Adani group's market rout hits $66 bn as fight with Hindenburg escalates

The Adani Group took another blow on Monday, with the stock rout growing to $66 billion and its dollar bonds sold as the fight with short seller Hindenburg Research escalated.

While the broad selloff continued with Adani Total Gas Ltd. and Adani Transmission Ltd. down as much as 20% again, there were signs of a divide emerging among traders. Adani Enterprises Ltd., the flagship of billionaire Gautam Adani, as well as Adani Ports & Special Economic Zone Ltd., rebounded following a rebuttal of Hindenburg’s fraud allegations.

“The initial reaction suggests the market is likely to reward Adani group companies with relatively better visibility of earnings and solid fundamentals such as Adani Ports, Ambuja and ACC,” according to Bloomberg Intelligence analyst Nitin Chanduka. “Post the sharp correction, valuations have cooled off and could offer attractive opportunities for long-term investors.”

The turmoil comes as Adani Enterprises seeks to complete a $2.5 billion share sale, with a tit-for-tat between the two coming fast and furious. Just before markets open, Hindenburg said a Sunday 413-page refutation by Adani to its report last week fails to answer most of its questions. The saga also threatens to weaken broader confidence in India, until recently a top investment destination for Wall Street, and accelerate a nascent shift toward a reopening China.

Adani Enterprises rose 4.3% to 2,879.7 rupees as of 10:51 a.m. in Mumbai, still below the floor price it has set for its follow-on equity sale. The company is seeking to raise 200 billion rupees by selling shares in a price band of 3,112 rupees to 3,276 rupees.

“Adani Enterprises and Adani Ports are rebounding because they are the focal point for the group,” said Sameer Kalra, founder of Target Investing in Mumbai. “The main recovery in Adani stocks has to first come in these stocks as they are flagship companies.”

Meanwhile, a decline in the dollar bonds of the Adani Group companies quickened on Monday. Adani Ports & Special Economic Zone Ltd.’s 2027 note dropped 7.1 cents on the dollar to 72 cents in Hong Kong earlier, hitting a fresh low following an 11 cent tumble last week, Bloomberg-compiled data show.

At least eight other Adani corporate bonds dropped by more than two cents on the dollar in volatile trading, as the value of the company’s debt has plunged by hundreds of millions of dollars in less than a week.

Tit-for-Tat

In its rebuttal published Sunday, Adani said that some 65 of the 88 questions have been addressed in the conglomerate’s public disclosures, describing the short seller’s conduct as “nothing short of a calculated securities fraud under applicable law.” It reiterated it will “exercise our rights to pursue remedies to safeguard our stakeholders before all appropriate authorities.”

The lengthy response comes in the last leg of a share offer by Adani Enterprises, which received overall subscriptions of 1% for the institutional and retail portions on Friday. While investors in Indian public offerings typically wait until the last day of the sale to place bids, there were concerns that Hindenburg’s attack would sour sentiment.

In the latest twist, Hindenburg then said Adani’s rebuttal ignored all its key allegations and was “obfuscated by nationalism.” The conglomerate’s statement failed to specifically answer 62 of Hindenburg’s 88 questions, the short seller said Monday, and conflated the company’s “meteoric rise” and the wealth of Asia’s richest man “with the success of India itself.”

“About 70% of rebuttals are from prospectus disclosures, so nothing new to learn from it,” said Deven Choksey, managing director at KR Choksey Holdings. Still, “Hindenburg must prove their allegations by testing them under Indian laws.”