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MUMBAI: Shares of India’s Adani Enterprises sank nearly 20% on Friday as a scathing report by a US short seller triggered a rout in the conglomerate’s listed firms, casting doubts on how investors will respond to the company’s record $2.45 billion secondary sale.

Seven listed companies of the Adani conglomerate - controlled by one of the world’s richest men Gautam Adani - have lost a combined $48 billion in market capitalisation since Wednesday, with US bonds of Adani firms also falling after Hindenburg Research flagged concerns in a Jan. 24 report about debt levels and the use of tax havens.

The rout took shares of Adani Enterprises, the group’s flagship company, well below the offer price of its secondary sale, which had initially been offered at a discount.

India’s capital markets regulator is studying the Hindenburg report and may use it to aid its own ongoing probe into offshore fund holdings of Adani Group, two sources said. Spokepersons for the regulator had no immediate comment.

Adani Group has dismissed the Hindenburg report as baseless and said it is considering whether to take legal action against the New York-based firm. It did not immediately respond to a request for comment on the regulator’s move.

With a net worth of $97.6 billion, billionaire Gautam Adani is now the world’s seventh richest man, according to Forbes, slipping from the third position he held before the Hindenburg report.

Adani met the country’s power minister R.K. Singh on Friday in New Delhi, according to a source familiar with the matter. The agenda of the meeting was not immediately known.

The billionaire hails from the western state of Gujarat, the home state of Prime Minister Narendra Modi. India’s main opposition Congress party has often accused Adani and other billionaires of getting favourable policy treatment from Modi’s federal administration, allegations the billionaire denies.

The stunning market selloff has cast a shadow over Adani Enterprises’ secondary share sale that started Friday.

The anchor portion of the sale saw participation from investors including the Abu Dhabi Investment Authority on Wednesday. “The sell-off is seriously extreme … it has clearly dented the overall investor sentiment in the market,” said Saurabh Jain, Assistant Vice-President - Research at SMC Global Securities. Market worries extended to Indian banks with exposure to Adani’s debt.

The index tracking state-run banks slid 6.6%, while the main Nifty Bank index fell 3.5%. CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion rupees ($24.53 billion) of Adani Group debt in the fiscal year to March 2022. As of 0818 GMT, investors, mostly retail, had bid for around 320,000 shares of Adani Enterprises, or less than 1% of the 45.5 million on offer, according to BSE exchange data.

Gulf investors bid for India’s Adani Enterprises’ $2.5bn FPO

Bidding for retail investors will close on Jan. 31. The share sale is being managed by Jefferies, India’s SBI Capital Markets, Axis Capital, and ICICI Securities among others.

The firm has set a floor price of 3,112 rupees ($38.22) a share and a cap of 3,276 rupees. But on Friday the stock slumped to as low as 2,721.65 rupees - well below the lower end of the price offering.

Shares of other listed Adani firms also plummeted, with Adani Transmission Ltd Adani Total Gas, Adani Green Energy and Adani Ports sinking 20% each. US dollar-denominated bonds issued by Adani Green Energy extended this week’s sharp falls to just under 77 cents in the dollar to their lowest since November, Tradeweb data showed. The price was last down 7.32 cents to 77.007 cents.

“Sky-high valuations”

In its report, Hindenburg said key listed Adani Group companies had “substantial debt”, putting the conglomerate on a “precarious financial footing”, and that “sky-high valuations” had pushed the share prices of seven listed Adani companies as much as 85% beyond actual value. Billionaire US investor Bill Ackman said on Thursday that he found the Hindenburg report “highly credible and extremely well researched.”

Ackman had bet $1 billion against Herbalife Ltd starting in 2012, but exited his position at a loss. Hindenburg said it held short positions in Adani through its US-traded bonds and non-Indian-traded derivative instruments. Adani Group has repeatedly faced and dismissed concern about its debt levels. 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”. Jefferies in a client note said it does not see material risk arising to the Indian banking sector from Adani Group’s debt.

Adani has said its debt is at a manageable level and that no investor has raised any concern. The Adani conglomerate has been diversifying its business interests and last year bought cement firms ACC and Ambuja Cements from Switzerland’s Holcim for $10.5 billion. ACC shares slid 15% on Friday, while Ambuja plunged up to 25%.

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SAMIR SARDANA Jan 27, 2023 07:24pm
THE 1ST AIM OF HINDENBERG IS ACHIEVED ! THE ADANI PRICES IS BELOW THE OFFER PRICE ! SO NOW IT IS A RACE TO CRATER BOMB THE SHARE PRICE ! IF THE PUBLIC OFFER OF ADANI FLOPS- THAT WILL BE DISASTER FOR ADANI - & THEN BANKS WILL HAVE MASSIVE M2M LOSSES ON LOANS ON SHARES PLEDGED. BANKS WILL NOT DUMP THE STOCKS,AS THEY ARE UNDER THUMB OF CHAIWALA ! THEN BANK SHORTING WILL START ! ACC AND AMBUJA ARE DOOMED ! HINDENBERG HAS "INVITED" ADANI, TO SUE THEM, IN NY CITY ! THE BET IS THAT ADANI WILL "NOT SUE" ! NEITHER IN INDIA NOR IN THE US - AS THEN HINDENBERG WILL HAVE A LICENSE TO RELEASE INFO,AND OPEN THE "CAN OF WORMS",DAY BY DAY, VIA THE COURT. LAWYERS AND MEDIA. SOON ADANI BONDS WILL BE SHORTED IN US ALSO ! THERE IS ONLY 1 WAY OUT,FOR ADANI ! ADANI IS AN "INSTRUMENT OF THE STATE" ! SO LIC/GIC/OIC AND OIL PSUs,WILL HAVE TO TAKE STAKES, IN THE PUBLIC OFFER,AND IN ADANI ! SAMIR SARDANA THERE IS NO OTHER OPTION ! ELSE HINDENBERG WILL COLLAPSE THE GROUP AND INDIAN BANKS !
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SAMIR SARDANA Jan 28, 2023 01:50am
WHAT HINDENBERG PROVES IS THAT, ANY INFRA COMPANY WITH A CAPITALISATION OF 50 BILLION USD,,WITH A PE,OF MORE THAN 40 TIMES,CAN BE BLOWN UP TO SMITHREENS THE INDIANS ARE DUDS - THEY DO NOT SEE PROVIDENCE ! HINDENBERG = ZEPELIN ADANI HAS LOADED HYDROGEN,AND HINDENBERG HAS MANPAED-DED THEIR ZEPELIN (ADANI ENTERPRISES) ! ADANI HAS A TOLLING BUSINESS MODEL - BUT CAN IT JUSTIFY A PE OF MORE THAN 40 TIMES (BASED ON PROJECTIONS), WITH LARGE PROMOTER HOLDINGS ? THE SECOND ANGLE IS ACCOUNTING AND OFV TO INVEST IN GROUP COMPANIES - BUY THAT IS PASSE, FOR INDIAN COMPANIES ! SO HERE ALSO HINDENBERG HAS A WRENCH ON THE ACHILLES HEEL! ONLY CHAIWALA CAN SAVE ADANI,BY DIRECTING SOE TO INVEST IN ADANI ! AND THEN,THE POLITICIANS WILL COME IN ! SOONER RATHER THAN LATER, THE DETAILS OF HINDENBERG REPORT,WILL BE WITH CONGRESS,AND SOMEONE WILL MOVE THE COURTS. COULD THIS BE THE BOFORS FOR CHAIWALA ? SAMIR SARDANA
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