Billionaire Adani's empire loses $154 billion in a month

Adani Group is on a roadshow to reassure international investors after the short-seller Hindenburg Research launched allegations of fraud.

The hemorrhage in the empire of Indian billionaire Gautam Adani continues.

A month after accusations of fraud, stock-market manipulation and money laundering were launched by the New York short-selling investment firm Hindenburg Research, Adani Group has not succeeded in allaying investors' fears.

The opposite: The entities making up the conglomerate continue to be mistrusted by investors. During the Feb. 27 trading session, most shares of these entities fell on the Mumbai Stock Exchange.

Adani Enterprises, the flagship of the conglomerate, ended the session down 9.17%. Adani Power fell 4.97%, Adani Transmission lost 4.99% and Adani Total Gas fell 5%, while Adani Green Energy fell 4.99%.

All in all, Adani Group has lost about $154 billion in market capitalization since Hindenburg Research's accusations surfaced on Jan. 24, according to Bloomberg News. That's more than half its market value.

Adani Falls Among the Billionaires

The impact on the wealth of the founder, Gautam Adani, is colossal. His net worth has shrunk to $39.9 billion from $80.6 billion this year, according to the Bloomberg Billionaires Index.

The Indian tycoon, who started the year in the top 5 of the world's richest people, was 30th as of Feb. 26. His drop in this ranking may continue in the coming weeks.

Hindenburg Research on Jan. 24 said that it had shorted stocks of the Adani conglomerate through U.S.-traded bonds and non-Indian-traded derivative instruments. This means that the New York-based investment firm, a well-known short-seller, is betting on a short-term drop in the prices of these equities.

The short-seller claims that the conglomerate has used shell companies in tax havens to boost its revenue and manipulate the stock prices of its various entities. The report describes a galaxy of shell entities based in the Caribbean, Mauritius and the United Arab Emirates controlled by the Adani family.

"We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades," Hindenburg wrote.

"Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities."

Adani Group has rejected the allegations as baseless and has threatened to pursue all possible legal remedies in Indian courts. The conglomerate also went so far as to say that India was the target of Hindenburg.

"This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India," Adani Group said, in a 413-page report, on Jan. 29.

Roadshow in Asia

These denials did not convince investors.

The conglomerate has therefore just started a world tour to meet foreign investors, a source close to the matter told TheStreet. A meeting took place in Singapore on 27 February. It will be followed by meetings in Hong Kong on Feb. 28 and March 1.

The pitch of the Adani Group executives to foreign investors revolves around three points, according to Bloomberg News.

A first is about a roadmap for repaying debt maturities. The second point Adani Group will discuss with investors is the Hindenburg allegations. They must convince the investors that no business funds were illegally transferred to the Adani family, denying a Hindenburg allegation.

Finally, Adani Group must say how the conglomerate intends to solve the governance issues the short-seller raised.

In the U.S. Vanguard Group and BlackRock have exposure to the Adani Group conglomerate. BlackRock's investments in the conglomerate are held through index strategies such as ETFs.

BlackRock and Vanguard did not immediately respond to the question of whether they would participate in one of the meetings planned by Adani Group.

Adani Group has retained the services of the powerful, and expensive, New York law firm Wachtell, Lipton, Rosen & Katz to respond to the accusations from Hindenburg Research, according to the Financial Times.

The law firm is known for defending companies attacked by activist investors. In 2020, it even wrote guidelines on the subject, a report titled 'Dealing with activist hedge funds (and other activist investors)." In it, it lists various attacks by activist investors and gives a guide on how to respond to them.