Adani to launch key share sale in face of fraud allegations

Indian billionaire Gautam Adani is due to launch a key share sale on Friday in the face of fraud allegations from a US short seller.

Adani Enterprises, the flagship business of an empire that spans ports to coal, plans to raise up to Rs200bn ($2.4bn) in a share sale that was designed to show the company can attract international investors.

But the fundraising has been overshadowed by allegations from short seller Hindenburg Research that the Adani Group had engaged in stock price manipulation and accounting fraud over the course of decades.

London-listed Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs are among the institutions to have already been allocated shares, according to a statement from Adani before the allegations were made public on Wednesday.

One of the investors told the Financial Times they were “aware” of the short selling report by Hindenburg and that they were “taking it into consideration”.

The share sale was designed to show the broader appeal of the Adani Group, which is closely held by related entities, opaque Mauritius-based funds and state-controlled funds such as the Abu Dhabi Investment Authority.

If western investors balk, there is the prospect of more support from traditional allies. Abu Dhabi’s largest listed company, International Holding Company, said it was “studying and considering the opportunity”, a spokesperson for the group said. IHC invested $2bn in Adani’s businesses last year.

The efforts to court international investors come after shares in Adani Enterprises surged more than 3,300 per cent in three years, prompting the group to last year announce plans to increase the amount of freely traded shares.

IHC has been among the beneficiaries of the explosive share price performance. The Abu Dhabi company previously told the Financial Times that its investments in Adani had helped its results last year.

Chaired by the UAE’s powerful national security adviser, Sheikh Tahnoon bin Zayed al-Nahyan, it has transformed into a behemoth with a market capitalisation of $240bn over the past couple of years.

But the 40,000 per cent increase in the IHC share price since 2019 has also left bankers worried about the apparent dislocation between its market capitalisation and underlying economic fundamentals.

Adani is pressing ahead with the sale after the group’s seven listed companies shed a collective $10.8bn in market capitalisation on Wednesday following the allegations from Hindenburg. The Indian stock market was closed on Thursday for a public holiday.

Adani Group has denied the allegations, calling the report “a malicious combination of selective misinformation and stale, baseless and discredited allegations” intended to “undermine the Adani Group’s reputation” and damage demand for the share sale.

Public bidding for the shares is due to begin on Friday, with the sale expected to complete next Tuesday. Maybank Securities, the Singapore-based brokerage arm of the eponymous Malaysian lender, was allocated 6.3mn shares, or more than a third of the Rs60bn ($735mn) offered to institutional investors.

Several Mauritius-based funds have been allocated shares, including Elm Park Fund Limited, which was the second-largest investor after Maybank. The remaining shares will be targeted at retail Indian investors.

A self-made tycoon who started as a commodities trader, Adani built India’s largest private infrastructure group with about a dozen ports and eight airports, and it is expanding at breakneck pace. The Adani Group has vowed to become one of the world’s largest green energy businesses through investing $70bn by 2030.

The group said on Thursday that it was considering legal action against Hindenburg.

“We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research,” Jatin Jalunhwala, head of legal at Adani Group, said in a statement.