As a result of a US short-seller report, shares of Indian tycoon Gautam Adani’s conglomerate fell once further on Wednesday, costing the billionaire his position as Asia’s richest person and deepening an $84 billion downturn in his enterprises.
Due to Wednesday’s stock losses, Adani’s estimated net worth dropped from $83.6 billion to $76.8 billion, placing him behind Mukesh Ambani, chairman of Reliance Industries, who is currently tenth on the Forbes rich list.
Prior to the damning analysis by American short-seller Hindenburg, Adani had been third.
The losses represent a significant blow for Adani, the millionaire school dropout with stakes in mining, cement, ports, and other industries.
The corporate tycoon is currently battling to protect his name and stabilise his companies.
It happens only one day after the group was able to rally support from investors for a $2.5 billion share sale for flagship company Adani Enterprises on Tuesday, which some interpreted as a vote of confidence in the group’s ability to rally support from investors.
According to the research released by Hindenburg Research last week, the Adani Group engaged in stock manipulation and inappropriate exploitation of offshore tax havens.
Concerns were also expressed regarding the valuations of seven Adani-listed firms and the high level of debt.
The group has refuted the accusations, claiming that the short-claim seller that stock manipulation took place has “no validity” and results from a lack of understanding of Indian law.
It said that it has always disclosed information as required by regulations.
Adani Enterprises (ADEL.NS), frequently referred to as the incubator of Adani firms, had a 30% decline in share price on Wednesday.
Adani Power (ADAN.NS) decreased by 5%, while Adani Total Gas (ADAG.NS) decreased its daily price cap by 10%.
Adani Ports and Special Economic Zone (APSE.NS) fell 20%, while Adani Transmission (ADAI.NS) was down 6%.
The largest victim of the short seller report, Adani Total Gas, a joint venture with France’s Total (TTEF.PA), lost roughly $27 billion.
“There was a modest rally yesterday after the share sale went through, after seeming implausible at a point,” said Ambareesh Baliga, an independent market analyst based in Mumbai.
“However, the bad market mood has become obvious again after the bombshell Hindenburg report,” he said.
“Despite Adani’s refutation, the stock market is down, clearly harming investor confidence. The process of stabilisation will take time, said Baliga.
The fact that Credit Suisse (CSGN.S) no longer accepts bonds from Adani group companies as security for margin loans to its private banking clients underscores the anxiety in some quarters, according to a Wednesday Bloomberg article.
This was a significant contributor to Wednesday’s share declines, according to the managing director of KRChoksey Shares & Securities Deven Choksey.
Credit Suisse was unable to immediately respond.
The company is being scrutinised more closely after an Australian regulator announced on Wednesday that it will study the accusations made by Hindenburg to determine whether further investigations were necessary.
The Hindenburg report resulted in a net $1.5 billion sale of Indian stocks by foreign investors, the largest four-day outflow since September 30.
It’s anticipated that the Adani Group would experience difficulties for some time.
Hindenburg’s report will be included in the preliminary investigation conducted by India’s markets regulator, which has been investigating transactions by the company.
The state-run Life Insurance Corporation (LIC) (LIFI.NS), which insures people, declared on Monday that it would ask Adani’s management for clarifications regarding the short seller report.
A significant investor in the sale of Adani Enterprises shares was the world’s largest insurer, however.
In its report, Hindenburg claimed to have shorted Adani Group derivatives trading outside of India and US bonds.