MUMBAI: Even after two days of strong denials and threat of legal action by the Adani Group against a report by US-based Hindenburg Research, stock prices of group companies were pummelled on Friday. Three of the 10 stocks fell as much as 20% each to hit the lower circuit breaker.
The two-day sell-off left the group’s shareholders poorer by $51.6 billion or about Rs 4.2 lakh crore, BSE data showed. It also wiped off over $25 billion of the personal net worth of Gautam Adani, the group’s chairman, to below $100 billion and relegated him to seventh richest in the world, from third earlier this week, Forbes data showed. The group chairman’s net worth is now at $96.6 billion (about Rs 7.9 lakh crore).
The sensex dropped 874 points or 1.5%, its biggest single-day loss in over a month, to settle at 59,331, its lowest close since October 21. SBI was 5% lower at Rs 540, while LIC lost 3.5% to Rs 666 on concerns over exposure to the group.
According to some, one of the triggers for Friday’s selloff was a tweet by billionaire hedge fund manager Bill Ackman, who called Hindenburg’s work on Adani Group “highly credible and well-researched”. Ackman is the founder of Pershing Square, rated by Reuters as one of the best performing hedge funds in the world. He is known for betting against popular companies by going short and later buying their shares when they are not trending.
“We are not invested long or short in any of the Adani companies…nor have we done our own independent research,” Ackman said, joining the Hindenburg-Adani debate on Twitter on Friday.
The development indicates that the Adani group has come under the scanner of global investors. Late Tuesday, New York-based Hindenburg Research came out with a report titled ‘Adani Group: How the world’s 3rd richest man is pulling the largest con in corporate history’.
The report alleged that the Adani Group was involved “in a brazen stock manipulation and accounting fraud scheme over the course of decades.” Hindenburg also said that it had taken a short position in stocks and bonds of Adani Group companies through offshore channels. The report mentioned that the group’s key listed companies had taken on substantial debt, including pledging shares of their inflated stock for loans, “putting the entire group on precarious financial footing”.
Adani Group was quick to junk the report and called it “a malicious combination of selective misinformation, stale and baseless allegations that have already been tested and rejected” by the SC. On Thursday, the group said that it was mulling legal recourse against Hindenburg.
In response, Hindenburg tweeted that they would welcome such a move and dared Adani to sue them in the US, saying they would demand “a long list of documents” in a legal discovery process.
Friday’s selloff pulled down Adani Enterprises’ stock price by 18% to Rs 2,762. Along with it, Adani Transmission, Adani Green Energy and Adani Total Gas all closed at the 20% lower circuit. Adani Power, Adani Wilmar and NDTV all closed at the 5% lower circuit, while Adani Ports lost 16%. Ambuja Cements and subsidiary ACC recorded a 17.2% and 13.4% drop respectively.
As a result of this selloff in Adani stocks, the group’s shareholders lost Rs 3.2 lakh crore. Together with the initial sell-off on Wednesday, the total loss to investors’ wealth is nearly Rs 4.2 lakh crore in two days.