Adani Rout hits $71 billion as fight with Hindenburg escalates – Stock Market News

(Bloomberg) – Billionaire Gautam Adani’s 413-page attempt to restore confidence in his business empire is falling flat with investors as stock market losses mount and key dollar bonds fall to new lows.

Bloomberg’s Most Read

Shares of most Adani Group companies fell on Monday despite the Indian conglomerate’s lengthy rebuttal to allegations of fraud by short seller Hindenburg Research. The three-day sale has now wiped out an estimated $71 billion in market value amid a stock sale by Adani’s flagship that was to mark the tycoon’s rise to the global stage.

While the Adani Group has described Hindenburg’s allegations as baseless and an attack on India itself, the saga reignites long-standing investor concerns over the conglomerate’s corporate governance. It also threatens to weaken broader confidence in India, until recently a top investment destination for Wall Street, and accelerate a nascent shift toward reopening China.

“The risk-reward for Indian markets just got worse,” said Charu Chanana, strategist at Saxo Capital Markets. “Foreign investor confidence has been shaken and will take time to recover, so I would be rather cautious. India has started trading this year anyway at a premium to other emerging markets, and the Adani saga once again questioned the merits of this.

The sale is also rapidly eroding the wealth of Adani, Asia’s richest man, after his shares were among the best performers last year, not only in the local market but also on the MSCI index. wider Asia Pacific.

Some wins

As the selloff continued on Monday with Adani Total Gas Ltd. and Adani Transmission Ltd. down 20% again, signs of a rift emerged among traders. Adani Enterprises Ltd., the flagship, as well as Ambuja Cements Ltd., rebounded after the cement conglomerate refuted Hindenburg’s fraud allegations.

The story continues

Six of Adani Group’s 10 shares traded lower at 12:20 p.m. in Mumbai, with Adani Enterprises up 4% after an earlier jump of up to 10%. Its shares remain below the floor price set for the follow-on stock sale. The company is looking to raise 200 billion rupees ($2.5 billion).

“The market is likely to reward Adani Group companies with relatively better earnings visibility and strong fundamentals such as Adani Ports, Ambuja and ACC,” according to Bloomberg Intelligence analyst Nitin Chanduka. “After the sharp correction, valuations have cooled down and could offer attractive opportunities for long-term investors.”

Overall subscription for Adani Enterprises’ share offering, which closes on Tuesday, was just 2% at 12:06 p.m. in Mumbai on Monday. Retail investors had bet on 3% of the shares offered for them, while company employees bet on 8% of the shares in their category. The non-institutional part, which includes wealthy individuals, was taken up at 1%. Institutional investors offered 4,576 shares, a fraction of the 12.8 million on offer.

As investors in Indian public offerings typically wait until the last day of the sale to place bids, concerns have grown that Hindenburg’s attack has soured sentiment.

There will be no change in the price of the sale of additional shares and it will go ahead as planned, Adani Group Chief Financial Officer Jugeshinder Singh told CNBC TV 18 news channel in an interview.

Tit-for-Tat

The decline in dollar bonds of Adani Group companies accelerated on Monday. The 2027 note of Adani Ports & Special Economic Zone Ltd. fell 6.2 cents, according to data compiled by Bloomberg.

At least four group ratings, including Adani Electricity Mumbai Ltd.’s debt, fell to distress levels below 70 cents on the dollar, generally indicating growing concern over solvency.

In his rebuttal published on Sunday, Adani said some 65 of the 88 issues had been addressed in the conglomerate’s public disclosures, describing the short seller’s conduct as “nothing less than calculated securities fraud under the law. apply”. He reiterated that he “will exercise our rights of recourse to protect our stakeholders before all competent authorities”.

In the latest twist, Hindenburg then said that Adani’s rebuttal ignored all of his key allegations and was “clouded by nationalism”. The conglomerate’s statement did not specifically answer 62 of Hindenburg’s 88 questions, the short seller said on Monday, and confused the company’s “meteoric rise” with the wealth of the world’s richest man. Asia “with the success of India itself”.

“About 70% of rebuttals come from prospectuses, so nothing new to take from that,” said Deven Choksey, chief executive of KRChoksey Holdings. Still, “Hindenburg must prove their claims by testing them under Indian laws.”

–With help from Finbarr Flynn and Devidutta Tripathy.

Bloomberg Businessweek’s Most Read

©2023 Bloomberg LP