Shares of India's conglomerate of Asia's richest man Gautam Adani fell nearly 20% on Friday, leading to a suspension of their listing, days after claims of fraud by an investment firm American.
Adani Enterprises shares finally closed down 18.52% on the Bombay Stock Exchange, after falling to a low of 2.712 rupees.
The listing of the shares of five group companies has also been suspended.
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"
Obviously this is panic selling
," Ashish Chaturmohta of JM Financials told AFP, adding that traders were creating new short-selling positions to protect prior bullish bets on stocks. shares of Adani.
Hindenburg Research alleged this week that the Adani Group used undisclosed related party transactions and earnings manipulation to “
maintain the appearance of sound financial health and creditworthiness
” of its listed subsidiaries.
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In two days, billionaire Gautam Shantilal Adani, 60, went from third place in the ranking of the richest men in the world to seventh place, according to the Forbes ranking of the wealthiest.
It lost $22.6 billion on Friday.
The Adani Empire has operations ranging from coal mines in Australia to the largest ports in India.
Shares of these subsidiaries have soared 2,000% over the past three years, adding more than $100 billion to its founder's net worth.
Adani, who now has an estimated fortune of $96.6 billion, is seen as a close supporter of Prime Minister Narendra Modi.
"Baugers and Threats"
Hindenburg's report accuses the group of engaging in "
bold stock manipulation and a system of accounting fraud over several decades
".
He claims Vinod, Adani's older brother, managed a "
vast maze of fictitious offshore entities
" in tax havens such as Mauritius, Cyprus and several Caribbean islands.
The report says a decades-long pattern of '
government leniency on the group
' has left investors, journalists, citizens and politicians unwilling to question the conduct of the group "
for fear of reprisals
".
Charges dismissed by the Indian conglomerate, which was preparing for a major fundraiser and denounced Thursday a "
maliciously malicious
" reputation attack on the part of Hindenburg.
Jatin Jalundhwala, Adani Group's head of legal affairs, said in a statement that Hindenburg's short-selling position within the group was evidence that the company had a vested interest in driving down Adani's shares.
But according to Hindenburg, the group is content with “
bragging and threatening
” rather than confronting the issues raised by the report.
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“
If Adani is serious, he should also file a complaint in the United States
,” the American company said in a statement.
“
We have a long list of documents that we will require
” during the legal process.
The allegations come as Adani has launched an ambitious $2.5 billion capital increase in a price range of 3.112-3.276 rupees per share.
“
These issues go to the heart of the Indian corporate sector, where a number of family-controlled conglomerates dominate
,” Gary Dugan, managing director of the Global CIO Office, told Bloomberg.
"
By their very nature, they are opaque, and global investors
" must rely on companies' good faith, he said.
The Bombay Stock Exchange's benchmark Sensex index fell 1.45% on Friday, mainly due to the Adani rout.
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