Lhe title of Adani Enterprises fell to 508.45 rupees (6.23 dollars) on the Bombay Stock Exchange in the afternoon, causing a suspension of its quotation for 105 minutes. The quotation of the action of the subsidiary Adani Total Gas was also suspended, after the title fell by 20%.
“Obviously this is panic selling”told AFP Ashish Chaturmohta of JM Financials, adding that traders were creating new short-sell positions to protect prior bullish bets on Adani shares.
Hindenburg Research alleged this week that the Adani Group used undisclosed related party transactions and earnings manipulation to “maintain the appearance of sound financial health and solvency” of its listed subsidiaries.
From 3e at the 7e place of the richest in the world
In two days, billionaire Gautam Shantilal Adani, considered a close supporter of Prime Minister Narendra Modi, fell from third place in the ranking of the richest men in the world to seventh place, according to the Forbes ranking of the richest people recording a loss of $19 billion.
The Adani empire has operations ranging from coal mines in Australia to India’s largest ports, and the capitalization of its seven listed companies exceeds $218 billion.
The shares of these subsidiaries have soared 2000% over the past three years, adding more than $100 billion to the net worth of its founder, whose fortune today is said to be around $120 billion.
Hindenburg’s report accuses the group of engaging in a “bold stock manipulation and a decades-long system of accounting fraud”. He claims that Vinod, Adani’s older brother, managed a “vast maze of fictional offshore entities” in tax havens such as Mauritius, Cyprus and several Caribbean islands.
The report also indicates that a model of“government leniency towards the group” spanning decades has made investors, journalists, citizens and politicians unwilling to question the conduct of the group “for fear of reprisals”.
Charges dismissed by the Indian conglomerate, which was preparing for a major fundraising and denounced a reputational attack on Thursday “maliciously malicious” from the part of Hindenburg.
Jatin Jalundhwala, Adani Group’s head of legal affairs, said in a statement that Hindenburg’s short-selling position within the group was evidence that the company had a vested interest in driving down Adani’s shares.
“Boasting and Threats”
But according to Hindenburg, the group is content to “bragging and threats” rather than confronting the issues raised by the report. “If Adani is serious, he should also file a complaint in the United States”the US company said in a statement. “We have a long list of documents that we will require” during the court process.
These allegations come as Adani has launched an ambitious capital increase operation, to the tune of 2.5 billion dollars.
“These issues go to the heart of India’s corporate sector, where a number of family-controlled conglomerates dominate”argued Gary Dugan, managing director of the Global CIO Office, to Bloomberg. “By their very nature, they are opaque, and global investors” must rely on the good faith of companies, according to him.
The Bombay stock exchange’s benchmark Sensex index lost 1.8% on Friday afternoon, mainly due to the Adani rout.