Gautam Adani, billionaire and Chairman of the Adani Group, during an event at the Haifa Port in Haifa, Israel, Tuesday, January 31, 2023. Adani, the Indian billionaire whose business empire was rocked by allegations of seller fraud Hindenburg Research, in short, said his company will make further investments in Israel.
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Adani shares continued to post heavy losses during the trading session on Wednesday in Mumbai, despite the conglomerate managing to pull out a win the day before.
Adani Enterprises received a vote of confidence from investors on Tuesday when its $2.5 billion follow-on public offering (FPO) was fully subscribed on the last day.
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The sharp falls reflect investor sentiment eroded from a report published by the short sale firm Hindenburg. He Report of January 24 accused the Adani Group companies of “blatant stock manipulation and accounting fraud.”
Adani Group shares fell on Wednesday after days of volatile trading.
Adani Enterprises Stock fell 28% on Wednesday. Port Adani and Special Economic Zone fell 19%, adani green energy fell more than 5%, Adani Total Gas lost 10% while Adani Transmission closed 2.8% lower.
The stock drop that followed the announcement amounted to $84 billion, Reuters reported.
According to ForbesGautam Adani, the group’s founder and chairman, has lost his status as Asia’s richest man to Mukesh Ambani, chairman of Reliance Industries.
Hindenburg, who said he has taken a short position in Adani Group, it will benefit from the decline in value of those shares.
Adani’s battle with the short seller firm has put the group exposure to Wall Street — amounting to nearly $9 billion, according to JPMorgan — under the spotlight.
How did we get here?
In just one week, Indian billionaire Gautam Adani saw more than $34 billion wiped from his net worth, according to the Bloomberg Billionaires Index.
Here’s a timeline of the major events leading up to this.
January 25: Before India market opened on Wednesday Asia time, Hindenburg Research announced its short position in Adani Group companies through US-traded bonds and non-Indian-traded derivatives. Adani-affiliated stocks posted heavy losses during the trading day. Gautam Adani’s net worth dropped $6 billion overnight.
26 of January: The India market was closed for a holiday.
January 27th: Adani Enterprises proceeded with the opening of subscriptions for its $2.5 billion follow-on public offering despite a continued sell-off seen in shares of group companies. The billionaire’s net worth fell another $20.3 billion to $92.7 billion.
January 28 and 29: The Adani Group launched a long answer of 413 pages over the weekend, warned of legal action against Hindenburg and challenged the allegations made against the Indian firm it was a “calculated attack on India” and its institutions.
Hindenburg responded, criticizing Adani Group’s response as “inflated”, claiming that it “ignores all the key allegations” raised.
January 30th: In an interview with CNBC-TV18, the CFO of Adani Enterprises Group jugeshinder singh defended the group. He told the CNBC affiliate that the value of Adani Enterprises has not changed “simply because of” the volatility of the stock price. Shares of group companies continued to record further losses. Adani’s net worth falls another $8 billion to $84.5 billion
January 31: Adani Enterprises’ $2.5 billion share sale was fully subscribed on the last day of subscription, despite analyst concerns that it could fail.
Who is Gautam Adani?
The 60-year-old self-made Indian billionaire expanded his empire through deals and the support of Indian Prime Minister Narendra Modi, according to Forbes.
He became a billionaire in 2008 after launching his commodity export company and surpassed Bill Gates in the Bloomberg Billionaires Index in July 2022. He came even as several tech billionaires lost a combined $315 billion last yearaccording to Forbes.
The Adani conglomerate owns the largest airport operator in India and the largest port operator in the country. The group recently searched for a hostile takeover of the Indian media group NDTV. In a filing, the media company said the move was “carried out without any consent” from its founders.
Despite his net worth experiencing sharp declines due to Hindenburg’s short seller report, Adani tweeted a photo with Israel’s Prime Minister Benjamin Netanyahu on Tuesday.
According to Reutersthe Indian conglomerate has completed its $1.15 billion acquisition of the port of Haifa in Israel.
What are the implications?
Hindenburg’s allegations have raised questions about Adani Group’s expansion, mainly driven by debt, and the lax regulations that allowed acquisitions to continue.
However, the economists CNBC spoke to downplayed the long-term spillover effects.
“I think the events with Adani Group are viewed in isolation,” Herald van der Linde, head of Asia Pacific equity strategy at HSBC, told CNBC. “The story for Indian equities remains one of the best in the region. Growth is visible and more predictable than in other parts of the region.”
“In the short term, sentiment and flows may be negatively affected, but this should not have a lasting impact in the medium term,” Sonal Varma, Nomura’s chief economist for India and Asia outside Japan, told CNBC..
“The key drivers of India’s medium-term growth prospects remain intact, corporate and bank balance sheets are much stronger, reforms are focused on enabling investment and increasing productivity, and as a large market, India will benefit from the ongoing diversification of the supply chain”. she added.
When asked if investors should buy Adani shares right now, Smart Investor’s David Kuo bluntly said: “It’s better to stay out of trouble than to get out of it later.”
“What Hindenburg is referring to is that there is a problem with the debt. And it may not be reflected in the stock price, but there may be a debt problem,” Kuo said on the CNBC show.Asian street signs.”
“It has a lot of bonds outside of India, what happens if those bonds deteriorate in value would have an impact on the company,” he said.
“Whether you believe the Hindenburg report or not, I think something needs to happen. Something needs to be clarified before investors start to get involved,” he added.
– CNBC’s Seema Mody contributed to this report.
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