AP

India’s Adani scraps $2.5B share sale after fraud claims

Feb 2, 2023, 1:09 AM | Updated: 3:13 pm

NEW DELHI (AP) — Indian conglomerate Adani Enterprises called off its $2.5 billion share offering after it lost tens of billions of dollars in market value due to fraud claims by a U.S.-based short-selling firm.

Billionaire Gautam Adani ‘s company said Thursday it will review its plans for raising capital after it canceled the share sale late Wednesday, citing “market volatility.”

Adani stocks sank after Hindenburg Research, which has a track record of sending stock prices of its targets tumbling, accused the group of “brazen” stock market manipulation and accounting fraud, among other financial abuses.

The share offering had drawn nearly 51 million bids, exceeding the 45.5 million offered to the public. It was seen as a crucial test of investor confidence in Adani, whose net worth had shot up about 2,000% in recent years as share prices for his listed companies soared.

Adani made a vast fortune mining coal as energy-hungry India grew swiftly after its economy was liberalized in the 1990s. Adani companies operate airports in major cities, build roads, generate electricity, manufacture defense equipment, develop agricultural drones, sell cooking oil and run a media outlet.

By the time trading closed Thursday, Adani Enterprises was down by another 27% in a single day, following Wednesday’s 30% drop. Stocks in six of Adani’s other listed companies sank between 5% and 10%.

Overall, shares in Adani Enterprises have tumbled 54.5% since the Hindenburg report was published last week.

In a video address Thursday, Adani said the decision to scrap the share offering was made “to insulate the investors from potential losses.”

“For me, the interest of my investors is paramount and everything else is secondary,” he said.

Adani Enterprises said in a statement that it would withdraw the transaction and return the money to its investors. The decision would not “have any impact on our existing operations and future plans,” it said, adding that the group’s balance sheet was “very healthy” with strong cashflows and secure assets.

Hindenburg said it was betting against the group, accusing it of “pulling the largest con in corporate history.” It said it judged the seven key Adani listed companies to have an “85% downside, purely on a fundamental basis owing to sky-high valuations.”

Most of the allegations involved concerns about the group’s debt levels, activities of top executives, use of offshore shell companies to artificially boost share prices and past investigations into fraud. It listed 88 questions for the group to answer.

Adani Group dismissed Hindenburg’s allegations, and called its report a “calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.” On Sunday, it issued a 413-page report that rejected its questions, saying none were “based on independent or journalistic fact finding.”

Adani’s response included documents and data tables. It said the group has made all necessary regulatory disclosures and abided by local laws.

India’s parliament was adjourned Thursday for the first half of the day when the chair of the upper house rejected a request by opposition lawmakers to debate the allegations made by Hindenburg.

India’s federal government and its finance ministry have not commented on the Adani stock rout so far.

Mallikarjun Kharge, president of the main opposition Congress party, told reporters opposition parties were demanding a discussion of public sector investments “in companies losing market value, endangering the hard-earned savings” of millions of Indians. The opposition parties were pushing for an investigation into the Adani Group by a parliamentary or a Supreme Court-appointed panel.

The stock losses on Wednesday cost Adani his title as the richest man in Asia and in India. He slid from being the world’s third richest man to the 13th as his fortune plummeted to $72 billion, according to Bloomberg’s Billionaire Index. Prior to the Hindenburg report, his net worth was about $120 billion.

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India’s Adani scraps $2.5B share sale after fraud claims