Avinash karn
Adani vs. Hindenburg: How Asia’s richest man lost his crown in just a few days
Indian billionaire Gautam Adani has attempted to soothe investors following his company’s unexpected decision to cancel its share sale.
Wednesday, Adani Enterprises announced it would refund $2.5 billion (£2 billion) to investors.
Mr. Adani has stated that the decision will not affect “our current activities and future plans.”
This action concludes an exciting week that began with a US investment firm accusing Adani group companies of fraud.
Adani disputes the charges.
In contrast, the market value of the group’s companies has declined by $108 billion during the past several days.
Mr. Adani has lost $48 billion of his own wealth and is now ranked sixteenth on the current Forbes list of billionaires.
How did this come about?
Prior to less than two weeks ago, Mr. Adani was the third richest man in the world.
The flagship firm of his port-to-energy conglomerate, Adani Enterprises, was scheduled to go public on January 25 in India’s largest secondary share offering ever.
A day earlier, however, the U.S. investment firm Hindenburg Research published a study accusing the Adani group of “brazen” stock manipulation and accounting fraud spanning decades.
Hindenburg specialises in “short-selling,” or betting against the share price of a firm in the assumption that it will decline.
The Adani group responded to the research by describing it as “a vicious combination of selective falsehoods and stale, unsubstantiated, and debunked charges,” but this did not allay investor concerns.
Mr. Adani’s company consists of seven publicly traded companies that engage in a variety of industries, including commodity trading, airports, utilities, ports, and renewable energy. Numerous Indian banks and state-owned insurance organisations have invested or lent billions of dollars to the group’s affiliated companies.
Was that all?
No. As the market decline persisted, the Adani Group produced a 400-page reply and dubbed the Hindenburg study a “calculated assault on India.”
Also Read | Adani groups cancels FPO in order to return investor funds.
It stated that it had complied with all applicable local laws and made all required regulatory disclosures. It also said that the purpose of the report was to allow Hindenburg “to record large financial gains through improper tactics at the expense of many investors.”
Hindenburg, however, stood by the assessment and stated that the Adani Group had “failed to answer 62 of our 88 queries in a detailed manner.”
How did the market respond?
On January 25, the Adani Enterprises share sale began to a muted reception. On the second day, only 3% of its shares had been purchased, while retail investors stayed away.
Nonetheless, foreign institutional investors and corporate funds supported the group; on 30 January, Abu Dhabi’s International Holding Company, backed by a member of the United Arab Emirates royal family, invested $400 million in the share sale.
Bloomberg stated that in a last-minute rush, Indian tycoons Sajjan Jindal and Sunil Mittal also purchased shares in their own capacity.
After the share sale, analyst Ambareesh Baliga told Reuters that the organisation had failed to achieve its goal of “broadening the shareholding.”
Diverse group companies’ stock prices continued to decline.
So what’s next?
According to Reuters and Bloomberg, India’s central bank has requested information from the country’s lenders regarding their exposure to the business.
Mr. Adani stated in his statement to India’s markets, “Our balance sheet is quite solid, with strong cashflows and secure assets, and we have an impeccable track record of fulfilling our loans.”
Edward Moya, an analyst at the brokerage firm OANDA, told Reuters that the withdrawal of the share sale was “worrisome” because it was “intended to demonstrate that high net-worth investors still have faith in the company.”
Citigroup’s wealth department has ceased taking Adani group securities as collateral for margin loans, while Credit Suisse has also stopped accepting the firm’s bonds. Moody’s subsidiary ICRA stated that it was evaluating the impact of recent events on Adani Group stock.
Vinayak Chatterjee, founder and managing trustee of the Infravision Foundation, viewed the current situation as “a temporary blip.”
“As an infrastructure expert, I have observed this group for 25 years. I observe numerous operating projects, including ports, airports, cement plants, and renewables, that are robust, reliable, and producing a healthy cash flow. They are entirely protected from the fluctuations of the stock market “He told Arunoday Mukharji of the BBC.
Hemindra Hazari, an independent research analyst, expressed surprise that “we haven’t heard anything from market regulator SEBI or the government so far.”
“They ought to have spoken out to calm investor anxieties,” he told the BBC.
This problem has also sparked a political dispute.
Mr. Adani is seen to be close to Prime Minister Narendra Modi, and opposition leaders have long accused him of profiting from his political links, which he denies.
Thursday, opposition parties urged a parliamentary discussion over the risk to Indian investors posed by the decline in Adani firm shares. Additionally, they have requested a probe into Hindenburg’s allegations.
