Adani shares plunge another 20% after Hindenburg report

Shares of India's Adani Enterprises sank nearly 20 per cent on Friday as a scathing report by a US short seller triggered a rout in the conglomerate's listed companies, casting doubts on how investors will respond to the company's record $2.45 billion secondary sale.

Seven listed companies of the Adani conglomerate — controlled by one of the world's richest men Gautam Adani — have lost a combined $48 billion in market capitalisation since Wednesday, with US bonds of Adani companies also falling after Hindenburg Research flagged concerns in a January 24 report about debt levels and the use of tax havens.

The rout took shares of Adani Enterprises, the group's flagship company, well below the offer price of its secondary sale, which had initially been offered at a discount.

India's capital markets regulator is studying the Hindenburg report and may use it to aid its own continuing probe into offshore fund holdings of Adani Group, two sources said.

Representatives for the regulator had no immediate comment.

Adani Group has dismissed the Hindenburg report as baseless and said it is considering whether to take legal action against the New York-based firm. It did not immediately respond to a request for comment on the regulator's move.

With a net worth of $97.6 billion, billionaire Gautam Adani is now the world's seventh richest man, according to Forbes, slipping from the third position he held before the Hindenburg report.

Mr Adani met the county's power minister RK Singh on Friday in New Delhi, according to a source familiar with the matter. The agenda of the meeting was not immediately known.

The stunning market sell-off has cast a shadow over Adani Enterprises' secondary share sale that started on Friday.

"The sell-off is seriously extreme ... it has clearly dented the overall investor sentiment in the market," said Saurabh Jain, assistant vice-president of research at SMC Global Securities.

Market worries extended to Indian banks with exposure to Adani's debt. The index tracking state-run banks slid 6.6 per cent, while the main Nifty Bank index fell 3.5 per cent.

Investment group CLSA estimates that Indian banks were exposed to about 40 per cent of the 2 trillion rupees ($24.53 billion) of Adani Group debt in the fiscal year to March 2022.

Investors, mostly retail, had bid for around 320,000 shares of Adani Enterprises, or less than 1 per cent of the 45.5 million on offer, according to BSE exchange data as of 12.18 pm UAE time. Bidding for retail investors will close on January 31.

The share sale is being managed by Jefferies, India's SBI Capital Markets, Axis Capital and ICICI Securities, Among others.

The company has set a floor price of 3,112 rupees a share and a cap of 3,276 rupees. But on Friday, the stock slumped to as low as 2,721.65 rupees — well below the lower end of the price offering.

Shares of other listed Adani companies also plummeted, with Adani Transmission, Adani Total Gas, Adani Green Energy and Adani Ports sinking 20 per cent each.

US dollar-denominated bonds issued by Adani Green Energy extended this week's sharp falls to just under 77 cents in the dollar to their lowest since November, Tradeweb data showed. The price was last down 7.32 cents to 77.007 cents.

In its report, Hindenburg said key listed Adani Group companies had "substantial debt", putting the conglomerate on a "precarious financial footing", and that "sky-high valuations" had pushed the share prices of seven listed Adani companies as much as 85 per cent beyond actual value.

Billionaire US investor Bill Ackman said on Thursday that he found the Hindenburg report "highly credible and extremely well researched".

Hindenburg said it held short positions in Adani through its US-traded bonds and non-Indian-traded derivative instruments.

Adani Group has repeatedly faced and dismissed concerns about its debt levels. It defended itself in a presentation titled "Myths of Short Seller" on Thursday, saying deleveraging by promoters — or key shareholders — was "in a high growth phase".

Jefferies, in a client note, said it does not see material risk arising to the Indian banking sector from Adani Group's debt. Adani has said its debt is at a manageable level and that no investor has raised any concern.

The Adani conglomerate has been diversifying its business interests and last year bought cement firms ACC and Ambuja Cements from Switzerland's Holcim for $10.5 billion. ACC shares slid 15 per cent on Friday, while Ambuja plunged up to 25 per cent.

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