Thread by @Abhishe27960014

🚨"Adani Group Pledges More Shares: Unraveling the Reason Behind the Move"

[THREAD🧵]

1) SBICAP Trustee said that 3 Adani companies(Adani Transmission/Adani Green/Adani Ports) have pledged additional shares for lenders of Adani Ent.

#AdaniGroup #AdaniEnterprises #AdaniFiles

2) This could be because of Margin Call from the lenders to Adani Group.

3) What is Margin call?

When company's shares go down below a preset value that can cover bank's loan value, the bank will ask for more money or shares as a guarantee that the loan will be paid back.

4) Given the recent decline in Adani Group's stock prices, it is possible that the lenders may have requested additional margin for security.

5) If the business owner is unable to meet the bank's request for additional funds or collateral, the bank has the authority to sell the pledged shares on the stock market to secure repayment of the loan.

6) If banks start selling shares in order to get their money back, it will make other investors less confident & they will also start selling their shares.

This can create a cycle of more selling and more banks asking for more money. This process is called Downward Spiral.

7) Therefore, to prevent this outcome, it is crucial for the Adani Group to offer collateral, which is why they might be pledging additional shares to cover the additional margin requested by the lenders.

Disclaimer: This is based on my limited understanding of the situation and I may be mistaken in my analysis.

I would be interested in hearing others' perspectives on this matter.

The SBI spokesperson said that required collateral coverage is reviewed at the end of each month and any shortfall is required to be topped up.

There have been top-ups in June and July 2022. The February pledge was 3rd such top up.

Source:

timesofindia.indiatimes.com/business/india…