ADIA and Others Hunker Down as Clouds Form Around Adani Empire over Short Seller Report

Posted on 01/29/2023

Indian industrialist billionaire Gautam Adani oversees the Adani Group, a massive conglomerate that was worth 17.8 trillion Indian rupees. Gautam Adani, a school dropout, has seen his net worth skyrocket over the last three years due to the value of his listed equity shareholdings. The Adani Group’s core wealth is found in seven listed companies: Adani Enterprises, Adani Green Energy, Adani Ports, Adani Power, Adani Total Gas, Adani Transmission, and Adani Wilmar.

On January 27, 2023 Gautam Adani witnessed more than US$ 20 billion wiped off his fortune. This is after short-seller research firm Hindenburg Research revealed a scathing 100-page report on the finances of Adani Group. The Adani Group quickly dismissed the report as malicious. India’s main opposition party has demanded an investigation. Furthermore, many Indian banks, asset managers, and insurance companies have invested or lent money to companies tied to the Adani Group.

Adani Group’s publicly listed companies have lost about US$ 50 billion in market value from when the Hindenburg Research report was released on January 24, 2023 till January 29, 2023. Shares in the firm’s flagship Adani Enterprises Limited dropped by nearly 20% on January 27, 2023. Hindenburg Research has taken a short position in Adani’s companies through U.S.-traded bonds and non-Indian-traded derivatives. The Adani Group said, “This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.”

Hindenburg Research claims that Adani Group is engaging in decades of “brazen” stock manipulation and accounting fraud. The report called out the conglomerate’s “substantial debt.” In addition, the flagship listed entity Adani Enterprises had five chief financial officers in an 8-year period. Its report came ahead of a planned share sale for Adani Enterprises. Some investors came through in the offering such as Maybank Securities and the Abu Dhabi Investment Authority (ADIA), which picked up stakes in Adani Enterprises’ US$ 2.45 billion secondary share offering. Life Insurance Corporation of India is spending about 3 billion rupees (US$ 37 million) as an anchor investor in a $2.5 billion new share sale by Adani Enterprises Ltd., according to a filing. State Bank of India Employees Pension Fund is also investing in the offering. Abu Dhabi-based International Holding Co. (IHC), owned by The Royal Group, will invest about US$ 400 million in Adani Enterprises Ltd.’s follow-on share sale. This will represent about 16% of the offering.

Before the share offering, IHC has invested almost US$ 2 billion in companies owned by Gautam Adani in 2022. In April 2022, Adani Enterprises raised 77 billion rupees (US $943 million) by issuing preferential shares to IHC. Adani Green Energy Limited and Adani Transmission Limited also received 38.5 billion rupees from IHC.

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