By Chris Thomas and Aditya Kalra
NEW DELHI (Reuters) – Most Adani Group shares extended their sharp decline until Monday as a detailed rebuttal of criticism of a U.S. short seller by the Indian conglomerate failed to appease investors whose market losses have now reached $65 billion over three days.
Flagship Adani Enterprises, which faces a crucial test this week with a follow-on stock offering, rose 3% but saw initial gains of up to 10% and significantly below the bid price.
Adani, led by Asia’s richest man Gautam Adani, locked horns with Hindenburg Research and hit back on Sunday at last week’s short seller’s report that flagged concerns about its debt levels and the use of tax havens. Adani said he complied with all local laws and made necessary regulatory disclosures.
Adani Transmission and Adani Total Gas plunged 20% each on Monday, while Adani Green Energy fell 16%. Adani Ports and Special Economic Zone fell 1.1%.
Adani Enterprises’ $2.5 billion secondary stock sale entered its second day amid weak investor sentiment. The stock was trading at 2,848 rupees in early trading, well below the price range for selling shares of 3,112 to 3,276 rupees per share.
On Friday, the first day of the offering, the issue was underwritten at 1% amid a broader decline in equities. Early data from exchanges on Monday showed Adani had now received bids for 563,156 of the 45.5 million shares, or 1.2%, on offer. Foreign and domestic institutional investors, as well as mutual funds, have so far made no bids in the offering, according to the data.
Indian regulations state that the share offering must receive a minimum subscription of 90%, and if not, the issuer must repay the full amount. Maybank Securities and Abu Dhabi Investment Authority are among the investors who bid for the main part of the issue.
Adani Group told Reuters in a statement on Saturday that the sale remained on schedule at the expected issue price, although sources said bankers at the country’s largest secondary stock sale were considering extending the deadline to beyond January 31 or to modify the price due to the fall in its share price.
The Hindenburg report has led since last week to a massive write-off of seven listed companies from the Adani group. On Monday, the group’s seven listed entities have collectively lost $65 billion in market capitalization since the report was released. Adani Total Gas lost the most, with $21 billion.
Responding to Adani’s rebuttal on Monday, Hindenburg said “the response largely confirmed our findings and ignored our key questions.”
The stock market crash was a dramatic setback for Adani, 60, a school dropout who rose rapidly in recent years to become the world’s third-richest man, before slipping to eighth on the Forbes list.
Hindenburg’s report states that five of Adani’s seven largest publicly traded companies reported current ratios, a measure of liquid assets minus current liabilities, of less than 1, which it said suggests “liquidity risk at increased short term”.
He said Adani’s main listed companies had “substantial debt”, which put the whole group in a “precarious financial situation” and shares of seven Adani listed companies were down 85%. % due to what he called “exorbitant valuations”.
Adani’s response on Sunday said that over the past decade his group companies have “systematically deleveraged”.
(Reporting by Chris Thomas and Aditya Kalra; Additional reporting by Gaurav Dogra; Editing by Muralikumar Anantharaman)