MUMBAI, Jan 27 (Reuters) – Shares in India’s Adani Enterprises (ADEL.NS) fell 20% on Friday as a scathing report by a U.S. short-seller sparked a plunge in the group’s listed company, raising doubts How investors will respond to the company’s record $2.45 billion secondary offering.
Adani Group’s seven listed companies – controlled by Gautam Adani, one of the world’s richest men – have lost a combined $48 billion in market value since Wednesday, according to Hindenburg Research. Adani’s US bonds also fell after expressing concerns on Jan. 10. 24 Report on debt levels and use of tax havens.
Shares in the group’s flagship Adani Enterprises plunged well below the offer price of its secondary sale, which was initially offered at a discount.
Adani Group is concerned about the share price drop but remains on the sidelines as share sales continue until January 10. 31, indicating two persons with direct knowledge of the discussion.
India’s capital markets regulator is studying Hindenburg’s report and may use it to aid its ongoing probe into Adani Group’s offshore fund holdings, two other sources said. Spokespeople for the regulator and Adani were not immediately available for comment.read more
Adani Group dismissed the Hindenburg report as baseless and said it was considering whether to take legal action against the New York-based company. It did not immediately respond to a request for comment on the regulator’s move.
Billionaire Gautam Adani has a net worth of $97.6 billion, according to Forbes magazine, slipping from his third position before the Hindenburg Report to now the seventh richest person in the world .
Adani met the county’s power minister, RK Singh, in New Delhi on Friday, according to a person familiar with the matter. An agenda for the meeting was not immediately released.
The billionaire hails from the western state of Gujarat, the home state of Prime Minister Narendra Modi. India’s main opposition Congress party regularly accuses Adani and other billionaires of receiving preferential treatment from Modi’s federal government, an allegation the billionaires deny.
The shock market sell-off overshadowed Adani Enterprises’ secondary share sale, which started on Friday. Investors, including Abu Dhabi Investment Authority, took part in a major part of the sale on Wednesday.
“The sell-off was pretty severe … it’s clearly dampened the overall investor sentiment in the market,” said Saurabh Jain, assistant vice president of research at SMC Global Securities.
Market concerns extended to Indian banks linked to Adani Group’s debt. The Nifty Bank index (.NSEBANK) fell more than 3 percent, while the broader 50-stock Nifty index (.NSEI) fell 1.5 percent.
CLSA estimates Indian banks account for about 40% of Adani Group’s 2 trillion rupiah ($24.53 billion) in debt for the fiscal year ending March 2022.
Investors, mainly retail investors, had bid for about 320,000 Adani Enterprises shares, less than 1% of the 45.5 million shares, as of 0818 GMT, according to BSE exchange data. Retail investor bidding will close on January 1. 31.
The stake sale was managed by Jefferies, India’s SBI Capital Markets, Axis Capital and ICICI Securities, among others.
The company set a floor price of 3,112 rupees ($38.22) per share, with a ceiling of 3,276 rupees. But on Friday, the stock fell to a low of 2,721.65 rupees – well below the floor of the issue price.
Shares in other Adani-listed companies also tumbled, with Adani Transmission Ltd (ADAI.NS), Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Ports (APSE.NS) down 20 percent each.
Adani Ports, Adani Green Energy and Adani Transmission posted their worst intraday losses on record on heavy volume.
Dollar-denominated bonds issued by Adani Green Energy (ADNA.NS) extended sharp losses this week, falling to just under 77 cents on face, the lowest level since November, according to Tradeweb data. The price was last down 7.32 cents at 77.007 cents.read more
In its report, Hindenburg said Adani Group’s main listed companies were “heavily indebted”, leaving the group on “unstable financial footing” and that “sky-high valuations” had pushed up the share prices of seven Adani listed companies up to 85 % above the actual value.
Billionaire U.S. investor Bill Ackman said Thursday he found Hindenburg’s report “very credible and very well researched.” Ackman had bet $1 billion on Herbalife since 2012, but backed out at a loss.
Hindenburg said it held a short position in Adani through its U.S.-traded bonds and non-India-traded derivatives.
Adani Group has repeatedly confronted and dismissed concerns about its debt levels. It defended itself in a presentation on Thursday titled “The Myth of the Short Seller”, saying the deleveraging of promoters – or major shareholders – was “in a hypergrowth phase”.
Jefferies said in a client note that it does not believe Adani Group’s debt poses a significant risk to the Indian banking sector. Adani said its debt was at a manageable level and no investors had raised any concerns.
Adani Group has been diversifying its business interests, buying cement companies ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) from Switzerland’s Holcim (HOLN.S) last year for $10.5 billion. ACC shares fell 15% on Friday, while Ambuja shares plummeted 25%.
Reporting by M. Sriram and Chris Thomas; Editing by Aditya Kalra, Christopher Cushing and Kim Coghill
Our Standards: The Thomson Reuters Trust Principles.