Gautam Adani, billionaire and chairman of Adani Group, during an event at the Port of Haifa in Haifa, Israel, on Tuesday, Jan. 31, 2023.
Kobi Wolf | Bloomberg | Getty Images
Gautam Adani’s flagship firm called off its $2.5 billion share sale in a dramatic reversal on Wednesday as a rout sparked by a U.S. short-seller’s criticisms wiped billions more off the value of the Indian tycoon’s stocks.
The withdrawal of the Adani Enterprises share offering marks a stunning setback for Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years in line with stock values of his businesses.
“Today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct,” Adani said.
“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans,” the billionaire added in a statement to Indian exchanges.
Adani, whose global business interests span ports, airports, mining, cement and power, is battling to stabilize his companies and defend his reputation.
“Once the market stabilizes, we will review our capital market strategy,” he added.
A report by Hindenburg Research last week alleged improper use by the of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The India flag in front of the Adani Group headquarters in Ahmedabad, India, on Wednesday, Feb. 1, 2023.
Dhiraj Singh | Bloomberg | Getty Images
The Jan. 24 report has since triggered a $86 billion erosion in market capitalization of seven listed Adani Group companies.
Adani Group has denied the allegations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.
Adani Group was working with its bankers to refund the proceeds received by in the secondary share sale of Adani Enterprises. Anchor investors who had supported the issue included Maybank Securities and Abu Dhabi Investment Authority.
The company aims to protect the interests of its investing community by returning the proceeds, it said.
Adani Group had on Tuesday mustered enough support from investors for the share sale to proceed, in what some saw as a stamp of investor confidence amid the storm.
But after a brief respite, the selloff in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone dropping 19%, the worst day on record for both.
The fundraising was critical for Adani, not just because it would have helped cut his group’s debt, but also because it was being seen by some as a gauge of confidence as he faced the biggest business and reputational challenge of his career.
Wednesday’s stock losses saw Adani slip to 15th on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries who ranks ninth with a net worth of $83.7 billion.
The share sale had succeeded on Tuesday even when the Adani Enterprises stock price in Mumbai markets traded below the offer price of the share sale.
“I do not know how the markets will behave in short term. But this is a measure to enhance (Adani’s) reputation since the investors were staring at a 30% loss even before the shares were alloted,” said Rajesh Baheti, chief executive, Crossseas Capital Services, an algo trading firm.