The fallout from a US short-seller’s scathing report into Adani – which alleges stock manipulation and fraud – has so far wiped more than $100 billion off the Indian conglomerate’s value.
Adani’s sprawling interests span ports, power, airports, rail, and coal mines – including the contentious Carmichael thermal coal mine and rail project in Queensland, which began exporting coal last year and aims to produce 10 million tonnes a year.
A Company In Crisis
Adani has been in crisis mode since the publication of a report by US short-seller Hindenburg Research a week ago, which alleges the group’s founder and chairman Gautam Adani is “pulling the largest con in corporate history” through “a brazen stock manipulation and accounting fraud scheme over the course of decades.”
Adani has denied the allegations, labelling the report as a “malicious combination of selective misinformation and concealed facts.”
The plunge in Adani shares is one of the biggest wipeouts in corporate history.
Coal Mines In Australia
While the fallout continues across Adani’s global business, Morningstar analysts say it shouldn’t impact the viability of its Queenland coal mine, which began exporting coal in December and has been benefiting from soaring thermal coal prices.
Morningstar’s director of equity research Mathew Hodge says while coal prices have come off their highs recently, the thermal coal price remains at sky high levels relative to history and the mines are generating ‘amazing’ returns.
“In the event Adani gets into financial distress, from the point of view of thermal coal supply and prices, now the mine is built and producing, it's unlikely to have an impact,” Mr Hodge says.
“So long as the mine is built and profitable, we'd expect that supply to remain in the market, even if there is an outside chance of a change in ownership.”
Morningstar’s mining analyst Jon Mills added supply-demand constraints will continue to underpin prices.
“On the thermal coal side, there’s very few new mines being built in the west,” he says.
“So if you’ve got diminishing supply with demand increasing – and we’re now burning more thermal coal than ever on a global basis – that’s obviously bullish for prices and hence, the Carmichael coal mine.”
Mills says thermal coal prices remain elevated compared with historical values as the Russia-Ukraine war reinforces the importance of energy security.
This article originally appeared on Morningstar.com.au and has been slightly modified for an Asian audience.
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