It is any industrialist’s worst nightmare. Damning information filtering in on the eve of your ambitious effort to mop up funds from the markets, leading to a bloodbath in value of not just your assets, but even the country’s premier stock market by nearly 900 points.
The crash in value of Adani group companies following the revelations by US-based activist-analyst Hindenberg Research continued for a second day on Friday, with some estimates putting the total loss at Rs 3.6 lakh — and that, just half-way through the trading session on Friday.
For Gautam Adani, if you thought it couldn’t get worse, you are wrong. The revelations came on the eve of Adani’s ambitious Rs 20,000 crore follow on public offer (FPO) of his flagship firm, Adani Enterprises. It is India’s biggest ever FPO.
It is not just the fate of the FPO, but the future prospects of his business empire that is at stake.
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The report by US-based activist/analyst firm Hindenburg which came out mid-week had alleged wide-ranging malpractices. Hindenburg called Adani businesses “the largest con in corporate history”.
An Adani statement called the report ‘maliciously mischievous, mis-researched’, saying it is “evaluating the relevant provisions under US and Indian laws for remedial and punitive action”.
Hindenburg, in response, said it welcomed it and that it stood by its report.
The issue, obviously, is having a fallout much more than on the bourses. Adani, and his supposed political patronage, has always been a hot potato, and the Hindenburg report seems to have unleashed the floodgates. India’s opposition parties were quick to jump on the issue. While the CPI(M) alleged that “Modi government’s undue favour…ensured the rise of Adani” and that “probe must be done”, Congress called for an inquiry by the market regulator SEBI as well as the Reserve Bank.
“The Adani group is no ordinary conglomerate. It is closely identified with Prime Minister Narendra Modi since the time he was chief minister (of Gujarat),” said Jairam Ramesh, general secretary (communications) of the Congress. “Furthermore, the high exposure of financial institutions such as LIC and SBI to the Adani group has implications to the financial stability for crores of Indians whose savings (are with these institutions),” he added.
A Bloomberg report on Friday afternoon said Adani group companies will file a detailed response to the charges made by Hindenburg later in the day. It also said senior Adani officials had got on a conference call with investors and told them that the US short seller’s allegations were “devoid of facts”.
For Adani, it has been a rude jolt after the high it was on for most of last year. The fresh highs that the company’s shares hit saw Gautam Adani’s wealth crossing that of even Mukesh Ambani, for long India’s richest person, to become the world’s third richest, just behind Bernard Arnault of Louis Vuitton Moet Hennessy (LVMH) and Tesla’s Elon Musk. But that is now a distant memory, with the intense crash in stock value over Wednesday and today (the stock markets were shut on Thursday for Republic Day). Worse, the fate of the FPO now hangs in the balance.
