BENGALURU, 1 February (InsiderBLM) – Following a U.S. short-seller report, shares of Indian tycoon Gautam Adani’s conglomerate fell once more on Wednesday, and the billionaire also lost his position as Asia’s richest person. The decline in his company’s stock reached $84 billion.
The chairman of Reliance Industries Ltd (RELI.NS), Mukesh Ambani, ranks ninth on Forbes’ rich list with an estimated net worth of $83.6 billion, ahead of rival Adani, who dropped to position 15 due to Wednesday’s stock losses.
Adani had been ranked third prior to the critical report by American short-seller Hindenburg.
The losses represent a severe setback for Adani, the billionaire school dropout whose businesses range from ports and airports to mining and cement. The tycoon is currently battling to protect his reputation and stabilize his businesses.
It happens just one day after the group was able to secure investor backing for a $2.5 billion share sale for flagship company Adani Enterprises on Tuesday, which some saw as a vote of confidence in the group.
The Adani Group was accused of stock manipulation and improper use of offshore tax havens in the report released by Hindenburg Research last week. High debt and the valuations of seven listed Adani companies were other issues that were brought up.
The group has refuted the claims, claiming that the stock manipulation story put forth by the short-seller has “no basis” and is the result of a misunderstanding of Indian law. It added that it has always provided the necessary regulatory disclosures.
On Wednesday, shares of Adani Enterprises (ADEL.NS), frequently referred to as the incubator of Adani businesses, fell 30%. Adani Total Gas (ADAG.NS) dropped 10%, exceeding its daily price cap, while Adani Power (ADAN.NS) dropped 5%.
Adani Ports and Special Economic Zone (APSE.NS) and Adani Transmission (ADAI.NS) both saw declines of 6% and 20%, respectively.
The joint venture between India’s Adani and France’s Total (TTEF.PA), Adani Total Gas, lost about $27 billion as a result of the short seller report.
According to Ambareesh Baliga, a Mumbai-based independent market analyst, “there was a slight bounce yesterday after the share sale went through, after seeming improbable at one point. However, the weak market sentiment has become visible again after the bombshell Hindenburg report.”
“The fact that the stocks are down despite Adani’s refutation clearly indicates that investor confidence has been harmed. Stabilization will take time, “Baliga included.
Bloomberg reported on Wednesday that Credit Suisse (CSGN.S) had stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients, underscoring the unease in some quarters.
This was a major contributing factor in Wednesday’s share declines, according to Deven Choksey, managing director of KRChoksey Shares and Securities.
Credit Suisse was unable to comment right away.
An Australian regulator announced on Wednesday that it would review the allegations made by Hindenburg to determine whether further investigations were necessary. This comes as scrutiny of the conglomerate is intensifying.
Data also revealed that after the release of the Hindenburg report, foreign investors sold Indian equities worth a net $1.5 billion, the largest four-day outflow since September 30.
The Adani Group is anticipated to experience difficulties for some time.
The markets regulator for India has said it will incorporate Hindenburg’s report into its own preliminary investigation into deals by the conglomerate.
On Monday, the state-run Life Insurance Corporation (LIC) (LIFI.NS) announced that it would ask Adani’s management for clarifications regarding the short seller report. However, the large insurance company played a significant role in the sale of Adani Enterprises shares.
In its report, Hindenburg claimed to have shorted Adani Group U.S. bonds and derivatives that were traded outside of India.
