exchange till it hogged the headlines recently.
However, market analysts claim that castor oil leaders can not remain unexposed to such an exchange. “One cannot buy the claims that big companies cannot have exposure to NSEL,” said a castor analyst.
It is learnt that NK Industries is one of the largest packaged castor oil seller in Gujarat. The company sells around 250,000 tonnes of castor oil annually, insiders claimed. As on last available data, NK had revenues of Rs 2,132 crore as on FY2011 and a loss of Rs 12 crore.
“It is quite likely that players such as NK Industries would have used NSEL platform as they too have similar interest in castor seed. An argument indicates that it was convenient for NK Industries with regard to assured supply of castor seed from NSEL at their preferred quality. And since they deal in bulk, NK can have better bargain power,” said another source privy to the development.