The majority of Adani Group shares plunged on Monday as the Indian conglomerate’s response to criticism from a US short seller fell on deaf ears with investors, escalating a market meltdown that has already cost the company’s stock $65 billion.
The Indian business, led by Asia’s richest man Gautam Adani, has been at odds with Hindenburg Research and responded on Sunday to the short seller’s report from the previous week that raised worries about its level of debt and usage of tax havens.
Adani claimed to have followed all local regulations and to have provided the required regulatory disclosures.
On Monday, the stock prices of Adani Transmission, Adani Total Gas, Adani Green Energy, Adani Power, and Adani Wilmar plummeted by 5% to 20%.
Flagship Adani Enterprises fluctuated between gains and losses before closing 4.8 percent higher. This week’s follow-on share offering will be a crucial test for the company. It maintained a significant distance from the issue’s offer price, which, if it is accepted, will represent India’s largest-ever share offering.
The second day of Adani Enterprises’ $2.5 billion secondary share offering came to an end amid gloomy investor sentiment. The stock’s closing price of 2,892.85 rupees ($35.47) was 7% less than the lower limit of the offer price band of 3,112 rupees ($38.17). A maximum of 3,276 rupees ($40.17) is set.
Adani has now received offers for 1.4 million shares, or slightly more than 3 percent, of the 45.5 million shares up for sale, according to data from stock exchanges on Monday. On Tuesday, the agreement is finalized.
According to the data, neither domestic nor international institutional investors, nor mutual funds, have placed any offers thus far.
Hemang Jani, stock strategist at Motilal Oswal Financial Services, said: “Retail participation is expected to have a shortfall with current market prices still trailing the offer price and sentiment taking a knock due to the Hindenburg issue.”
Even though there is a chance the share sale won’t go through, it will be important to watch to see how institutional investors participate right now.
International Holding Company, an Abu Dhabi corporation, announced on Monday that it will contribute 1.4 billion dirhams ($381.17 million) to the sale.
Even though sources claimed bankers of the nation’s largest secondary share sale were considering extending the timeline beyond January 31 or adjusting the price due to the decline in its share price, the Adani Group told Reuters in a statement on Saturday that the sale remained on schedule at the planned issue price.
According to Indian regulations, the share offering must receive a minimum of 90% of the total subscription; otherwise, the issuer is required to repay the full cost. Among the investors who submitted bids for the anchor portion of the offering were Maybank Securities and the Abu Dhabi Investment Authority.
Maybank stated in a statement that the subscription to Adani’s offer was entirely supported by client funds and that “there is no financial impact” on it.
Life Insurance Corporation (LIC), a state-run insurance giant in India, said on Monday that it was examining the Adani Group’s response to Hindenburg’s assessment and will meet with the management in the coming days.
LIC received 5% of the $734 million anchor component. It already owns a 4.23 percent interest in the main Adani company, and it also has exposures to 5.96 percent in Adani Total Gas and 9.14 percent in Adani Ports.
Raj Kumar, the managing director of LIC, said, “Since we are a significant investor, we have the right to ask pertinent questions.
Adani Ports and Special Economic Zone’s US dollar-denominated bonds continued to decline into the second week, with the August 2027 maturity bond falling 5 cents to 73.03 cents, the lowest price since June 2020. The group’s other dollar-denominated bonds were also selling at a lower price.
According to MSCI, the company that creates indexes, it was monitoring the variables that “may effect the eligibility of the relevant assets” in MSCI indexes and was looking for market players’ opinions on Adani.
Adani listed US banks Citigroup and JPMorgan Chase & Co. in its response on Sunday, along with other lenders BNP Paribas, Credit Suisse, Deutsche Bank, Barclays, and Standard Chartered, as well as its relationships with local and foreign banks and its access to a variety of funding sources and structures.
The collapse of the stock market is a severe defeat for Adani, 60. Before slipping to ninth place on the Forbes list on Monday, the school dropout’s spectacular rise included gains of more than 1,500 percent in some of his group stocks over the course of three years, giving him the third-richest man in the world.
Hindenburg responded to Adani’s statement by saying that it “essentially verified our findings and ignored our critical questions.”
According to Hindenburg’s assessment, shares in seven Adani-listed firms have an 85% downside due to what it dubbed “sky-high valuations” and Adani companies have “significant debt.”
In its answer, Adani claimed that its group firms had “consistently de-levered” during the previous ten years.
