Gautam Adani ‘s confidence crisis is worsening, with a stock rout prompted by Hindenburg Research’s fraud charges wiping nearly a third of the market value in his group’s companies despite the completion of a significant share transaction.
The drop in prices accelerated in afternoon trading, with all ten equities associated with the billionaire falling. Adani Enterprises Ltd., the flagship company that completed a $2.5 billion follow-on stock offering on Tuesday, lost up to 15% of its value.
The uproar reflects increased anxiety over the conglomerate’s debt load accrued as a result of its rapid expansion into businesses ranging from green energy to media, with short-seller Hindenburg accusing it of misrepresenting revenue. Banks have requested more stock collateral on a loan as the group’s stock selloff has reached $80 billion, according to Bloomberg this week.
“It’s a wait-and-see situation. “They found the investors, but Hindenburg Research’s concerns have not been addressed,” said Brian Freitas, an analyst at Smartkarma.
Adani Enterprises’ offering was India’s largest follow-on share sale, and it was completely subscribed to on a penultimate day, thanks to a surge in demand from institutional investors at the last minute. At least two of India’s most powerful business families, including tycoons Sajjan Jindal and Sunil Mittal, are claimed to have taken part in solidarity with Adani.
Adani was expecting to recruit retail investors, but interest was noticeably low. The exact pricing for the offering is scheduled to be announced later Wednesday. The offering received bids for 1.12 times the number of shares available, which was less than six of seven jumbo-sized sales examined by Bloomberg.
On Wednesday, Adani Enterprises fell as low as 2,527.85 rupees, or 19% below the lower end of the offer price range of 3,112-3,276 rupees.
The increasing selloff in Adani dragged on India’s broader benchmarks, wiping off a budget-fueled gain of up to 1.8% on the Nifty 50. The stock of Life Insurance Corporation of India, an Adani shareholder, and participant in the share sale, fell roughly 6%.
The crisis surrounding Asia’s richest man has also become a test case for India, with Hindenburg’s charges raising concerns about the country’s corporate governance, and Adani himself calling the report an attack on India. It has converted the company into a drag on the country’s stock markets, a sharp contrast to last year when Adani-linked equities fueled a world-beating surge.
The success of the fundraising appears to have provided immediate respite to the credit market, with most of the Adani group’s dollar bonds extending gains into the next day. The latest stock offering by the flagship company is meant to help repay debt.
However, if Adani’s stock prices continue to fall, the pressure on the conglomerate’s debt, which uses shares as security, will increase.
