One of the richest people in the world, Gautama Adani lost $48.5 billion of his fortune in a few days, and the capitalization of the companies that are part of his Adani Group group of companies has collapsed by $100 billion, informs Reuters. The reason for such a sharp drawdown was the investigation of the American investment company Hindenburg Research, which specializes in short sales (betting down). The company’s report spoke of numerous frauds, as well as the high level of debt of the Adani Group, the document caused panic among investors, which led to a sharp drop in the value of shares and the state of the Indian businessman.
Prior to the investigation by Hindenburg Research, Adani was the third richest person on the planet, second only to Louis Vuitton Moët Hennessy CEO Bernard Arnault and Tesla owner Elon Musk. The fortune of the Indian businessman was estimated at $ 120.6 billion, he was the richest man in Asia, but the scandal lowered him to the second line of the local rating. Now the richest man in Asia is considered by another representative of India – the manager and main owner of the Indian company Reliance Industries, Mukesh Ambani.
The investigative scandal derailed Adani Group’s plans to sell $2.5 billion worth of paper on the market, which only accelerated the fall. At the moment, the shares of the main company of the Adani Enterprises conglomerate for 5 trading sessions collapsed by 51.76%, shares of other companies within the conglomerate fell within 10-35%. Adani has a widely diversified business, but key assets are mining, port services and cement production. The agency notes that for the companies of the Indian businessman, the scandal came at a very wrong time – many enterprises within the conglomerate were in international negotiations on cooperation, which may now suffer.
“Sales may pick up. If Adani fails to restore the confidence of institutional investors, the stock will be in free fall,” says Avinash Gorakshakar, head of research at Profitmart Securities.
The collapse of the shares of one of the largest Indian companies has already caused concern among the regulator. The Indian Central Bank requested information from banks on their level of involvement in the Adani Group’s business and required them to report on the level of the company’s debt to banks. The agency estimates that they account for about 40% of the company’s short-term debt, which Adani must repay by March 2022. The amount of debt is estimated at 2 trillion rupees or $ 24.53 billion. Some banks, such as Citi, have already revised their assessments of the company’s debt, and Adani Group papers have ceased to be considered as collateral for margin transactions. The collapse of the company’s shares even reached the Indian Parliament, which called for an investigation into the group of companies.
Hindenburg Research published its investigation on January 24, in which the company alleged that the Adani Group is using a wide network of offshore companies to reduce taxes and also inflate the market value of the conglomerate companies. Also, investigators from Hindenburg Research drew the attention of investors to the company’s high level of debt. The Adani Group itself denies all the accusations against them, noting that Hindenburg Research is simply not aware of Indian legislation, and Adani complied with all the requirements of local regulators.
