NEW DELHI –
Shares of India’s Adani Group fell as much as 20% on Friday and the company said it was considering legal action against US-based short-seller Hindenburg Research for alleged market manipulation. stock market and accounting fraud causes investors to dump their stocks.
The sharp sale of Adani-related shares, which wiped out the multi-billion dollar market value of India’s second-largest corporation, caused trading of some Adani companies to be suspended or halted on Friday. .
The impact has been mainly on Adani Group companies so far, although India’s Sensex index fell 1.5% on Friday and its Nifty index fell 1.6%. But analysts say there could be bigger consequences if the selling continues.
Gautam Adani and his family have made a fortune by mining coal to power India’s rapidly growing economy. The group’s businesses span industries including construction, data transmission, media, renewable energy, defense manufacturing and agriculture.
In recent years, Adani’s net worth has increased by nearly 2,000% to $125 billion, according to the Bloomberg Billionaires Index. He briefly surpassed Amazon boss Jeff Bezos to become the world’s second-richest person briefly in September after the value of his seven listed companies skyrocketed. After this week’s losses, Bloomberg’s index ranks him as the fourth-richest person in the world with a fortune of $113 billion.
Shashank Aggarwal, an investment advisor representing Addwise Capital, said Adani’s stock is “trading at insane valuations”. “Certainly, the report triggered a correction.”
Investors began unloading shares after Hindenburg Research released a report saying they were betting on shares of companies belonging to the Adani empire. Hindenburg said it assessed seven of Adani’s main listed companies with “85% off, purely on a fundamental basis, due to sky-high valuations.”
Brian Freitas, a New Zealand-based Periscope Analytics analyst who has researched the Adani Group, said he does not currently see a risk of broader financial contagion, “other than a change in mentality It makes sense when investors start questioning the accounts of every single person and every company.”
However, if Adani’s lenders required more collateral and the stock used to borrow had to be sold to meet those needs, that would push prices even lower.
“In the event of a sharp drop in stocks, financial institutions themselves could be at risk,” he said.
Aggarwal notes that members of the Adani family hold a large percentage of the shares of the group, leaving a relatively small amount available for trading, which can increase price volatility.
If the issues raised in Hindenburg’s report are true, he said, it could have a broader impact. “Then the banking system was affected. It was a highly leveraged company. They certainly had a lot of loans from the bank.”
After being heavily sold on Wednesday, the Indian market was closed on Thursday for a holiday. The bloodshed resumed in earnest on Friday, with shares of leading company Adani Enterprises falling 18.3%. Its shares fell 1.6% on Wednesday.
Some of Adani’s companies have been hit even harder.
Shares of Adani Transmission fell 20% on Friday after falling 8.1% on Wednesday. Adani Green and Adani Total Gas are also 20% off. Adani Ports and Special Economic Zone Ltd. down 15.2%.
Hindenburg said its report, “The Adani Group: How the World’s 3rd Richest Man Is Running the Largest Scam in Corporate History,” follows a two-year investigation and “list 88 questions they invited the company (Adani) to answer.” Most of the charges relate to concerns about the corporation’s debt levels, the practices of top executives, the use of offshore shell companies and past fraud investigations. . It said Adani did not respond to any questions.
Late on Thursday, Jatin Jalundhwala, the Adani group’s head of legal affairs, said the team “is evaluating the relevant provisions under US and Indian law to remedy the consequences for the Hindenburg Study. “
“Clearly, the report and its unsubstantiated content are designed to adversely affect the stock value of Adani Group companies because the Hindenburg Research is, to their own admission, determined. position to benefit from the slide in Adani stock,” Jalundhwala said.
Jalundhwala said the allegations were an attempt by Hindenburg to sabotage Adani’s offering of shares, which was ruined because the value of Adani Enterprises’ shares fell below the asking price.
Hindenburg Research said in a rebuttal that it would welcome legal action by the Adani group.
“We fully support our report and believe that any legal action against us will be futile,” it said in a statement.
Freitas said he expects the weekend to give investors time to research the situation and Adani time to build a defense against Hindenburg’s criticism.
“If you look more broadly, it is not a great view for the Indian company that a short seller gives such a detailed report and the company cannot refute any argument,” he said. “.
“So it raises doubts about corporate governance in India in general and how the regulator fits into the picture,” said Freitas.
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AP business writer Elaine Kurtenbach in Bangkok contributed
