Indian tycoon Gautam Adani’s conglomerate faces accusations of stock price manipulation and fraud that have chilled investors.
Nearly a month after the explosive allegations made by short seller Hindenburg Research, billionaire Gautam Adani’s empire continues to bleed.
Adani Group has yet to clear up doubts and questions raised by the New York-based investment firm. Hindenburg accused the empire of the billionaire, who at the end of January was still the richest man in Asia, of stock price manipulation, fraud and money laundering.
Adani Group rejected these accusations but has not reassured the markets.
This industrial group, with interests in ports, data centers, energy, airports and others, has been expanding rapidly, alongside Indian Prime Minister Narendra Modi’s development ambitions for the country. The founder Gautam Adani and Modi are close, according to the local press.
The stock market flight of the Adani Group continues
The group has seen a precipitous decline in the stock market, having lost more than $135 billion in market capitalization as of February 20, Bloomberg News calculated. This is more than half of its market value.
This stock market crash, which began after the Hindenburg report was released on January 24, continues.
During the February 21 trading session on the Mumbai Stock Exchange, most of the entities that make up the Adani conglomerate ended lower.
Adani Enterprises, the flagship, ended the session down 3.16%, Adani Green Energy was down 5%, Adani Total Gas was down 5% and Adani Transmission was down 4.99%.
This stock market bloodbath has also drastically reduced Adani’s net worth. The billionaire, who started the year as one of the world’s five richest people, is now outside the top 20. His net worth has dropped by nearly $72 billion this year to $49.1 billion as of February 20. , according to himBloomberg. Billionaires Index.
The collapse of the Adani empire raises questions, experts say, about India’s ability to become an alternative to China for foreign investment. Legendary investor George Soros recently claimed that this debacle weakened Modi, who must answer for what happened.
“Modi and business magnate Adani are close allies; their fate is intertwined,” Soros said during a speech at the 2023 Munich Security Conference on February 16. “Adani Enterprises tried to raise funds on the stock market, but failed. Adani is accused of stock manipulation and his stock collapsed like a house of cards.”
“Modi is silent on the issue but will have to answer questions from foreign investors and in parliament.”
The billionaire ended his scathing criticism by saying that “I may be naive, but I hope for a democratic renaissance in India,” said Soros, who hit Modi by saying India is “a democracy, but its leader Narendra Modi is not a democrat.” “. “
While Indian political parties have condemned Soros’s comments, a cloud of mistrust still enshrouds the Adani Group. The conglomerate recently secured the services of the public relations firm Kekst CNC, which specializes in crisis communications.
Kekst, which has offices around the world, is known for handling communications around WeWork’s valuation implosion four years ago.
Adani Group hires a powerful law firm
The Adani Group also retained the services of the powerful and expensive New York law firm of Wachtell, Lipton, Rosen & Katz to respond to the Hindenburg Research allegations, according to the Financial Times.
The law firm is known for defending companies attacked by activist investors. In 2020, the law firm even wroteguidelines on the subject, a report titled “Dealing with Activist Hedge Funds (and Other Activist Investors).” In it, he lists several attacks by activist investors and provides guidance on how to respond to them.
“When a company’s management and directors work together to present a compelling long-term strategy for value creation, investors will listen,” the law firm concludes.
At the same time, Adani Group is trying to reassure investors about its ability to pay its debts. Investors are eyeing his leverage ratios and ability to generate cash flow after he canceled a $2.5 billion stock sale.
Executives last week told bondholders the goal was to reduce the group’s net debt to Ebitda ratio to less than three times next year, from 3.2 times now, according to Bloomberg News.
Adani Power has abandoned a plan to acquire a coal plant in central India, as part of the group’s overall effort to reduce capital expenditures and conserve cash.
The conglomerate could also sell assets.
