We have witnessed a lot of big businesses fall off in a blink of time…It was really quick. Asia’s richest Gautam Adani group faced a sudden decline in their shares and is now in their way of collapsing. Even the whole country could feel it. Started this year being world’s third richest person with a personal fortune estimated at $120 billion. The “self-made” Indian industrialist was wealthier than either Bill Gates or Warren Buffett. Now slipped to 22nd spot in the Forbes billionaire list in the wake of Hindenburg Research’s report.
“Farsightedness and the ability to seize opportunity” are the qualities that differentiate a successful person from the mass. Adani was living proof of that. But he failed to see that Hindenburg Research. However, an American short seller with bets against Adani’s companies, accused him of pulling off “the largest con in corporate history.”
It was an irony Adani facing accusations of fraud and manipulation while his philosophy of doing business is to grow with goodness.
Who is Adani? India’s fastest grown Business Tycoon
Gautam Adani is the Founder and Chairman of the Adani Group. Which ranks among the top 3 industrial conglomerates in India. A college dropout, Adani spurned his father’s textile shop to start his own commodities trading firm.
Adani, a first-generation entrepreneur. The Adani Group, which began in 1988 as a commodity trading firm. Expanded through acquisitions and with the support of Indian Prime Minister Narendra Modi.
Gautam Adani is India’s biggest airport operator and also controls Mundra Port, India’s largest, in his home state of Gujarat. He became India’s second-largest cement producer in 2022. After acquiring Swiss firm Holcim’s Indian assets for $10.5 billion. Adani owns Abbot Point, a controversial coal mining project in Australia. Whose Carmichael coal mine is billed as one of the world’s largest. Moreover, he wanted to become the world’s largest producer of green energy. While invest up to $70 billion on renewable energy projects.
The Hindenburg Research; which caused Adani’s loss
Hindenburg research report alleging Adani group of stock manipulation and multiple financial fraud. It has caused the conglomerate to lose $120 billion as all its stocks have fallen. Wiping out more than half of their combined value. Adani’s personal wealth has plummeted by around $40 billion since January 25. According to the real-time Forbes list, pushed him out of the top 10 world’s richest .
In the wake of the report, Adani’s market losses have swelled over USD 100 billion. According to a report in Reuters, the listed Adani firms now have a combined market value of USD 108 billion, versus USD 218 billion before Hindenburg’s report.
Earlier this week, the Adani Group announced that it had decided to call off the Rs 20,000 crore FPO of Adani Enterprises Ltd (AEL) and said that it would refund the money to the investors.
S&P Dow Jones Indices on Thursday said it would remove Adani Enterprises Ltd from widely used sustainability indices on February 7, making the shares less appealing to environment-conscious investors.
What did the report say..
The Hindenburg Research said that the seven listed companies of the Adani group, have an 85% downside on a fundamental basis due to sky-high valuations, Hindenburg said in the report.
The report pointed out the debt on the company. “Key listed Adani companies have also taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. 5 of 7 key listed companies have reported ‘current ratios’ below 1, indicating near-term liquidity pressure,” the report said.
The report said that 8 of 22 key roles are held by the family members of Gautam Adani, Founder and Chairman of the Adani Group.
Response of Adani Group:
In a 413-page rebuttal filed late Sunday night, the Adani group labelled the US short seller as the “Madoffs of Manhattan.”
The Gautam Adani group has called the report baseless and termed the allegations “unsubstantiated speculations”.
“All transactions entered into by us with entities who qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us,” Adani said in the 413-page response
Despite of Indian Govt’s Efforts to Calm Investors Shares of Adani Group Firms Continue to Fall
Standard Chartered has stopped accepting Adani Group bonds as collateral for giving loans to their private banking clients, after Credit Suisse and Citigroup.
Credit Suisse assigned ‘zero lending value’ to bonds issued by Adani Ports & Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai on February 1 – the day Adani Group called off its share sale. It earlier offered a lending value of about 75% for the bonds issued by Adani Ports.
This means that the client who held Adani bonds as collateral could borrow up to 75% of the bonds’ value. When a private bank cuts lending value to zero, clients need to offer more cash or another form of collateral, and if they fail to do so, their securities can be liquidated. These decisions were taken amid volatility in the prices of Adani bonds.
Adani Group’s bonds were trading at distressed levels in the US markets. The report said that the yields on some bonds of Adani Ports & Special Economic Zone and Adani Green Energy skyrocketed past average levels for global junk bonds.
“Some bonds of Adani Ports & Special Economic zone and Adani Green Energy yield more than 30% in global secondary markets, which is much higher than the average investment grade yield of 4.96% and junk bond yield of 8.14%,” mint reported.
When bond yields go up, it is a signal that corporations will have to pay a higher interest cost on debt, increasing the risk of default.
