MUMBAI – Billionaire Gautam Adani’s 413-page attempt to restore confidence in his business empire is falling flat with investors, as stock-market losses deepen and key US dollar bonds fall to fresh lows.

Shares of all Adani Group firms slumped on Monday despite the Indian conglomerate’s lengthy weekend rebuttal to allegations of fraud by short-seller Hindenburg Research. The three-day sell-off has now erased nearly US$72 billion (S$94 billion) in market value amid a share sale by Adani’s flagship that was meant to underline the tycoon’s ascension on the global stage.

While the Adani Group has portrayed Hindenburg’s allegations as baseless and an attack against India itself, the saga is reviving longstanding investor concerns about the conglomerate’s corporate governance. It also threatens to weaken broader confidence in India, until recently a top investment destination for Wall Street, and accelerate a nascent shift towards a reopening China.

“Not sure if Adani’s rebuttal is enough to assuage investor concerns. Just because things are disclosed and known does not make them right,” said analyst Brian Freitas at Smartkarma. “How does a group that big explain no analyst coverage and no mutual fund holdings?”

Hindenburg published a 100-page report on Jan 2 alleging that its two-year investigation found “brazen stock manipulation and accounting fraud”. It also called out the conglomerate’s “substantial debt”.

In its rebuttal published on Sunday, the Adani Group said that some 65 of the 88 questions in Hindenburg’s report had 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 that it would exercise its rights “to pursue remedies to safeguard our stakeholders before all appropriate authorities”.

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 and conflated the company’s “meteoric rise” and the wealth of Asia’s richest man “with the success of India itself”, the short-seller said in a statement.

The rout is fast eroding the wealth of Mr Adani, Asia’s richest man, after his stocks were some of the best performers last year not just in the local market, but also on the broader MSCI Asia Pacific Index.

All down

The broad sell-off continued on Monday with Adani Total Gas and Adani Transmission plunging as much as 20 per cent again.

The flagship Adani Enterprises also erased its earlier gain of 10 per cent to trade 2 per cent lower. Its shares remain below the floor price set for the follow-on equity sale. The company is seeking to raise US$2.5 billion.

While investors in Indian public offerings typically wait until the last day of the sale to place bids, concerns have risen that Hindenburg’s attack has soured sentiment.

Overall subscription for the share offer by Adani Enterprises, which closes on Tuesday, was at just 2 per cent as at 1.42pm in Mumbai on Monday. Retail investors had bid for 3 per cent of the shares on offer for them, while the company’s employees bid for 10 per cent of the shares for their category. The non-institutional part that includes wealthy individuals had taken up 1 per cent. Institutional investors bid for 4,576 shares, a fraction of the 12.8 million on offer.

Adani debts enter spotlight

A decline in the dollar bonds of the Adani Group companies quickened on Monday. Adani Ports & Special Economic Zone’s 2027 note dropped 6.2 cents, Bloomberg-compiled data show.

At least four group notes including debt of Adani Electricity Mumbai have fallen to distressed levels below 70 cents on the dollar that generally indicate mounting concern about creditworthiness.

“The risk-reward for Indian markets has just taken a turn for the worse,” said strategist Charu Chanana at Saxo Capital Markets. “Foreign investor confidence has been dented and will take time to repair, so I would be rather cautious. India anyway started this year trading at a premium to other emerging markets, and the Adani saga has once again questioned whether that is justified.”

Adani Group companies have at least US$289 million worth of dollar note coupon payments due in 2023. The first deadline is on Thursday, when Adani Ports & Special Economic Zone must pay a combined US$24.7 million of interest for three bonds. 

There has been no suggestion that the Adani entities would struggle to make these payments, and Adani has flagged interest coverage ratios that show it has the wherewithal to meet such obligations. BLOOMBERG