The crisis of confidence plaguing Gautam Adani has taken a sudden turn for the worse, with a record 28% plunge in his flagship company’s stock raising questions over the extra collateral he needs to cover loans.

Adani Enterprises Ltd. plummeted in afternoon trading in Mumbai after Bloomberg reported Credit Suisse Group AG has stopped accepting bonds of Adani Group’s firms as collateral for margin loans to its private banking clients. Banks including Barclays Plc had earlier asked for more shares to cover a $1 billion loan.

With the rout in the group’s stocks triggered by short seller Hindenburg Research’s fraud allegations reaching $92 billion on Wednesday, the risk is that more financial institutions start to scrutinize their exposure to the indebted conglomerate. Without a dramatic upturn, investors who bought into a recently completed $2.5 billion stock sale by Adani Enterprises may be staring at deep losses.

“The problem now is that the dynamics are becoming a self-reinforcing negative feedback loop and investors are now just dumping the shares and asking questions later,” said Peter Garnry, head of equity strategy at Saxo Bank A/S.

Eoin Treacy's view

Adani Enterprises is a trading house with interests in coal, shipping and ports. The size of leveraged positions is a product of risk appetite and the willingness of credit providers to provide margin trading. When margin calls come in, positions have to be reduced or the trader must successfully scramble for fresh funds. Adani Enterprises is currently receiving margin calls faster than it can source new funds. That is contributing to volatility.

The share has halved this year but it also rallied from INR500 to INR4000 in two years so there is a large band where trading can potentially settle. The biggest takeaway is this is a massive reaction against the prevailing trend and a top has been completed. It could be a long time before the peaks are retested.