By Archis Chowdhury
Share prices of Adani Group companies have been on a freefall throughout the week. By Friday morning, the group's listed companies saw over US $100 billion wiped out in market cap, as per Bloomberg.
Ten days ago, Gautam Adani was Asia's richest individual, and the world's third richest - with his triumph being closely linked to India's own story of successful growth. He was about to embark on India's largest further public offering of Rs. 20,000 crore (approximately US $2.4 billion) of Adani Enterprise shares.
Following a week-long bloodbath after a report by short selling firm Hindenburg Research alleging stock manipulation and accounting fraud, he was knocked off the Forbes' list of top 10 billionaires in the world (dropping to 17), and became India's second richest, being replaced by Mukesh Ambani at the top. He had to withdraw the FPO, which had sailed through earlier this week at a lower price band, and saw his personal wealth dropped from $113 billion to $61.9 billion.
"For me, the interest of my investors is paramount and everything is secondary," the billionaire businessman said in a recorded statement on Thursday morning, while announcing the FPO withdrawal.
By the end of the week, seven of his companies were on the National Stock Exchange and Bombay Stock Exchanges' Additional Securities Measure (ASM) list, with Adani Ports and Special Economic Zones (APSEZ), Adani Enterprises and Ambuja Cements being the latest additions
Also Read:Battered Adani Stocks Under ASM Framework: What Does It Mean?
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What's Next For The Investors?
His statement on Thursday failed to regain the trust of investors, as shares of Adani Enterprises fell over 26 per cent by the end of the day, while those of the other listed companies continued to nosedive.
On the same day, Citigroup and Credit Suisse reportedly stopped accepting securities of Adani's companies as collateral for margin loans.
As the markets closed on February 3, the share price of Adani Enterprises fell by 53.9 per cent since the release of Hindenburg's report on January 24, while that of Adani Green Energy fell by 51.2 per cent during the same time.
His other listed companies fared badly too - Adani Ports & SEZ fell by 34.5 per cent, Adani Total Gas fell by 58.3 per cent, Adani Power fell by 30.1 per cent, Adani Transmission fell by 49.5 per cent, Ambuja Cement fell by 25.1 per cent, it's subsidiary ACC fell by 17.5 per cent, and Adani Wilmar fell by 30.2 per cent.
As of now, the future for those investing in Adani's companies is shrouded with uncertainty. While Adani Enterprises made slight recovery from Thursday's bloodbath, it is too soon to tell if the billionaire tycoon can regain investors' trust.
Concerns have been raised about the exposure of Life Insurance Corporation (LIC), due to it being a large investor in Adani Group companies. After facing massive losses last week due to the rout, LIC told Reuters that the PSU is reviewing Adani's response to the Hindenburg report, and will engage with the Adani Group for answers.
In conversation with Network18, Finance Minister Nirmala Sitharaman said on Friday that she was assured by both LIC and State Bank of India (SBI), yet another PSU investor in Adani, that their exposure to the Adani Group is withing their permissible limits.
What Went Wrong For Adani? A Recap
The share prices of Adani Group entities took a hit almost immediately after the release of a 32,000-strongly worded report by New York-based short seller firm Hindenburg Research, who made allegations of stock manipulation and accounting fraud against Adani, and claimed that his companies were grossly overvalued.
The report, Hindenburg claims, is the result of a two-year investigation, which included a close scrutiny of Adani's private investors in multiple countries, along with the reviewal of large number of publicly available data and conversations with individuals linked to the Adani Group.
What Is Hindenburg's Stake On The Matter?
The allegations by Hindenburg Research came with the disclosure that the firm was holding short positions on Adani Group companies.
Short selling is when investors borrow securities and sell them at the market price, with the hope of buying them at a lower price when the share value drops. For this purpose, short sellers pick companies they deem to be overvalued. Investors also use short positions against a company to hedge against the risk of a long position against the same, or related companies.
For Hindenburg, the short position was held entirely with the purpose of speculation - with the expectation that their exposé of accounting fraud and stock manipulation by Adani Group will drive down the value of its companies' shares. As Adani Group entities drop in value, Hindenburg makes money.
Also Read:Adani Group Refutes Research By Hindenburg, Says Report Aims To Damage FPO
Adani Group provided a 400-plus page rebuttal to the Hindenburg report on Sunday night, before the market opened up to the final days of the FPO, calling it a "calculated attack on India".
In response, Hindenburg stated that Adani failed to address most of the questions raised by them, and instead used nationalism as a cover.
