MUMBAI – India’s market regulator is examining a recent crash in shares of the Adani Group and looking into any possible irregularities in a share sale by its flagship company, a source with direct knowledge of the matter told Reuters on Wednesday.
The Securities and Exchange Board of India’s (Sebi) examination comes on the day that Adani shares plunged, extending losses in seven listed companies to US$92 billion (S$120 billion) on Wednesday in the wake of a United States short-seller report.
Late on Wednesday, billionaire Gautam Adani’s flagship firm called off its share sale in a dramatic reversal, citing market conditions.
Spokesmen for the Adani Group and Sebi did not immediately respond to a request for comment.
The regulator is undertaking a full-scale examination of the fall in shares, the source said, declining to be identified as the matter is confidential.
The share plunge was sparked by a report by Hindenburg Research last week that alleged stock manipulation and improper use by the Adani Group of offshore tax havens. It also raised concerns about high debt and the valuations of the seven listed Adani companies.
The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.
The source told Reuters that the Indian market regulator is also looking into any possible price manipulation of Adani group stocks, as well as examining possible irregularities in the US$2.5 billion share sale of the flagship firm, Adani Enterprises, that concluded on Tuesday.
While the share offering’s book-building process was only 3 per cent covered on Monday, it was fully subscribed on Tuesday. As foreign institutional investors and corporate funds flooded in, the group managed to secure investments even though Adani Enterprises traded below the share sale’s offer price.
On Wednesday, a day after the share sale closed, Adani Enterprises plunged 28 per cent, bringing its losses since the Hindenburg report was released to more than US$18 billion. Adani Ports and Special Economic Zone dropped 19 per cent. Both stocks marked their worst day ever.
In a statement withdrawing the issue on Wednesday night, the Adani Group said: “The market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct.”
The first source added that Sebi was also looking into allegations of dealings between the Adani Group and related entities that were cited in the Hindenburg report.
In its rebuttal to Hindenburg’s report, Adani had said: “All transactions entered into by us with entities that qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us.”
A second source familiar with the matter said: “All key departments – corporate finance, surveillance department – at the regulator are examining the share price fall. Exchanges are also sending a report.” REUTERS
