Adani Enterprises Ltd began a record $2.45 billion (₹20,000 crore) secondary share sale for retail investors on Friday, as a heavy selloff in Adani group companies intensified after an attack by a U.S.-based short seller.
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 and saw falls in its U.S. bonds after Hindenburg Research flagged concerns in a report about debt levels and the use of tax havens.
Adani Group has dismissed the report as baseless.
Adani Enterprises aims to use the share sale proceeds for capital expenditure and to pay debt. The anchor portion of the sale saw participation from investors including the Abu Dhabi Investment Authority on Wednesday.
Bidding for the Adani Enterprises share sale for retail investors started on Friday and will close on January 31. The firm has set a floor price of ₹3,112 ($38.22) a share and a cap of ₹3,276. But on Friday the stock slumped to as low as ₹2,721.65, well below the lower end of the price offering.
Shares plunge on Friday
Adani group stocks took a beating falling up to 20% after Hindenburg Research’s damaging allegations. The group’s flagship Adani Enterprises, which launched the ₹20,000 crore FPO on Friday, tanked 18.52%. Adani Ports plunged 16%, Adani Power by 5%, Adani Green Energy by 19.99%, and Adani Total Gas by 20%.
In two days, the Adani group firms have lost a whopping ₹4,17,824.79 crore from their market valuation. The market valuation of Adani Total Gas plummeted ₹1,04,580.93 crore while that of Adani Transmission by ₹83,265.95 crore.
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Adani Enterprises market capitalisation fell by ₹77,588.47 crore, Adani Green Energy lost ₹67,962.91 crore and Adani Ports by ₹35,048.25 crore.
The market valuation of Ambuja Cements declined by ₹23,311.47 crore, Adani Power by ₹10,317.31 crore, ACC by ₹8,490.8 crore and Adani Wilmar by ₹7,258.7 crore.
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.
Continuing its decline for a second session, the 30-share BSE benchmark tanked 874.16 points or 1.45%, its biggest single day loss in more than a month, to settle at 59,330.90. This is the lowest closing level since October 21.
Investors’ wealth eroded by more than ₹10.73 lakh crore in just two trading sessions as the market slumped. Stock markets were closed on Thursday on account of Republic Day. Massive selling in the Adani group stocks also added to the overall bearish trend in the equity market.
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% beyond actual value.
Billionaire U.S. 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 U.S.-traded bonds and non-Indian-traded derivative instruments, meaning it is betting that their price would fall.
The Adani Group’s legal head, Jatin Jalundhwala, in a statement, said the report was an “intentional and reckless attempt by a foreign entity” to mislead the investor community and the general public.
He stressed that it was meant to “sabotage the FPO (Follow-on Public Offering) from Adani Enterprises”. “The maliciously mischievous, unresearched report published by Hindenburg Research on 24 Jan 2023 has adversely affected the Adani Group, our shareholders, and investors. The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens.”
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.
Adani dismisses concerns about debt levels
Adani Group has repeatedly faced and dismissed concern about 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".
"I don't see much effect of the Hindenburg report," Esquire Capital Investment Advisors Chief Executive Samrat Dasgupta told Reuters. The Adani Enterprises share sale "should sail through successfully."
Jefferies in a client note said Adani Group had shared details of debt and leverage levels, and that it does not "see material risk arising to the Indian banking sector".
Adani Group's consolidated gross debt stood at ₹1.9 trillion ($23.34 billion), Jefferies said.
Adani has said its debt is at a manageable level and that no investor has raised any concern.
Adani Enterprises' net profit for the period ended September 30, 2022 doubled to ₹9 billion ($110.31 million) while its total income nearly tripled to ₹795 billion, according to its share sale prospectus.
The company's total liabilities as of September 2022 stood at ₹869 billion ($10.64 billion), the prospectus showed.
(With inputs from Reuters and PTI)