How Asia’s richest man lost his crown in days

Gautam Adani, billionaire and chairman of the Adani Group, during an event at the Port of Haifa in Haifa, Israel, Tuesday, Jan. 31, 2023. Adani, the Indian billionaire whose business empire has been rocked by allegations of fraud by the short seller Hindenburg Research, said his company would make more investments in Israel.

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Shares of Adani continued to suffer steep losses in Wednesday’s trading session in Mumbai – even though the conglomerate managed to pull off a win a day earlier.

Adani Enterprises received a vote of confidence from investors on Tuesday, when its $2.5 billion follow-on public offering (FPO) was fully subscribed on the final day.

The steep declines reflect eroded investor sentiment from a report by short selling firm Hindenburg. The Jan. 24 report accused Adani Group companies of “brazen stock manipulation and accounting fraud.”

Adani Group shares fell on Wednesday after days of volatile trading.

Shares of Adani Enterprises dipped at least 25% Wednesday afternoon. Adani Port and Special Economic Zone down about 20% Adani green energy fell more than 5%, Adani Total Gas lost 10% while Adani Transmission traded 3% lower.

The stock rout following the announcement was $84 billion, Reuters reported.

According to Forbes, Gautam Adani, the group’s founder and chairman, lost his status as the richest man in Asia to Mukesh Ambani, the chairman of Reliance Industries.

Hindenburg, who said he took a short position in Adani Group, should benefit from the fall in value of these shares.

Adani’s battle with the short-selling firm has thrust the group’s exposure on Wall Street – amounting to nearly $9 billion, according to JPMorgan – into the spotlight.

How did we come here?

In just one week, Indian billionaire Gautam Adani saw more than $34 billion wiped from his net worth, according to the Bloomberg Billionaires Index.

Here is a timeline of the major events leading up to this.

January 25: Ahead of the Indian market opening on Wednesday Asia time, Hindenburg Research announced its short position in Adani Group companies through US-traded bonds and non-India-traded derivatives. Shares affiliated with Adani posted steep losses during the trading day. Gautam Adani’s net worth plummeted by $6 billion overnight.

January 26: The Indian market was closed for a holiday.

January 27: Adani Enterprises proceeded to open subscriptions for its $2.5 billion follow-on public offering despite a continued sell-off seen in shares of group companies. The billionaire’s net worth fell another $20.3 billion to $92.7 billion.

January 28-29: Adani Group issued a lengthy 413-page response over the weekend, warning against legal action against Hindenburg and claiming responsibility for the charges against the Indian company was a “calculated attack on India” and its institutions.

Hindenburg fired back and called the Adani Group’s response “bloated”, saying it “ignored all the key allegations” raised.

January 30: In an interview with CNBC-TV18, Adani Enterprises group chief financial officer Jugeshinder Singh defended the group. He told the CNBC affiliate that Adani Enterprises’ value hasn’t changed “simply because” of share price volatility. Shares of group companies continued to suffer more losses. Adani’s net worth drops another $8 billion to $84.5 billion

January 31: The $2.5 billion Adani Enterprises share sale was fully subscribed on the last day of subscription, despite analysts’ concerns it could fall through.

Who is Gautam Adani?

Gautam Adani: Asia's richest man loses $28 billion in a month

What are the implications?

Hindenburg’s allegations have raised questions about the Adani Group’s mainly debt-driven expansion and the lax regulations that have allowed acquisitions to proceed.

However, economists CNBC spoke to ignored any long-term ripple effects.

“I think the events with Adani Group are viewed in isolation,” HSBC’s head of Asia-Pacific equity strategy told CNBC Herald van der Linde. “The Indian equity story remains one of the best in the region. Growth is visible and more predictable than elsewhere in the region.”

“In the short term, sentiment and flows could be affected, but that shouldn’t have a lasting impact in the medium term,” Sonal Varma, Nomura’s chief economist for India and excluding Asia, told CNBC. Japan..

“The key drivers of India’s medium-term growth prospects remain intact, corporate and bank balance sheets are much stronger, reforms are focused on facilitating investment and boosting productivity, and as As a large market, India will benefit from the ongoing supply chain diversification,” she added.

India's debt-to-GDP ratio is high but

When asked if investors should buy Adani shares right now, Smart Investor’s David Kuo answered bluntly, “It’s better to avoid trouble than to get out of it later.”

“What Hindenburg is referring to is that there is a problem with debt. And that may not be reflected in the stock price, but there may be a problem with debt,” said Kuo on CNBC”Asia street signs.”

“There are a lot of bonds outside of India – what if the value of those bonds deteriorates, it will impact the business,” he said.

“Whether you believe the Hindenburg report or not, I think something has to happen. Something has to be clarified before investors start to intervene,” he added.

CNBC’s Seema Mody contributed to this report.

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