Shares in Gautam Adani’s business fell further on Thursday after the Indian billionaire’s efforts to calm panicked investors failed to stem a stock market collapse that has wiped $100 billion from the value of his conglomerate.
“For me, the interests of my investors are paramount and everything else is secondary,” the 60-year-old businessman said in a video released after he abruptly walked away from a $2.5 billion deal to sell new shares to his top in Adani Enterprises. , just 24 hours after it was sealed.
“Once the market stabilizes, we will review our capital market strategy,” he added
This was the first time the tycoon spoke about the market turmoil which slashed his personal fortune by nearly $50 billion in a week, stripping him of the crown of Asia’s richest man. But it was not enough to calm the markets. Adani Enterprises shares fell 25% On Thursday, while shares of its other companies fell 5% to 10%.
The unprecedented fall in Adani Group’s share value began when American short seller Hindenburg Research accused the conglomerate of fraud and stock market manipulation. The group, which has seven companies on the list, has lost 50% of its value since last Tuesday, when Hindenburg published its report.
Reuters reported on Wednesday that the Securities and Exchange Board of India (SEBI) is investigating the fall in share prices and is also looking into possible irregularities related to the botched share sale, citing a source with direct knowledge of the matter. SEBI has so far not responded to requests for comment.
India’s central bank has asked lenders for details on its debt to Adani Group, Bloomberg reported Thursday, citing unnamed sources. The Reserve Bank of India did not respond to a request for comment.
The crisis surrounding one of India’s most prominent businessmen could have wider implications for the fast-growing economy, which just two weeks ago was aggressively pitching for foreign investment at the World Economic Forum in Davos.
“Clearly, looking at the broader market activity, foreign investors … have had a rude awakening,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.
The fallout from the Hindenburg report could ripple through other big Indian businesses, experts warned.
“The Adani saga has opened up a big can of worms,” said Manish Chaudhuri, head of research at brokerage Stoxbox. “India’s track record looks weak” for foreign investors, he added.
Chaudhuri said investors would now be “skeptical” about the accounting practices of all Indian companies, while Mukherjea said his clients were already asking more questions.
“Naturally … they’re asking us to be a little bit more careful about accounting and corporate governance work in India,” Mukherjea told CNN.
Adani is considered a close ally of the Indian Prime Minister. And the opposition lawmakers have started asking for an investigation into the Hindenburg report. On Wednesday, they even organized a protest in the Indian Parliament while the country’s finance minister was presenting the annual budget.
“Now this will certainly be a turn-off for large foreign investors because it has now become a political issue,” said Stephen Innes, managing partner at SPI Asset Management.
In an investigation published on January 24, Hindenburg Research accused the Adani group of “decades of egregious stock manipulation and an accounting fraud scheme.”
The research firm questioned the “high valuations” of Adani’s companies and said their “significant debt” put the entire group on “uncertain financial footing”. It concluded its report with 88 questions. They range from asking for details on Adani’s offshore entities to why it has “such a convoluted, interconnected corporate structure”.
While the Adani Group immediately condemned the report as “baseless” and “malicious”, the video message was the first time the company’s founder spoke about the crisis.
Analysts have long expressed concern that Adani’s rapid business expansion carries significant risks. The group has been fueled by $30 billion in borrowings, making it one of India’s most indebted companies.
CreditSights, a research firm owned by Fitch Group, last year published a report on Adani Group titled “Deeply Overleveraged” in which it expressed strong concerns about its debt-financed growth plans.
Adan Group said at the time that its companies’ “leverage ratios” “continue to remain healthy and in line with industry standards in the respective sectors. ”
In a video message, Adani said the group’s fundamentals were “strong” and that it had an “impeccable track record” in meeting its debt obligations. He said the Adani Enterprise share issue was withdrawn to protect investors from losses. shares have been trading well below the offer price since last week.
“This decision will not have any impact on our current activities and future plans. We will continue to focus on timely execution and delivery of projects,” he added.