Beleaguered Indian billionaire Gautam Adani said on Thursday his conglomerate will review its plans to raise capital after canceling a $2.5 billion share offer in his flagship company following the loss of tens of billions of dollars in value of assets. market due to allegations of fraud by a US-based short-term vendor firm.
Adani Enterprises called off the share sale Wednesday night, citing “market volatility.” Shares in the coal mines to ports empire plunged after Hindenburg Research, which has a history of driving share prices down from its targets, accused the group of “blatant” stock market manipulation and accounting fraud, among other financial abuses.
The share sale was seen as a crucial test of investor confidence in Adani, whose net worth has soared around 2,000% in recent years as share prices of his publicly traded companies soared. .
By the time they closed business on Wednesday, Adani Enterprises was down 28%. But the stock offering had attracted nearly 51 million bids, surpassing the 45.5 million offered to the public. Shares of six of Adani’s other listed companies sank between 2% and 19%.
Early Thursday, Adani Enterprises was down 5%. Shares of four of Adani’s other publicly traded companies fell 10% and two others sank between 5% and 8%.
In a video speech on Thursday, Adani said the decision to cancel the share offering was made “to insulate investors from potential loss.”
“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 will not “have any impact on our existing operations and future plans,” he said, adding that the group’s balance sheet was “very healthy” with strong cash flows and safe assets.
Adani made a fortune mining coal as energy-hungry India grew rapidly after its economy was liberalized in the 1990s. Adani’s companies operate airports in major cities, build roads, generate electricity, manufacture equipment defense, develop agricultural drones, sell cooking oil and run a media outlet.
Hindenburg said he was betting against the group, accusing it of “pulling the biggest scam in corporate history.” He said he judged the seven key Adani-listed companies to be “85% underperforming, purely on a fundamental basis due to sky-high valuations.”
Most of the allegations involved concerns about the group’s debt levels, the activities of top executives, the use of offshore shell companies to artificially increase share prices, and previous fraud investigations. He listed 88 questions for the group to answer.
The Adani Group dismissed Hindenburg’s allegations, calling his report a “calculated attack on India, the independence, integrity and quality of Indian institutions, and India’s history of growth and ambition.” On Sunday, it issued a 413-page report that rejected his questions, saying none were “based on journalistic or independent factual investigation.”
Adani’s response included documents and data tables. He said the group has made all necessary regulatory disclosures and complied with local laws.
Wednesday’s stock losses cost Adani his title as the richest man in Asia and India. Adani also slipped from a ranking of being the world’s third-richest man to 13th as his fortune plummeted to $72 billion, according to the Bloomberg Billionaires Index. Before the Hindenburg report, his net worth was about $120 billion.
