Following the unexpected cancellation of his company’s share sale, Indian billionaire Gautam Adani has reached out to investors in an effort to allay their concerns.
On Wednesday, Adani Enterprises said it would give back $2.5 billion (£2 billion) to investors. The money was raised via the sale of the company.
According to Mr. Adani’s statements, the decision will not have an effect on “our existing activities and future plans.”
This action brings to a close an eventful week, which began with an investment firm from the United States making fraud accusations against enterprises belonging to the Adani group.
The charges are not true, according to Adani.
In contrast, the market value of the group’s enterprises has dropped by $108 billion over the course of the last several days.
Mr. Adani has suffered a personal loss of wealth equal to $48 billion and is now ranked sixteenth on the real-time billionaire’s list maintained by Forbes.
What led to this occurrence?
Mr. Adani was the world’s third-richest man a little more than a fortnight ago.
On January 25, shares in Adani Enterprises, the most important company in his port-to-energy complex, were supposed to be put up for sale in India’s biggest secondary share offering ever.
But one day before that, an American investment firm called Hindenburg Research released a study in which they accused the Adani group of “brazen” stock manipulation and accounting fraud for decades.
“Short-selling” refers to the practice of wagering against the share price of a firm with the belief that the price would go down. Hindenburg is an expert in this field.
Although the Adani group responded to the research by labeling it as “a vicious combination of selected falsehoods and stale, unsubstantiated and discredited charges,” this was not enough to allay the concerns of the investors.
The Mr. Adani group is comprised of seven publicly traded firms that are active in a diverse array of industries, including but not limited to the trading of commodities, airports, utilities, ports, and renewable energy. A number of Indian financial institutions and state-owned insurance firms have either made investments in or provided loans totaling billions of dollars to enterprises that are affiliated with the organization.
Is that all there was?
No. As the sell-off in the market persisted, the Adani Group produced a comprehensive rebuttal, which consisted of more than 400 pages, and referred to the Hindenburg study as a “planned attack on India.”
It asserted that it had acted in accordance with all applicable regional laws and had provided the appropriate disclosures to the relevant authorities as required. In addition to this, it asserted that the report was written with the intention of assisting Hindenburg in “booking significant financial gain through unlawful means at the cost of many investors.”
Hindenburg, on the other hand, maintained his stance and stated that the Adani Group “failed to specifically address 62 of our 88 queries.” Hindenburg stood by the findings.
How did the market respond to this news?
January 25 marked the beginning of the share sale for Adani Enterprises, which was met with a lackluster reception. As of the second day of the offering, only three percent of the company’s shares had been purchased by individual investors.
The group was supported, however, by institutional investors and corporate funds from other countries. On January 30, Abu Dhabi’s International Holding Company, which is backed by a member of the royal family of the United Arab Emirates, invested $400 million in the share sale.
According to Bloomberg, Indian business magnates Sajjan Jindal and Sunil Mittal both made personal purchases from the share offering in a last-ditch effort to boost the company’s stock price.
After the shares were sold, an analyst named Ambareesh Baliga told Reuters that the company had not been able to “broadbase the shareholding,” which was one of its goals.
The different companies that make up the company saw their share prices continue to drop.
So what’s next?
According to reports by Reuters and Bloomberg, India’s central bank reportedly requested information from the country’s lenders over their level of exposure to the business.
Mr. Adani claimed the following in a statement that he made to the exchanges in India: “Our balance sheet is quite solid with robust cashflows and secure assets, and we have a perfect track record of fulfilling our loans.”
However, Edward Moya, an analyst at the brokerage firm OANDA, told Reuters that the withdrawal of the share sale was “troubling” because it was “supposed to show the company is still believed in by its high net-worth investors.” In other words, the share sale was “supposed to show the company is still believed in by its high net-worth investors.”
The wealth management division of the American investment bank Citigroup has ceased accepting bonds and securities issued by the Adani group as collateral for margin loans, and Credit Suisse has also stopped accepting bonds issued by the group. Moody’s unit ICRA has stated that it is monitoring the impact that current events are having on Adani Group’s stock.
But Vinayak Chatterjee, who started the Infravision Foundation and is now the organization’s managing trustee, was positive and called the situation “a short-term glitch.”
“As an infrastructure expert, I have been keeping an eye on this organization for the past quarter of a century. I see a variety of businesses that are strong, stable, and generate a healthy cash flow. These assets range from ports and airports to cement plants and renewable energy sources. They are not at all susceptible to the highs and lows that can be caused by fluctuations in the stock market “he explained to Arunoday Mukharji from the BBC.
But an independent research analyst named Hemindra Hazari was surprised that “we haven’t heard anything from the market regulator SEBI or the government so far.” He claimed that he was startled by this statement.
According to what he said to the BBC, “They should have spoken out to assuage the anxieties of investors.”
A political debate has also been sparked as a result of the issue.
Mr. Adani is believed to have a tight relationship with Prime Minister Narendra Modi. Lawmakers in the other party have said for a long time that he has used his political connections to his advantage. Mr. Adani disputes these allegations.
On Thursday, parties that are opposed to the government urged that there be a discussion in parliament about the danger that falling Adani business shares pose to Indian investors. In addition to this, they have requested that the charges made by Hindenburg be looked into.