NEW DELHI, Feb 2 (Portal) – Shares in India’s Adani group fell on Thursday after market turmoil forced the conglomerate to cancel a crucial £2.5 billion share offering.
The pullback of Adani Enterprises (ADEL.NS) stock sale was a dramatic setback for Gautam Adani, the high school dropout-turned-billionaire whose fortune has soared in recent years but has dwindled rapidly following criticism from a US-based short seller Research report published on January 24th.
Events are an embarrassing turn of events for the billionaire, who has forged partnerships with foreign players and marquee investors in a global expansion of companies spanning from ports to mining to cement.
Adani halted its share sale late Wednesday as the stock flight sparked by criticism from short seller Hindenburg deepened, although the offer was fully subscribed on Tuesday. In the aftermath of the attack, Adani also lost his title as Asia’s richest man.
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The group’s flagship — Adani Enterprises (ADEL.NS) — plummeted 10% after opening on Thursday. Other group companies — Adani Ports and Special Economic Zone (APSE.NS), Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) — each fell 10%, while Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) each lost 5%.
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Adani has slipped to 16th in the world’s richest list from last week’s third place, according to Forbes.
“Sales could strengthen in the afternoon as we have already seen. If Adani fails to win back institutional investors’ confidence, shares will be in freefall,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.
Adani’s falling shares have raised concerns about the likelihood of a larger impact on India’s financial system.
The central bank of India has asked local banks for details on its involvement in the Adani group of companies, government and bank sources told Portal on Thursday. CLSA estimates that Indian banks were exposed to about 40% of the Rs. 2 trillion (US$24.53 billion) of Adani Group debt in the fiscal year ending March 2022. Read more
Citigroup’s (CN) asset arm stopped providing margin loans to its customers against Adani Group securities and decided to cut the loan-to-value ratio for loans against Adani securities to zero on Thursday, a source said.
In New Delhi, opposition MPs in India’s parliament submitted memoranda calling for a discussion of the US short seller’s report. Congress party lawmaker Manish Tewari said he would call for an investigation into the matter by the Joint Parliamentary Committee, Portal affiliate ANI reported.
ADANI VS HINDENBURG
Hindenburg’s report last week alleged abuse of offshore tax havens and stock manipulation by the Adani group. It also raised concerns about the high level of debt and valuations of seven Adani listed companies.
The Adani Group has denied the allegations, saying the short seller’s allegation of stock manipulation has “no basis” and stems from a ignorance of Indian law. The group has always made the necessary regulatory disclosures, she added.
Earlier this week, Adani Group said it had the full support of investors but investor confidence had waned in recent days.
As shares plummeted after the Hindenburg report, Adani managed to secure share sale subscriptions on Tuesday, even though the share’s market price was below the offering price of the issue. But on Wednesday, shares plunged again.
In a late night announcement on Wednesday, Adani said he was withdrawing the share sale because the company’s “stock price has fluctuated throughout the day. Given these exceptional circumstances, the Company’s board of directors believed that proceeding with the offering will not be morally correct.”
Adani said in a video address early Thursday that “my investors’ interest is paramount and everything is secondary. Therefore, to protect investors from potential losses, we have withdrawn the share sale.”
Reporting by Chris Thomas, Aditya Kalra and Nallur Sethuraman in Bengaluru; Adaptation by Muralikumar Anantharaman
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