Adani: Share sale finds takers despite fraud claim

Indian businessman Gautam Adani has slipped from a list of 10 of the world's wealthiest, after fraud allegations against his firms wiped off billions of dollars of his fortune. The Adani Group denies the allegations. On Tuesday, a $2.5bn (£2.03bn) share sale in the group's flagship company was fully subscribed despite the controversy. The BBC's Nikhil Inamdar reports.

The Adani Enterprises - the holding company of Adani Group - share sale, which was only subscribed by a half at midday on Tuesday, managed to scrape through in the final hours of trading, after institutional investors, corporates and high net worth individuals pumped money into the country's largest follow-on public offering.

The company couldn't secure support for its offering from retail or non-professional investors though, as the price of the shares in the market was lower than the public offer price, following a massive sell-off.

Retail investors subscribed to just over 10% of the shares reserved for them.

However, the shares reserved for institutional investors, such as hedge funds and mutual funds, were fully subscribed on the first day itself. The sale also got a lifeline from an Abu Dhabi-based conglomerate which bought 16% of the offer through a subsidiary company on Monday.

The sale is critical for the port-to-energy conglomerate which has lost a third of its market capitalisation after US-based short-seller, the Hindenburg Group, accused its firms of decades of "brazen" stock market manipulation and accounting fraud.

The Adani Group has dismissed the allegations as malicious and untrue.

But the firm's publicly listed companies have lost about $65bn in market value over four trading sessions, with Mr Adani himself sliding from the fourth to the eleventh position on the Forbes list of the world's richest. His estimated net worth after the sell-off is $84bn, according to the Bloomberg Billionaires Index.

A 413-page rebuttal by the company and several television appearances by the Adani Group finance officer couldn't soothe frayed investor nerves, as shares in the firm's companies hit a lower circuit on Monday, triggering automatic halts in trading in Mumbai.

While there's been a recovery in the prices of some of the group's listed companies, the likes of Adani Total Gas have been under continuous selling pressure, losing half its value over five days and going down by 10% on Tuesday.

The Adani Group has called the allegations against it an attack on India itself. In an interview with Mint newspaper, the group's chief financial officer compared Hindenburg Research to General Dyer, the British officer of the Bengal Army responsible for a massacre that killed hundreds of Indians in the city of Amritsar in 1919.

Hindenburg responded saying the group was stoking a nationalist narrative to obfuscate fraud.

The fracas raises broader concerns about Indian markets and "risks damaging short term sentiment," Hugh Young, Asia Chairman of abrdn Plc, a UK based asset manager told Bloomberg.

According to the newswire, the fall in Adani stocks account for 51% of the slide in the nation's stock market capitalisation since 24 January.

This comes at a time of underperformance in Indian equities and foreign investors shifting allocations to markets in Hong Kong and China.

"In an already expensive market, foreign investors will definitely exercise caution, given that Adani shares are part of major global indices," the chief executive of a large wealth management fund, who preferred to remain unnamed, told the BBC.

India's stock market regulator SEBI has so far refrained from making an official comment. But the country's main opposition Congress party has demanded an investigation against the allegations.

Major investors in the conglomerate such as the state-run Life Insurance Corporation (LIC) have said it will be quizzing the Adani management about the allegations.

The Adani group has built a fortune with investments across ports, airports, renewable energy and other industries.

Gautam Adani's wealth has soared in the past three years, as the value of shares in some of his firms skyrocketed by as much as 2,000% according to Hindenburg Research.