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Adani Group Of India Has Been Hit By A $48 Billion Stock Rout, Blurring A Record Share Sale

Adani Group Of India Has Been Hit By A $48 Billion Stock Rout, Blurring A Record Share Sale
Adani Enterprises' shares fell 20% on Friday after a damning report by a US short seller sparked a sweep in the conglomerate's listed firms, raising questions on how investors will react to the company's record $2.45 billion secondary offer.
Seven listed Adani conglomerate enterprises, governed by one of the world's richest men Gautam Adani, have ended up losing a total $48 billion in market capitalisation since Wednesday, with Adani firm's US bonds also dropping following the Hindenburg Research report published on January 24 as it raised concerns about the debt levels of the company and the usage of havens.
The drubbing took shares of Adani Enterprises, the group's flagship company, far below the offer price of its secondary sale, which had been offered at a discount at the outset.
According to two people with direct knowledge of the discussions, the Adani Group is concerned about the drop in share prices but is still waiting to see what happens as the share sale continues until January 31.
According to two other sources, India's capital markets regulator is studying the Hindenburg report and may use it to aid its own ongoing investigation into Adani Group's offshore fund holdings. Both the regulator and Adani did not respond immediately. 
Adani Group has dismissed the Hindenburg report as unfounded and stated that it is considering legal action against the New York-based firm. It did not respond immediately to a request for comment on the regulator's decision.
With a net worth of $97.6 billion, billionaire Gautam Adani is now the world's seventh richest man, falling from third place before the Hindenburg report.
According to a source familiar with the situation, Adani met with the country's power minister, R.K. Singh, on Friday in New Delhi. The meeting's agenda was not immediately available.
The billionaire is from Gujarat, Prime Minister Narendra Modi's home state in western India. The main opposition Congress party in India has frequently accused Adani and other billionaires of receiving preferential policy treatment from Modi's federal administration, which the billionaire denies.
The market's stunning selloff has cast a pall over Adani Enterprises' secondary share sale, which began on Friday. On Wednesday, investors including the Abu Dhabi Investment Authority participated in the anchor portion of the sale.
"The sell-off is seriously extreme ... it has clearly dented the overall investor sentiment in the market," said Saurabh Jain, assistant vice-president of research at SMC Global Securities.
Market concerns extended to Indian banks with debt exposure to Adani Group. The Nifty Bank index fell more than 3%, while the broader Nifty 50 index fell 1.5%.
CLSA estimates that Indian banks were exposed to roughly 40% of Adani Group debt totaling 2 trillion rupees ($24.53 billion) in the fiscal year ending March 2022.
According to BSE exchange data, as of 0818 GMT, investors, mostly retail, had bid for approximately 320,000 shares of Adani Enterprises, or less than 1% of the 45.5 million on offer. The retail investor bidding period will end on January 31.
Jefferies, India's SBI Capital Markets, Axis Capital, and ICICI Securities, among others, are managing the share sale.
The company has set a share price floor of 3,112 rupees ($38.22) and a cap of 3,276 rupees. However, the stock fell as low as 2,721.65 rupees on Friday, well below the lower end of the price range.
Adani Transmission Ltd, Adani Total Gas, Adani Green Energy, and Adani Ports were among the other listed Adani companies that saw their shares fall 20%.
With heavy volumes, Adani Ports, Adani Green Energy, and Adani Transmission experienced their worst intraday drop ever.
Adani Green Energy's US dollar-denominated bonds fell to just under 77 cents on the dollar this week, the lowest since November, according to Tradeweb data. The price had dropped 7.32 cents to 77.007 cents at the time of writing.
Hindenburg stated in its report that key listed Adani Group companies had "substantial debt," putting the conglomerate on "precarious financial footing," and that "sky-high valuations" had pushed the share prices of seven listed Adani companies up to 85% above actual value.
Bill Ackman, a billionaire investor in the United States, said on Thursday that the Hindenburg report was "highly credible and extremely well researched." Ackman bet $1 billion against Herbalife Ltd beginning in 2012, but he lost the bet.
Hindenburg stated that it was short Adani through its US-traded bonds and non-Indian-traded derivative instruments.
Adani Group has faced and dismissed concerns about its debt levels on numerous occasions. It defended itself in a presentation titled "Myths of Short Seller" on Thursday, saying deleveraging by promoters - or key shareholders - was "in a high growth phase".
In a client note, Jefferies stated that Adani Group's debt poses no material risk to the Indian banking sector. Adani has stated that its debt is manageable and that no investors have expressed concern.
Adani has been diversifying its business interests, most recently purchasing cement firms ACC and Ambuja Cements from Switzerland's Holcim for $10.5 billion. On Friday, ACC shares fell 15%, while Ambuja fell up to 25%.

Christopher J. Mitchell

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