Most Adani Group shares fell sharply on Monday as the Indian conglomerate’s rebuttal of US short-seller criticism failed to calm investors, deepening a market rout that has now led to $65 billion in losses in the group’s stock values.
The Indian group led by Gautam Adani, Asia’s richest man, met with research firm Hindenburg and on Sunday took on last week’s short seller report that cited concerns about its debt levels and use of tax havens.
Adani said it complied with all local laws and made the necessary regulatory disclosures.
Adani Gas Transport, Adani Total Gas, Adani Green Energy, Adani Power and Adani Wilmar fell between 5 percent and 20 percent on Monday.
Flagship Adani Enterprises, which is facing a critical test this week with a follow-on view of shares, oscillated between gains and losses before settling up 4.8 percent. It remained well below the bid price for the issue, which if successful would be the largest such share offering in India ever.
A $2.5 billion secondary stock sale to Adani Enterprises closed its second day amid weak investor sentiment. The stock closed at 2,892.85 rupees ($35.47), 7 percent below the minimum offer price of 3,112 rupees ($38.17). Upper range 3,276 rupees ($40.17).
Data from stock exchanges on Monday showed Adani had now received offers for 1.4 million shares, or just over 3 percent, of the 45.5 million shares offered. The deal ends on Tuesday.
According to the data, foreign and local institutional investors, as well as mutual funds, have not submitted any offers so far.
“Retail participation is likely to run a deficit as current market prices still lag behind the bid price and sentiment has been hit by the Hindenburg controversy,” said Hemang Jani, equity analyst at Motilal Oswal Financial Services.
“While there is a risk that the share sale will not be carried out, today it will be necessary to wait and see how institutional investors get involved.”
The Abu Dhabi-based international holding company said on Monday it would invest 1.4 billion dirhams ($381.17 million) in the flotation.
Sell the shares on schedule
The sale remained on schedule at the scheduled issue price, the Adani Group told Reuters in a statement on Saturday, even as sources said bankers in the country’s largest secondary share sale were considering extending the schedule beyond Jan. 31 or adjusting the price due to a drop in its share price.
The rules of India state that the share offer must get a minimum 90 percent subscription, and if it does not, the issuer must refund the entire amount. Among the investors who submitted bids to buy the main part of the issue are Maybank Securities and the Abu Dhabi Investment Authority.
Maybank said in a statement that there was “no financial impact” on it because the subscription to Adani’s offer was funded entirely with customer funds.
India’s state-run insurance giant Life Insurance (LIC) told Reuters on Monday it was reviewing the Adani Group’s response to the Hindenburg report and would hold talks with management within days.
LIC received 5 percent of the principal portion of $734 million. It already owns a 4.23 percent stake in the main Adani company, while other exposures include a 9.14 percent stake in Adani Ports and a 5.96 percent stake in Adani Total Gas.
“Since we are a large investor, we have the right to ask the relevant questions,” said Raj Kumar, managing director of the life insurance company.
US dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their decline in the second week, with the bond due in August 2027 dropping 5 cents to 73.03 cents, the lowest level since June 2020. Other dollar-denominated bonds of the group were also trading lower.
Index provider MSCI said it was seeking feedback from market participants about Adani and was monitoring factors that “may affect the eligibility of those relevant securities” in the MSCI indices.
In its response Sunday, Adani highlighted its relationships with local and international banks and its access to diverse funding sources and structures, listing US banks Citigroup and JPMorgan Chase & Co, as well as other lenders including BNP Paribas, Credit Suisse, Deutsche Bank and Barclays and Standard Chartered.
The stock market crash is a dramatic setback for 60-year-old Adani. The staggering rise in school dropouts came with gains of more than 1,500 percent in some of his group’s shares over three years, making him the third richest man in the world before slumping to number eight on the Forbes list on Monday.
In response to Adani’s rebuttal, Hindenburg said that “the company’s response largely emphasized our findings and ignored our key questions.”
In its report, Hindenburg said the Adani companies had “significant debt” and that shares in seven Adani-listed companies had an 85 percent decline due to what it called “high valuations.”
Adani’s response states that over the past decade, group companies have “consistently de-leveraged”.