Adani Vs. Hindenburg: How Asia's Richest Man Lost His Crown in Just a Few Days

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  • Adani companies continued to sell off on eroded sentiment after short-selling firm Hindenburg released a report accusing the companies of stock manipulation and accounting fraud.
  • Adani's battle with the short-seller firm has put the group's exposure to Wall Street — amounting to nearly $9 billion, according to JPMorgan — under the spotlight.

In a dramatic turnaround, Adani Enterprises withdrew its $2.5 billion follow-on public offering despite the sale being fully subscribed, which many saw as a vote of confidence from investors.

The company pulled its share sale, citing "the unprecedented situation and the current market volatility," adding that it is working to refund the proceeds to investors.

"Given these extraordinary circumstances, the Company's board felt that going ahead with the issue would not be morally correct," founder Gautam Adani said.

"The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO."

The move comes after Adani stocks continued to sell off during Wednesday's trading session in Mumbai — reflecting eroded investor sentiment since Hindenburg Research announced its short position in Adani Group companies.

The Jan. 24 report accused Adani Group companies of "brazen stock manipulation and accounting fraud."

Shares of Adani Enterprises plunged by 28% on Wednesday. Adani Port and Special Economic Zone dropped 19%, Adani Green Energy fell 5.6%, Adani Total Gas lost 10% while Adani Transmission closed 2.8% lower.

The stock rout that followed the announcement amounted to $84 billion, Reuters reported, adding that the Securities and Exchange Board of India is looking into the allegations raised by Hindenburg.

Hindenburg, which said it has taken a short position in Adani Group, stands to benefit from the declining value of those stocks.

Adani's battle with the short-seller firm has put the group's exposure to Wall Street — amounting to nearly $9 billion, according to JPMorgan — under the spotlight.

How did we get here?

In just one week, Indian billionaire Gautam Adani saw more than $34 billion wiped off his net worth, according to the Bloomberg Billionaires Index.

Here's a timeline of the major events that led to this.

Jan. 25: Before India's market opened on Wednesday Asia time, Hindenburg Research announced its short position on Adani Group companies through U.S. traded bonds and non-Indian traded derivatives. Adani-affiliated stocks saw sharp losses during the trading day. Gautam Adani's net worth fell by $6 billion overnight.

Jan. 26: India's market was closed for a holiday.

Jan. 27: Adani Enterprises proceeded with opening subscriptions for its follow-on public offering of $2.5 billion despite a continued stock sell-off seen in group companies' stocks. The billionaire's net worth fell by another $20.3 billion to $92.7 billion.

Jan. 28-29: Adani Group released a lengthy 413-page response over the weekend, warning of legal action against Hindenburg and claimed the accusations raised against the Indian firm was a "calculated attack on India" and its institutions.

Hindenburg shot back and slammed Adani Group's response as "bloated," claiming it "ignores every key allegation" raised.

Jan. 30: In an interview with CNBC-TV18, Adani Enterprises Group CFO Jugeshinder Singh defended the group. He told the CNBC affiliate that the value of Adani Enterprises has not changed "simply because" of share price volatility. Shares of the group's companies continued to see more losses. Adani's net worth falls by another $8 billion to $84.5 billion

Jan. 31: Adani Enterprises' $2.5 billion share sale was fully subscribed on the final day of subscription, despite analysts' concerns it may fall through.

Feb 1: Adani Enterprises announces to not go ahead with its follow-on public offer, citing the current market volatility.

Who is Gautam Adani?

The 60-year self-made Indian billionaire expanded his empire through deals and the support of Indian Prime Minister Narendra Modi, according to Forbes.

Gautam Adani now stands in 13th place on the Bloomberg Billionaires Index, having lost his title of Asia's richest man to Mukesh Ambani, the chairman of Reliance Industries. Adani's net worth has fallen by $48.5 billion so far this year, as of Wednesday's market close.

He became a billionaire in 2008 after launching his commodities export firm and surpassed Bill Gates on the Bloomberg Billionaires Index in July 2022. It came even as a number of tech billionaires lost a combined $315 billion last year, according to Forbes.

The Adani conglomerate owns India's biggest airport operator and controls the nation's largest port operator. The group recently sought a hostile takeover of Indian media group NDTV. In a filing, the media company said the move was "carried out without any consent" from its founders.

Despite his net worth seeing sharp falls from Hindenburg's short-seller report, Adani tweeted a photo with Israel Prime Minister Benjamin Netanyahu on Tuesday.

According to Reuters, the Indian conglomerate has completed its $1.15 billion takeover of Israel's Port of Haifa.

What are the implications?

Hindenburg's allegations have raised questions about Adani Group's expansion, mostly driven by debt, and the lax regulations that allowed acquisitions to proceed.

However, economists that CNBC spoke to shrugged off any long-term spillover effects.

"I think the events with Adani Group are seen in isolation," Herald van der Linde, head of equity strategy, for Asia Pacific at HSBC told CNBC. "The Indian equity story remains one of the best across the region. Growth is visible and more predictable than elsewhere in the region."

"In the near term, sentiment and flows may be adversely impacted, but this should not have a lasting impact over the medium-term," said Sonal Varma, Nomura's chief economist for India and Asia outside of Japan told CNBC.

"The key drivers of India's medium-term growth prospects remain intact, corporate and banking balance sheets are much stronger, reforms are focused on enabling investments and raising productivity, and as a large market, India will benefit from the ongoing supply chain diversification," she added.

Asked if investors should be buying Adani stocks at the moment, Smart Investor's David Kuo, said bluntly: "It is better to stay out of trouble than to get out of trouble later."

"What Hindenburg is alluding to is that there is a problem with the debt. And it may not reflect itself in the share price, but there may be a debt problem," Kuo said on CNBC's "Street Signs Asia."

"It does have a lot of bonds outside of India – what happens if those bonds were to deteriorate in value, it would have an impact on the company," he said.

"Whether you believe the Hindenburg report or not, I think something needs to happen. Something needs to be clarified before investors start jumping in," he added.

CNBC's Seema Mody contributed to this report.

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