Gautam Adani fails to calm investors as market wipeout hits $100 billion

Gautam Adani fails to calm investors as market wipeout hits $100 billion

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Gautam Adani fails to calm investors as market wipeout hits $100 billion: The value of Gautam Adani’s conglomerate has lost $100 billion due to the stock market collapse, and shares of his companies continued to decline on Thursday. This was despite the Indian billionaire’s best efforts to calm his anxious investors.

The 60-year-old industrialist abruptly abandoned a $2.5 billion deal to sell new shares in his flagship company, Adani Enterprises, only 24 hours after it was finalized, saying in a recorded video message, “For me, the interest of my investors is primary and everything else secondary.”

He continued, “Once the market settles, we will review our capital market approach.”

It was the first time the businessman discussed the market chaos that cost him about $50 billion in just over a week and cost him the title of Asia’s richest man. The markets couldn’t be stabilized, though. On Thursday, shares in Adani Enterprises sank by 25%, while those of his other businesses fell by 5% to 10%.

When American short-seller Hindenburg Research accused the conglomerate of deceit and stock market manipulation, the unheard-of decline in the value of Adani Group shares began. Since Hindenburg issued its analysis on Tuesday of last week, the group, which consists of seven publicly traded companies, has lost 50% of its value.

The Securities and Exchange Board of India (SEBI) was looking into the stock price declines, according to Reuters on Wednesday.

According to a person with firsthand knowledge of the situation, Reuters reported on Wednesday that the Securities and Exchange Board of India (SEBI) was investigating the stock price declines as well as any potential violations in the failed share sale. Requests for feedback from the SEBI have not received a response to far.

Overleveraged?

Hindenburg Research charged the Adani Group of “brazen stock manipulation and accounting fraud scheme over the course of decades” in a report that was published on January 24.

The research company questioned the “sky-high values” of Adani enterprises and claimed that the group as a whole was “on a fragile financial footing” due to its “huge debt.” It asked 88 questions in the report’s conclusion. They include inquiries about Adani’s offshore firms and the reason for its “complicated, interconnected corporate structure.”

The video message was the first time the founder of the Adani Group has addressed the situation, despite the fact that the business had instantly criticised the report as “baseless” and “malicious.”

The business has a “impeccable track record of repaying” its financial obligations, according to Adani, who also described the group’s fundamentals as being “solid.” The stock had been trading significantly below the offer price since last week, he claimed, thus the Adani Enterprise share offering was cancelled to shield investors from losses.

“This choice won’t affect our ongoing activities or our future ambitions in any way. We’ll keep concentrating on timely project execution and delivery, he continued. “

Analysts have long raised concern about the significant risks associated with the rapid expansion of Adani enterprises. The group is one of the most indebted businesses in India thanks to a borrowing binge of $30 billion.

In a report titled “Deeply Overleveraged” that was issued on Adani Group last year, CreditSights, a research company owned by the Fitch Group, voiced grave worries about the company’s plans for debt-financed growth.

The “leverage ratios” of the Adani Group’s companies “remain to be robust and are in line with the industry benchmarks in the respective industries,” the company stated at the time.

‘Rude awakening’ for foreign investors

The crisis engulfing one of India’s most well-known businessmen may have more severe repercussions for the country’s rapidly expanding economy, which only two weeks ago was aggressively wooing international capital at the World Economic Forum in Davos.

Indicating that foreign investors “have had an unpleasant awakening,” Saurabh Mukherjea, founder of Marcellus Investment Managers, stated, “that is clear from looking at broader market activity.”

Experts cautioned that other significant Indian enterprises could be affected by the consequences from the Hindenburg report.

Manish Chowdhury, head of research at brokerage Stoxbox, declared that the Adani controversy had “opened a huge can of worms.” Foreign investors now perceive “the India story as weak,” he continued.

Investors would now be “sceptical,” according to Chowdhury, regarding the accounting processes used by all Indian companies, while Mukherjea claimed that his clients are already asking additional questions.

Naturally, they want us to provide some guidance on how accounting and corporate governance operate in India, Mukherjee told CNN.

Adani is thought of as the prime minister of India’s close friend. Furthermore, opposition politicians have started requesting an investigation into the Hindenburg report. On Wednesday, they even organised a protest inside the Indian parliament during the yearly budget speech by the finance minister.

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