New Delhi / London
Shares in Gautam Adani’s business fell further on Thursday after the Indian billionaire’s attempt to reassure panicked investors failed to stem a stock market crash that wiped $100 billion off the value of his group.
The 60-year-old businessman said The address of the recorded video Posted after that suddenly abandoned A $2.5 billion deal to sell new shares in his parent company, Adani Enterprises, just 24 hours after closing.
He added, “Once the market stabilizes, we will review our capital market strategy.”
This was the first time the businessman had spoken about the chaos in the market who has reduced his personal fortune by nearly $50 billion in just over a week, and removed his crown as The richest man in Asia. But that was not enough to calm the markets. Shares of Al-Adani companies fell 25% Thursday, while the shares of his other companies fell by 5% to 10%.
The unprecedented collapse in the value of Adani Group shares began when an American short seller, Hindenburg Researchand accused the conglomerate of fraud and stock market manipulation. The group, which has seven companies listed, has lost 50% of its value since last Tuesday, when the Hindenburg published its report.
Reuters reported On Wednesday, the Securities and Exchange Board of India (SEBI) was examining falling share prices and also looking into any possible irregularities in the failed share sale, citing a source familiar with the matter. SEBI has not yet responded to requests for comment.
India’s central bank asked lenders for details about their debt exposure to the Adani Group, bloomberg It was reported on Thursday, citing unnamed sources. The Reserve Bank of India did not respond to a request for comment.
The crisis revolving around one of India’s most prominent businessmen may have even greater consequences for the fast-growing economy than it did just two weeks ago. firmly erected For foreign investment at the World Economic Forum in Davos.
“Looking at the broader market activity, it is clear that foreign investors … have been rudely woken up,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.
Experts have warned that the fallout from the Hindenburg report could engulf other large Indian companies.
“The Adani saga opened a huge can of worms,” said Manish Chowdhury, head of research at brokerage Stoxbox. “India’s story looks weak” to foreign investors now, he added.
Choudary said investors will now be “skeptical” about the accounting practices of all Indian companies, while Mukherjea said his clients are already asking more questions.
“Naturally…they are asking us to do some manual work on how accounting and corporate governance works in India,” Mukherjea told CNN.
Adani is seen as a close ally of the Prime Minister of India. And opposition MPs have he started asking To conduct an investigation into the Hindenburg Report. They even staged a protest in India’s parliament on Wednesday while the country’s finance minister introduced the annual budget.
“This will definitely be a turn-off for large foreign investors now that it’s become a political issue now,” said Stephen Innes, managing partner at SPI Asset Management.
In an investigation published January 24, Hindenburg Research accused the Adani Group of “brazen stock manipulation and an accounting fraud scheme spanning decades.”
The research firm questioned the “extremely high valuations” of Adani’s companies and said its “significant debt” put the entire group “on a precarious financial footing”. She concluded her report with 88 questions. These range from asking for details about Adani’s external entities, to why there is “such a complex and interconnected corporate structure”.
While the Adani Group immediately denounced the report as “baseless” and “harmful,” the title of the video marked the first time the company’s founder spoke about the crisis.
Analysts have long expressed concerns that the rapid expansion of Adani’s business comes with significant risks. The group was fed by a 30 billion dollars in binge borrowingmaking it one of the most indebted companies in India.
CreditSights, a research firm owned by the Fitch Group, published a report last year on the Adani Group titled “Deeply Overleveraged” in which it expressed strong concerns about its debt-financed growth plans.
Al-Adani group said at the time that its companies’ leverage ratios “continue to be good and in line with industry standards in the respective sectors.”
In his video address, Adani said the group’s fundamentals are “strong” and it has a “proven track record of honoring” its debt obligations. He said the Adani Enterprise share issue has been withdrawn to protect investors from losses – the stock has been trading well below its offer price since last week.
This decision will not have any impact on our current operations and future plans. We will continue to focus on the timely implementation and delivery of projects.”