Adani empire loses more than US$ 100 bn after fraud claims

AFP: Under-fire Indian tycoon Gautam Adani’s empire has lost more than US$ 100 billion in value over the past week as shares in several firms plunged again yesterday, a day after the group cancelled a multi-billion-dollar public offering. 

The billionaire’s sprawling conglomerate has been thrown into turmoil following explosive allegations of accounting fraud on January 24 by US short-seller Hindenburg Research.
Flagship firm Adani Enterprises dived 14 percent having lost almost 30 percent Wednesday - and has now halved in value since the start of the year.

Other listed companies of Adani’s business empire were subject to trading halts after falling as much as 10 percent at the open in Mumbai.

Among them is Adani Total Gas in which French oil major Total Energies holds 37.4 percent which has now lost 52 percent since January 1.

Further panic has seen big banks including Credit Suisse and Citigroup stop accepting Adani bonds as collateral for loans to private clients, according to Bloomberg News.

The latest selling pressure came after Adani late Wednesday cancelled a US$ 2.5 billion stock sale that was meant to help reduce debt levels which have long been a concern and restore confidence by broadening its shareholder base.

But, the issue failed to attract “mom and dad” retail investors and only sold out thanks to large institutional buyers, fellow Indian tycoons and US$ 400 million from the United Arab Emirates’ IHC.

The Adani Enterprises board said in a statement that going ahead with the issue “would not be morally correct” and that it would refund all payments.

Adani himself insisted in a video statement that the “fundamentals of our company are very strong, our balance sheet is healthy and assets robust”.

“Once the market stabilises, we will review our capital market strategy,” he said, stressing that its record on paying back debt was “impeccable”.

Adani, a 60-year-old publicity-shy school dropout, has seen his operations expand at breakneck speed, with shares in Adani Enterprises soaring more than 1,000 percent over the past five years.

Until last week, he was the world’s third-richest man, behind Twitter and Tesla owner Elon Musk and France’s Bernard Arnault and family.

By Thursday he had slipped down to 16th place in the real-time Forbes rich list, losing his crown as Asia’s richest man to fellow Indian Mukesh Ambani.

According to Hindenburg Research, Adani has artificially boosted the share prices of its units by funnelling money into the stocks through offshore tax havens.

This “brazen stock manipulation and accounting fraud scheme” is “the largest con in corporate history”, Hindenburg said.

Adani said it was the victim of a “maliciously mischievous” reputational attack and issued a 413-page statement on Sunday that it said showed Hindenburg’s claims were “nothing but a lie”. Hindenburg, which makes money by betting on stocks falling, said in response that Adani failed to answer most of the questions raised in its report. Critics say Adani’s closeness to Prime Minister Narendra Modi, also from Gujarat state, has helped him win business and avoid proper oversight.

Analysts say that the turmoil has hurt India’s image just as it seeks to woo overseas investors away from China. Independent markets commentator Srinath Sridharan said the crisis was a key test for India’s financial regulators.

“Are they asking questions, demanding disclosures? All that is extremely critical,” Sridharan told AFP, calling the mayhem a “lesson for India Inc”.

India’s central bank has asked lenders for details of their exposure to the Adani Group - whose interests include ports, telecoms, airports, media and coal, oil and solar power - Bloomberg reported citing unnamed sources.

Parliament was adjourned yesterday morning after repeated interjections from lawmakers demanding the government grant a debate on Adani and the level of exposure by public-sector banks and financial institutions.

Its highly controversial coal project in Australia includes a mine, a port operation and plans to link the two with a railway line that would open up a vast area to exploration.

A number of major Australian and international banks said publicly that they would not finance the project.

Other Indian equities have remained steady since Adani’s slide and Indian tech minister Ashwini Vaishnaw told Bloomberg TV said he was not worried about a domino effect. “India has a very broad spectrum of infrastructure companies,” he said. “Whatever blip is there on the stock market is not going to affect the overall economy, I am very sure of that.”