After Wednesday’s share price drop, India’s Adani Enterprises decided to cancel its share sale. The flagship company of the Adani Group confirmed the $2.5bn (£2bn) would be returned to investors after shares fell 26%. Since a US investment firm made fraud claims, the value of the group’s companies has dropped by more than $90 billion. Adani has denied the allegations.
The company’s founder, Gautam Adani, is no longer among the world’s 10 richest people. Mr. Adani has risen to the ranks of the world’s wealthiest individuals, placing him at number 15 on the Forbes real-time billionaires list with a fortune of $74.7 billion. Last week, he ranked third on the list.
The billionaire owns and operates one of India’s largest businesses, Adani Group. Adani Enterprises, the parent company, is involved in the commodities trading, airports, utilities, and renewable energy industries, among others. Last week, “short-selling” firm Hindenburg Research published a report in which it claimed Mr. Adani was “pulling the largest con in corporate history” by misleading investors.
It also claimed that the Adani Group was on “precarious financial footing” due to the “substantial debt” of its companies and decades of “brazen” stock manipulation and accounting fraud. The organisation has denied the allegations, labelling them a “attack on India,” as malicious and false.
The report surfaced just days before Adani was scheduled to sell shares to the public, and on Tuesday, despite the controversy, the $2.5bn share sale in the group’s flagship company was fully subscribed. However, shares fell by 26.7% on Wednesday, bringing the total drop in market value for the group to more than $90bn, as reported by Bloomberg.
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Due to “the unprecedented situation and the current market volatility,” Adani Group announced after the market close that it would return the proceeds from the sale of its shares. Mr. Adani explained that the issue was delayed because the board of directors at the company “felt that going ahead with the issue would not be morally correct” given the unusual circumstances.
The Board has decided not to proceed with the FPO (follow-on public offer) in order to protect the interests of the investors and prevent them from suffering any financial losses. Mr. Adani characterised the firm’s finances as “very healthy with strong cashflows and secure assets.” “We have a perfect record of paying our debts on time,” he added. There will be no changes to our current procedures or future goals as a result of this decision.
Adani Group responded to the allegations by saying it was considering “remedial and punitive action” against Hindenburg Research in the United States and India. They claimed to have “complied with all laws” throughout their existence.
The company’s CFO likened Hindenburg Research to General Dyer, the British officer of the Bengal Army who ordered the massacre of hundreds of Indians in the city of Amritsar in 1919, in an interview with Mint newspaper. In response, Hindenburg claimed that the group was fanning a nationalist narrative in order to cover up the fraud allegations.