Indian billionaire Gautam Adani had more than $50bn wiped from the value of his business empire this week after a US short seller alleged fraud, threatening the success of a key share sale designed to attract international investors.
Shares in the Adani Group’s flagship company plunged 19 per cent on Friday, leading steep declines in the Mumbai-listed groups that make up a sprawling empire spanning ports to energy.
Adani, one of the world’s richest men, has faced intense scrutiny since short seller Hindenburg Research on Wednesday accused the Adani Group of engaging in stock price manipulation and accounting fraud over the course of decades. The group has denied the allegations.
Hindenburg launched the critique just days before Adani Enterprises embarked on a share sale to raise Rs200bn ($2.4bn) and intended to show the broad appeal of his business empire.
Adani Enterprises stock closed 18.5 per cent lower at Rs2,761 on Friday, an almost 16 per cent discount to the Rs3,276 that a group of institutional investors anchoring the share sale have agreed to pay.
Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs are among the institutions that were already allocated shares before the fraud allegations were made public.
The steep sell-off in Adani Enterprises threatens to dent demand from retail investors in India, who were permitted to start bidding for the shares on Friday. The sale is expected to complete on Tuesday.
Deepak Shenoy, chief executive of CapitalMind Wealth in Bangalore, said that the extent of the fallout on retail demand would not be clear until next week. “Monday and Tuesday are when any real demand will come in,” Shenoy said.
Adani Group has vowed to press ahead with the share sale despite the 60-year-old billionaire facing the biggest challenge of a career that has turned him into one of India’s most powerful moguls.
After starting life as a commodities trader, Adani built India’s largest private infrastructure group with about a dozen ports and eight airports and is expanding at breakneck pace.
The company has denied the allegations from Hindenburg, 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.
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 turmoil engulfing the listed Adani companies has also hit broader sentiment in India, with the benchmark Nifty 50 stock index down almost 3 per cent since market close on Tuesday.
Analysts said the selling on Friday was intensified by traders playing catch-up following a national holiday in India on Thursday.
Other Adani companies also endured steep losses with Adani Green Energy and Adani Transmission each sliding 20 per cent, taking the total losses in market capitalisation of Adani groups to $52bn.
One of the investors involved said of the share sale: “They [Adani Group] probably can’t raise that by Tuesday unless the share price goes up.”
Adani, a self-made tycoon, 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”.
With reporting by Emma Dunkley in London