Adani Group Stocks Lose $48Bn Over Hindenburg Fraud Claims, LIC Shares Also Fall

Adani, who started the week as the world’s 3rd-richest person, now ranks seventh on Forbes’ billionaire tracker.

Gautam Adani, who started the week as the world’s third-richest person, is now ranked seventh on Forbes’ billionaire tracker.

(Photo: Pranay Dutta Roy/The Quint)

Stocks of the Adani Group took a dive for a second consecutive session on Friday, 27 January, falling upto 20 percent and losing over 4.17 crore in combined market valuation after US-based investment research firm Hindenburg Research said it stood by its allegations of share price manipulation and accounting fraud by the conglomerate.

How bad is the damage? Shares of Adani Total Gas fell 20 per cent, Adani Green Energy and Adani Transmission, both plummeted 19.99 percent, and the Bombay Stock Exchange saw Adani Enterprises plunge by 18.52 percent.

But that’s not all. Adani Ports and Special Economic Zone (SEZ) fell 16.03 percent, while Adani Wilmar and Adani Power, both dipped 5 per cent.

What about Adani's Forbes ranking?: Gautam Adani, who started the week as the world’s third-richest person, is now ranked seventh on Forbes’ billionaire tracker following a $22.6 billion hit to his fortune.

Close to $50 billion lost: The seven listen companies of the Adani conglomerate lost a total $48 billion in market capitalisation after report by Hindenburg Research on 24 January flagged concerns about debt levels and the widespread use of tax havens.

Not the only one: While Adani group took a beating it wasn’t the only one. Life Insurance Corporation (LIC), which is the single largest non-promoter domestic shareholder in the group’s five largest companies, lost Rs 16,627 crore due to the fall in Adani’s holdings. 

LIC's woes: The value of LIC’s holdings in Adani Group dipped from 72,193 crore on Tuesday to Rs 55,565 crore on Friday - a drop of 22 percent. LIC’s share prices also took a hit and dell 5.3 percent by Friday. 

LIC has emerged as one of the largest victims other than the Adani Group’s promotors, and has sharply increased its shareholding in four of Adani Group’s seven listen companies, and almost six-fold in one of them. 

Hindenburg's allegations: In its report, Hindenburg Research said that the Adani Group had used undisclosed related party transactions, which are transaction that take place between two groups who hold a pre-existing relationship.

Moreover, the report added that the Adani Group had manipulated earnings to “maintain the appearance of financial health and solvency” of its businesses.

What did the Adani Group say?: On Thursday, the Adani Group said that it is examining legal options to take "punitive action" against the research firm for a "reckless" attempt to sabotage a huge share sale of the group’s flagship company. However, Hindenburg stood by its report and added that “If Adani is serious, it should also file a suit in the US…”

"We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO (Follow-on Public Offering) from Adani Enterprises," Adani Group's lead head Jatin Jalundhwala said in a statement.

Damage control? Bloomberg and Moneycontrol reported that on Friday, 27 January, that Adani Group executives held a conference call with players such as Barclays Plc, Deutsche Bank AG, Mitsubishi UFJ Financial Group Inc., and Standard Chartered Plc, along with other fixed-income investors.

• On the call, Adani Group reportedly asserted that the accounting fraud allegations were “devoid of facts.”

• Eight of the nine Adani portfolio companies are audited by one of the so-called “big six” auditors, as per a presentation that was reportedly shown to investors.