Shares of India’s Adani Enterprises plunged on Friday after a scathing report by a US short seller triggered a selloff in the conglomerate’s listed firms, casting doubts on the success of the company’s record $2.45bn (€2.25bn) secondary share sale.
Seven listed companies of the Adani conglomerate – controlled by one of the world’s richest men Gautam Adani – lost a combined $48bn in market capitalisation, with US bonds of Adani firms also falling after Hindenburg Research flagged concerns in a January 24 report about debt levels and the use of tax havens.
The rout led to a near 20pc fall in shares of Adani Enterprises, the group’s flagship company, well below the offer price of its secondary sale. As bidding started yesterday, the issue was subscribed around 1pc, raising concerns over whether it would be able to proceed.
“The news cycle in the past few days has clearly impacted the share sale and you can clearly see that in the subscription levels, especially the low retail participation,” said Narendra Solanki, fundamental research head at domestic brokerage Anand Rathi.
The Adani Group was concerned but prepared to wait it out for now as the share sale continues until January 31, two people with direct knowledge of the situation said.
India’s capital markets regulator is studying the Hindenburg report as it may help its own probe into offshore fund holdings of Adani Group, two other sources said. Spokespersons for the regulator and Adani had no immediate comment.
Adani Group dismissed the Hindenburg report as baseless and said it is considering whether to take legal action against the New York-based firm.
With a net worth of $96.6bn, Gautam Adani is now the world’s seventh richest man, according to Forbes, slipping from third position due to the stock rout.
The 60-year-old hails from the western state of Gujarat, the home state of Prime Minister Narendra Modi. India’s main opposition Congress party has often accused Adani and other billionaires of getting favourable policy treatment from Mr Modi’s administration, allegations the billionaire denies.
The Adani Group was established in 1988, beginning with commodities trading. Its interests now extend from ports and airports to mining and renewable power.
Investors’ worries extended to Indian banks with exposure to Adani debt. The Nifty Bank index fell over 3pc, while the broader 50-share Nifty index ended down 1.6pc.
“There is nothing alarming about Adani exposure and we don’t have any concerns as of now,” Dinesh Kumar Khara, chairman of the country’s largest lender State Bank of India, told Reuters, adding that Adani hasn’t raised any recent funds from the bank.
Adani met the country’s power minister RK Singh, but the agenda of the meeting was not immediately known.
In its report, Hindenburg said key listed Adani Group companies had “substantial debt”, putting the conglomerate on a “precarious financial footing”. It also said “sky-high valuations” had pushed the share prices of seven listed Adani companies as much as 85pc beyond actual value.
