The turmoil is getting worse day by day. The conglomerate of Indian billionaire Gautam Adani continues to sink into crisis since accusations of fraud launched by the investment fund Hindenburg. So much so that the flagship of the group, Adani Enterprises, suddenly announced on Wednesday 1er February, that it canceled its record fundraising of 2.5 billion dollars (2.3 billion euros), successfully completed the day before. Investors will be reimbursed.
This sale of shares, perceived as a victory for the conglomerate of Gautam Adani, in the battle which opposes it to Hindenburg, did not make it possible to put an end to the stock market debacle which the group has been experiencing for a week. Shares of Adani Enterprises recorded a colossal drop of 28% on the Bombay Stock Exchange on Wednesday 1er february.
“Given these extraordinary circumstances, the company’s board of directors felt that it would not be morally correct to proceed with [l’offre publique] which has been subscribed”, Gautam Adani said in a statement released late Wednesday evening. The latter asserted the paramount interest of investors and his desire to protect them from any financial loss.
“Cancelling this fundraiser was madness”
As part of its fundraising, Adani Enterprises sold its shares for a value ranging from 3,112 and 3,276 rupees (from 34.50 euros to 36.30 euros) per share. But when markets closed on Wednesday, they were trading at 2,135 rupees, a loss of more than 30% for investors.
Indian tycoons would be among the subscribers to this offer. Billionaires Sajjan Jindal, head of steel giant JSW Steel, and Sunil Mittal, founder of telecommunications specialist Bharti Enterprises, reportedly dipped into their personal funds to buy shares of Adani Enterprises and fly to the rescue of M Adani, according to information from Bloomberg.
After the surprise decision of the conglomerate to cancel its fundraising, the fall continued, Thursday, February 2 in the morning, at the opening of the markets. The securities of several companies in the group fell by more than 10%, leading to the immediate cessation of trading on the Bombay Stock Exchange. “Cancelling this fundraiser was madness”judges, in view of the reaction of the markets, an Indian trader, who has interests in the entities of the group.
“Shameless accounting fraud”
In a few days, the conglomerate, which previously weighed 222 billion dollars (201.6 billion euros), lost more than 100 billion of its value. Gautam Adani, whose rise was meteoric, saw 44 billion dollars evaporate, that is to say a whole part of his immense personal fortune, previously estimated at nearly 120 billion dollars. He lost his title as the richest man in Asia on Wednesday. A place he gave up to his great rival Mukesh Ambani, boss of Reliance Industries, who has long been enthroned on the podium.
The rout of the all-powerful Gautam Adani, close to Prime Minister Narendra Modi, was provoked by the publication, on January 24, of a report by the investment company Hindenburg Research. This short seller, who bets on the decline in the markets, accused the group of “brazen accounting fraud, stock manipulation and money laundering”. Calling the report a“unfounded” and of “malicious”Adani denounced a “Attack on India”.
The rise of Mr. Adani has been made in the footsteps of Narendra Modi, who has remained silent since the beginning of this affair. The Indian opposition is calling for a debate in Parliament on the accusations made by the Hindeburg report and the consequences that the fall in Adani securities could have on Indian investors.