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HomeBusinessShort-selling sends Adani into panic mode

Short-selling sends Adani into panic mode

Indian corporate giant Adani has called off its $US2.4 billion equity fundraising in a blow to billionaire Gautam Adani after shares tumbled in the wake of a short seller report – a move taken late Wednesday night.

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That was after another day of selling in Adani companies on the Indian stockmarket that have pushed the total losses to a massive $US76 billion since a US short seller’s shock report that raised a string of questions about the soundness of the Adani group’s finances and especially its debts levels.

News of the issue being dropped will send the Indian stockmarket lower on Thursday and triggered fears across Asian banking and investment markets as well after another brutal day’s selling on Wednesday saw the value of the key company in the group, Adani Enterprises plunge a record 28%, even though the capital raising was successful.

Despite that selling the Bombay Stock Exchange closed Wednesday with a small gain of just under 0.3% in its key index, the Senex

That slump, and big falls for other listed Adani companies, saw Adani Enterprises stun with a late announcement that the issue was off and it will return money to its investors.

The reason for the change of heart was not given by Adani or its spokes people but it has to be linked to the continuing share price rout triggered by US-based short seller Hindenburg Research which accused the Indian conglomerate of using tax havens and to hide true (higher) debt levels.

“The Board of Directors of the Company at its meeting held today i.e. February 1, 2023 has decided, in the interest of its subscribers, not to proceed with the further public offer (FPO) of equity shares aggregating up to Rs 20,000 crore of face value Rs 1 each on partly paid-up basis, which was fully subscribed,” the company said in an exchange filing on Wednesday evening.

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 aimed to protect the interests of its investing community by returning the proceeds, it said but failed to say what it was protecting investors against.

The about face stunned investors after the company had trumpeted that it had raised the more than $US2.4 billion following a late flood of funds from big investors.

Media reports said it was notable that small Indian investors had shoed away from the issue when normally they should have been supporting on of the country’s business heroes.

Instead of stabilising the share price of Adani companies, the news of the issue’s success triggered another round of selling.

Shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone dropping 19%, the worst day on record for both.

Shares in Adani Total Gas – of which French giant TotalEnergies owns 37.4% – fell, with trading suspended again after another 10% (limit down) drop.

Adani Group has denied the allegations from Hindenburg, saying the short-seller’s allegation of stock manipulation has “no basis” and stemmed from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.

In Australia Adani owns the huge Carmichael thermal coal mine in central Queensland and the Abbott Point terminal north of Bowen.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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