New Delhi: Billionaire Gautam Adani's embattled group clutched on to a USD 400-million investment by Abu Dhabi's International Holding Co. in its flagship firm's share sale to restore confidence in the conglomerate that saw nearly USD 70-billion rout in value after a tiny New York short seller came out with a damning report.
Adani, 60, who was third richest man in the world till a day before Hindenburg Research came out with its report on January 24 that flagged concerns about its debt levels and alleged stock manipulation, accounting fraud and the use of tax havens, has slipped to 8th position, narrowing the gap with rival Mukesh Ambani, whom he overtook in April last year, to just USD 4 billion.
His group late on Sunday night issued a 413-page response to the Hindenburg report in an attempt to restore confidence in the business empire but it could not cut much ice and stock prices of most group companies continued to fall and key dollar bonds sank to fresh lows on Monday.
The US short seller dismissed charges that its report on Adani Group's malfeasance was a "calculated attack" on India, saying a "fraud" cannot be obfuscated by nationalism or a bloated response that ignored key allegations.
Hindenburg released the report on January 24 -- the day on which Adani Enterprise Ltd's Rs 20,000-crore follow-on share sale opened for investors. While anchor investors poured in almost Rs 6,000 crore in the FPO on that day, the public subscription remained muted with just 3 per cent of the shares on offer being subscribed till Monday evening, according to information available on BSE.
The offer closes on January 31 and the retail investor portion -- which is the biggest chunk of the FPO -- is hardly 4 per cent subscribed.
IHC said it will invest about USD 400 million in Adani Enterprises' follow-on share sale, saying it was confident in the fundamentals of the conglomerate even after the route in share value. "We see a strong potential for growth from a long-term perspective and added value to our shareholders," its CEO Syed Basar Shueb said in a statement.
IHC is led by Sheikh Tahnoon Bin Zayed Al Nahyan -- the UAE's national security adviser and brother to the president.
Life Insurance Corporation (LIC) also issued a separate statement saying its investments in the group are safe. "Our total holding in the Adani group companies under equity and debt on date is Rs 36,474.78 crore. This was Rs 35,917.31 crore as of December 31, 2022. Total purchase value of these equities of the group companies, bought over the past many years, is Rs 30,127 crore and the market value for the same at close of market hours on January 27, 2023 was Rs 56,142 crore." Punjab National Bank (PNB), which has about Rs 7,000 crore exposure in Adani Group entities, however, said it is keeping a close watch on the developing situation.
Earlier in the day, Hindenburg responded to the 413-page detailed statement issued by the Adani Group late on Sunday, saying it failed to specifically answer 62 of its 88 questions, and conflated the company's "meteoric rise" and the wealth of Asia's richest man "with the success of India itself".
In the Sunday evening statement, Adani group had called Hindenburg "Madoffs of Manhattan" and that its report was "not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India." Standing by its report that alleged "fraud" at the second largest conglomerate in India run by the world's then-third richest man, Hindenburg said it disagrees with Adani group's assertion of its report being an attack on India.
"To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future," it said. "We also believe India's future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation." A "fraud is fraud, even when it's perpetrated by one of the wealthiest individuals in the world," it said, adding, "Adani also claimed we have committed a 'flagrant breach of applicable securities and foreign exchange laws'. Despite Adani's failure to identify any such laws, this is another serious accusation that we categorically deny." Adani's 413-page response only included about 30 pages focused on issues related to the report and the remainder consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on "irrelevant" corporate initiatives such as how it encourages female entrepreneurship and the production of safe vegetables.
On Sunday evening, Adani group said the Hindenburg report was intended to enable the US-based short seller to book gains by crashing stock prices.
The report had come just as a Rs 20,000-crore share sale at the group's flagship company, Adani Enterprises, opened to anchor investors.
"All transactions entered into by us with entities who qualify as 'related parties' under Indian laws and accounting standards have been duly disclosed by us," it had said late on Sunday. "This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors." Hindenburg reiterated that it was short on the Adani group through US traded bonds and non-Indian-traded derivative instruments.
In the January 24 report, it had called out the conglomerate's "substantial debt", which includes pledging shares for loans; that Adani's brother Vinod "manages a vast labyrinth of offshore shell entities" that move billions into group companies without required disclosure; and that its auditor "hardly seems capable of complex audit work".
Hindenburg, which is known for having shorted electric truck maker Nikola Corp and Twitter, said the Adani group has responded to its questions on the source of billions of dollars that have flowed from Vinod Adani-associated offshore shell entities saying it is neither aware nor required to be aware of the source of funds.
Vinod Adani is the brother of Gautam Adani.
Separately on Sunday, Adani Group CFO Jugeshinder Singh had expressed confidence in the follow-on public offer of Adani Enterprises sailing through.
He likened the behaviour of Indian investors participating in the sell-off to the colonial-era Jallianwala Bagh massacre in Amritsar.
"In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians," Singh told the Mint business daily, when asked why the market believed the Hindenburg report. "So am I surprised by the behaviour of some fellow Indians? No." At least 379 people were killed when Gen. Reginald Dyer on April 13, 1919, ordered about 50 Indian army soldiers to shoot at unarmed, peaceful civilian protesters.
Since Tuesday's close last week, shares of Adani Total Gas tanked 39.57 per cent, Adani Transmission tumbled 37.95 per cent, Adani Green Energy declined 37.93 per cent, Ambuja Cements went lower by 22.28 per cent and Adani Ports fell 21.55 per cent on the BSE.
In three days, shares of ACC tanked 18.47 per cent, Adani Enterprises fell 16.38 per cent, Adani Wilmar dipped 14.25 per cent, Adani Power (14.24 per cent) and NDTV (14.22 per cent).
The group firms have collectively lost over Rs 5.56 lakh crore in market valuation between Tuesday last week and Monday.