Adani sell-off hits $50bn after short seller targets group


Shares in the Adani Group’s flagship company fell 17 per cent on Friday in a sell-off fuelled by short seller allegations of fraud involving the business empire of one of the world’s richest men.

Other companies tied to Gautam Adani’s conglomerate also dropped sharply as the Indian tycoon pushes ahead with a Rs200bn ($2.4bn) share sale intended to attract global investors.

The sell-offs push the cumulative losses in market capitalisation to more than $50bn since Hindenburg Research alleged on Wednesday that the Adani Group had engaged in stock price manipulation and accounting fraud.

The allegations from Hindenburg, which said it had taken a short position in Adani Group companies, follow several years of breakneck expansion by the sprawling group, which sent its valuation soaring and catapulted Adani into the ranks of the world’s most prominent billionaires.

Shares in Adani Enterprises, the group’s main listed company which is conducting the equity offering, fell as much as 19.7 per cent in Mumbai to a low of Rs2,723.

The intraday low reflected an almost 17 per cent discount to the price per share of Rs3,276 paid by anchor investors already involved in the deal, including London-listed Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs. The drop below the offer price threatens to undercut the share sale, due to close on Tuesday, by dampening retail demand.

Losses among some of the six other listed Adani Group companies had also fallen to about 20 per cent, the maximum level allowed, including Adani Green Energy and Adani Transmission.

Line chart of Combined market value of listed Adani Group businesses (Rs tn) showing Adani sell-off sharpens

Adani is pressing ahead with the follow-on offering after the group’s companies shed close to $11bn in combined market capitalisation on Wednesday, following the allegations from Hindenburg. Books close on Tuesday.

Adani Group has denied the allegations, calling the report “a malicious combination of selective misinformation and stale, baseless and discredited allegations”.

India’s opposition Congress party on Friday called for the country’s securities regulator and central bank to investigate the allegations made by Hindenburg.

Jairam Ramesh, a Congress MP and the party’s general secretary for communications, said the Hindenburg report “demands a response” because Adani Group is “closely identified with Prime Minister Narendra Modi”. Modi was previously chief minister of Gujarat, Adani’s home state and his biggest base of operations.

The Adani Group stock sell-off has also hit wider sentiment in India, with the benchmark Nifty 50 stock index down more than 3 per cent since market close on Tuesday.

Analysts said the selling was intensified by traders playing catch-up following a national holiday in India on Thursday.

“These sharp price falls are a combination of the long holiday and the news flow,” said Deepak Shenoy, founder and chief executive of Capitalmind Wealth in Bangalore.

He added that the sell-off could dent demand for the follow-on offering by Adani Enterprises, but its impact on retail would not be clear until the final days of the sale. “Monday and Tuesday are when any real demand will come in,” Shenoy said.

Adani, a self-made tycoon who started as a commodities trader, built India’s largest private infrastructure group. He owns substantial stakes in all the group’s listed companies, including roughly three-quarters of Adani Enterprises.

Adani has said it is considering legal action against Hindenburg. A subsequent response from Hindenburg said the group “would welcome it”.

“If Adani is serious, it should also file suit in the US, where we operate,” the short seller said. “We have a long list of documents we would demand in a legal discovery process.”

Bill Ackman, the billionaire hedge fund manager, on Thursday described Hindenburg’s report as “highly credible” and “extremely well researched”.

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