Share sale finds takers despite fraud claim

Indian billionaire Gautam Adani has dismissed fraud allegations against his firm

Indian businessman Gautam Adani has slipped off a list of ten of the world’s richest after fraud allegations against his firms wiped billions of dollars from his fortune. The Adani group denies the allegations. On Tuesday, a $2.5bn (£2.03bn) share sale in the group’s flagship company was fully subscribed despite the controversy. The BBC’s Nikhil Inamdar reports.

The Adani Enterprises – the holding company of Adani Group – share sale, which was only half subscribed on Tuesday afternoon, managed to scrape through in the final hours of trading, after institutional investors, companies and high net worth individuals pumped in money. the nation’s largest follow-on public offering.

However, the company could not get support for its offer from retail or non-professional investors as the price of the shares in the market was lower than the public offer price, following a massive sell-off.

Retail investors subscribed to just over 10% of the shares reserved for them.

However, the shares reserved for institutional investors, such as hedge funds and mutual funds, were fully subscribed on the first day itself. The sale also got a bailout from an Abu Dhabi-based conglomerate that bought 16% of the offering through a subsidiary on Monday.

The sale is critical for the port-to-energy conglomerate, which lost a third of its market capitalization after US-based short-seller the Hindenburg Group accused its firms of decades of “reckless” stock market manipulation and accounting fraud.

The Adani Group dismissed the allegations as malicious and untrue.

The share sale is critical for the port-to-energy conglomerate

But the company’s publicly listed companies lost about $65 billion in market value over four trading sessions, with Mr Adani himself slipping from fourth to eleventh position on the Forbes list of the world’s richest. His estimated net worth after the sale is $84 billion, according to the Bloomberg Billionaires Index.

A 413-page rebuttal by the company and several televised appearances by the Adani Group CFO failed to calm frayed investor nerves as shares in the firm’s companies hit a lower circuit on Monday, prompting an automatic halt in trading in Mumbai caused.

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While there has been a recovery in the prices of some of the group’s listed companies, the likes of Adani Total Gas has been under constant selling pressure, losing half its value in five days and falling 10% on Tuesday.

The Adani group termed the allegations against it as an attack on India itself. In an interview with the Mint newspaper, the group’s chief financial officer compared Hindenburg Research to General Dyer, the British officer in the Bengal army responsible for a massacre that killed hundreds of Indians in the city of Amritsar in 1919.

Hindenburg responded, saying the group was fueling a nationalist narrative to cover up fraud.

The fracas raises broader concerns about Indian markets and “risks that damage short-term sentiment,” Hugh Young, Asia chairman of abrdn Plc, a British asset manager, told Bloomberg.

According to the newswire, the fall in Adani shares accounts for 51% of the fall in the country’s stock market capitalization since January 24.

This comes at a time of underperformance in Indian stocks and foreign investors shifting allocations to markets in Hong Kong and China.

“In an already expensive market, foreign investors will certainly be cautious as Adani shares are part of major global indices,” the chief executive of a major wealth management fund, who preferred to remain anonymous, told the BBC.

India’s stock market regulator SEBI has so far refrained from making an official comment. But the country’s main opposition Congress party has demanded an inquiry into the allegations.

Major investors in the conglomerate such as state-run Life Insurance Corporation (LIC) said it would question the Adani management over the allegations.

The Adani Group has built a fortune with investments across ports, airports, renewable energy and other industries.

Gautam Adani’s wealth has soared in the past three years, as the value of shares in some of his firms soared by as much as 2,000%, according to Hindenburg Research.