Adani pulls out of $2.5 billion stake sale in a major blow to the Indian tycoon

NEW DELHI, Feb 1 (Reuters) – Gautam Adani’s flagship firm called off a $2.5 billion share sale in a dramatic U-turn on Wednesday, as a rout sparked by criticism from short sellers in the U.S. wiped billions off the value of the shares of the Indian tycoon.

The withdrawal of the Adani Enterprises ( ADEL.NS ) share offering marks a stunning setback for Adani, the billionaire school dropout whose fortunes have grown rapidly in recent years in line with the value of his business’s shares.

“The market was unprecedented today and our share price fluctuated throughout the day. “Given these extraordinary circumstances, the company’s board is of the view that it would not be morally right to proceed with the issue,” Adani said.

“Our balance sheet is very strong with strong cash flows and secure assets, and we have an impeccable record of servicing our debt. This decision will have no impact on our existing operations and future plans,” the billionaire added in a statement to Indian stock exchanges.

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Adani, whose global business interests span ports, airports, mining, cement and energy, has struggled to stabilize its companies and protect its reputation.

“Once the market stabilizes, we will review our capital market strategy,” he added.

A report by Hindenburg Research last week suggested abuse by offshore tax havens and manipulation of Adani Group shares. It also raised concerns about the high debt and valuations of seven Adani-listed companies.

The January 24 report has since caused an erosion of $86 billion in the market capitalization of seven Adani Group listed companies.

Adani Group rejected the allegations, saying the short seller’s allegations of stock manipulation had “no basis” and stemmed from ignorance of Indian law. The group has always made the required regulatory disclosures, he added.


Adani Group was working with its bankers to recover the proceeds received from the secondary sale of Adani Enterprises shares. Major investors backing the issue included Maybank Securities and Abu Dhabi Investment Authority.

The company aims to protect the interests of its investment community by returning earnings, he said.

On Tuesday, Adani Group gathered enough support from investors to continue the share sale, in what some saw as a sign of investor confidence amid the storm.

But after a brief lull, the sell-off in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28 percent and Adani Ports and Special Economic Zone ( APSE.NS ) down 19 percent, the worst day in the story of both.

The fundraising was crucial for Adani, not only because it would help reduce his group’s debt, but also because it was seen by some as a sign of confidence as it faced its biggest business and reputational challenge in your career.

Share losses on Wednesday saw Adani drop to 15th place on the Forbes rich list with an estimated net worth of $75.1 billion, behind rival Mukesh Ambani, chairman of Reliance Industries ( RELI.NS ), who is ranked ninth with a net worth of $83.7 billion.

The share sale was successful on Tuesday even as the share price of Adani Enterprises traded below the offer price of the share sale in the Mumbai markets.

“I don’t know how the markets will behave in the short term. But this is a measure to improve (Adani’s) reputation as investors were expecting a 30% loss even before the shares were allotted,” said Rajesh Baheti, CEO, Crossseas Capital Services, an algo trading firm.

Reporting by Aditya Kalra and Jahnavi Nidumolu in Bengaluru; Editing by Anil D’Silva, Kirsten Donovan and Alexander Smith

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