Adani Group shares tumble after reports of US regulatory scrutiny

By India Today Business Desk: Shares of Adani Group plummeted on Friday following a report indicating that US authorities are scrutinising the conglomerate’s representations to investors, prompted by US short-seller Hindenburg Research’s scathing report.

Institutional investors holding significant stakes in Adani Group companies have reportedly received inquiries from the US Attorney’s Office in Brooklyn, New York, according to Bloomberg’s sources.

The report highlights that the inquiries focus on the information provided by the Adani Group to those investors. Additional sources mentioned that the Securities and Exchange Commission (SEC) is also conducting a similar investigation against the conglomerate.

Adani Enterprises, the flagship firm of the conglomerate, experienced an initial decline of nearly 9 per cent in early trade, although it recovered some ground by 12 pm. Most other Adani Group stocks witnessed falls ranging from 2 per cent to 6 per cent.

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Will US scrutiny hurt Adani Group?

While the request for information from US prosecutors does not necessarily imply the filing of criminal or civil proceedings, the interest shown by US authorities is concerning for the Adani Group, which had staged a strong recovery after Hindenburg Research’s report.

The short-seller had accused the group of long-running stock manipulation and accounting fraud, allegations that the Adani Group firmly denied.

Nonetheless, the conglomerate faced a significant slide in the share prices of its listed companies, resulting in a market capitalization loss of over $150 billion. Although the stocks have partially regained lost ground, the combined market capitalisation remains nearly $100 billion lower.

Responding to the matter, an Adani Group spokesperson stated that the conglomerate was not aware of any subpoenas issued to investors and expressed confidence in the completeness and adequacy of the disclosures as outlined in the relevant issuer offering circulars.

Hindenburg effect

Hindenburg Research’s report, released on January 24, accused the Adani Group of employing a network of offshore companies in tax havens to manipulate share prices and financial results.

It also alleged that the group violated disclosure and shareholding laws. In response, the Adani Group refuted the allegations, referring to the short-seller’s report as “nothing short of a calculated securities fraud.”

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However, the aftermath of the report dealt a severe blow to the Adani Group and its ten publicly listed companies. Several major investors divested their stakes, while others reduced their holdings within the group.

Following a period of significant decline, the Adani Group received support from US boutique firm GQG Partners, which purchased stakes worth Rs 15,000 crore in five Adani Group companies.

GQG Partners’ co-founder and chairman, Rajiv Jain, expressed optimism about the conglomerate’s infrastructure assets and confirmed the firm’s intention to participate in the group’s future fundraising.

Also Read | Big boost to Adani Group as GQG’s Rajiv Jain raises stake by 10%

Jain further emphasized GQG’s desire to be a prominent investor in the Adani Group within five years, trailing only the family’s stake.