Adani Group abandons share offer in escalating crisis triggered by fraud claims that routs wealth

Indian billionaire Gautam Adani called off his flagship company’s $2.5bn share sale as his conglomerate shed tens of billions of dollars in market value in the aftermath of a damning report that accused the group of market manipulation and fraud.

In a statement on Wednesday, the conglomerate announced that it will return the proceeds to investors due to “market volatility”.

“The Board of Adani Enterprises Ltd decided not to go ahead with the fully subscribed FPO [follow on public offer]. Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction,” the statement said.

The company said that while it is working to return the money, its balance sheet remains “very healthy”.

“This decision will not have any impact on our existing operations and future plans. We will continue to focus on long-term value creation and growth will be managed by internal accruals. Once the market stabilises, we will review our capital market strategy,” the statement said.

The move comes as Mr Adani, who was the world’s third richest man according to Forbes until last week with a net worth of $127bn, slipped to 16th place amid market losses in his companies worth $100bn.

He has also been overtaken by longtime rival Mukesh Ambani as Asia’s richest man.

In a statement on Thursday, the billionaire said that the decision to recall the FPO, which had been fully subscribed earlier on Wednesday, has been taken to protect investors.

“For me, the interest of my investors is paramount and everything else is secondary. Hence to insulate the investors from potential losses we have withdrawn the FPO,” he said in a video message.

Adani group has faced a tumultuous week in the market after US short-selling firm Hindenburg Research released a report last week calling out the company for engineering the “largest con in corporate history”.

It alleged “brazen” stock manipulation and accounting fraud worth $218bn by the multinational conglomerate, active in resources, logistics and energy.

Mr Adani and his company have denied the allegations in the report and called it “anti-Indian”.

However, the report set the stock market price of his company into a freefall and raised concerns over the high exposure of the state-owned insurance company, the Life Insurance Corporation (LIC), and India’s largest lender State Bank of India (SBI), to Adani Group companies.

On Thursday, the Reserve Bank of India asked local banks for details of their exposure to the Adani group of companies, reported Reuters, citing government and banking sources.

After Credit Suisse stopped accepting bonds of Adani’s group of firms as collateral for margin loans, Citigroup Inc also followed suit on Thursday, Bloomberg News reported.

India’s market regulator SEBI has not yet announced any probe into the crash in Adani shares and the withdrawal of the FPO.

Also, on Thursday the issue reached the country’s parliament as opposition lawmakers demanded a joint session to probe the Adani group.

Opposition parties also raised adjournment notices claiming that public money is tied to banks linked to the group.

Mallikarjun Kharge, president of the opposition Congress party, told reporters: “Money of crores of Indians tied to institutions like the LIC or banks like the SBI is being put in select companies.

“This company has been outed by Hindenburg Research’s report. Following which, the shares of the company have fallen … You know who owns this company. Why is the government giving such companies money?

“LIC, SBI and other institutions that have given money… that should be investigated. We want to demand that there should be a joint parliamentary committee or a committee supervised by the Chief Justice of India.”

Mr Adani’s meteoric rise has been questioned by critics for his closeness with prime minister Narendra Modi.

A top minister in Mr Modi’s cabinet said on Thursday that the stock market developments will not affect India’s overall economy.

“India has a very broad spectrum of infrastructure companies,” Ashwini Vaishnaw, India’s minister for tech and railways, told Bloomberg TV.

“Whatever blip is there on the stock market is not going to affect the overall economy, I am very sure of that.”