Adani Shares Hit by Fresh Hindenburg Allegations, Lose $2.4B

The Adani Group, a prominent Indian conglomerate, has come under renewed investigation as a result of fresh charges made by US-based short seller Hindenburg Research. The company's shares took a massive hit on Monday, losing $2.4 billion in market value at the end of the day. This is the latest phase in the Adani Group's protracted struggle with Hindenburg, which started roughly 18 months ago.

The fresh selloff was spurred by Hindenburg's newest report, which says that Madhabi Puri Buch, the chairman of the Securities and Exchange Board of India (SEBI), has links to Adani Group-linked offshore funds. According to the article, the conglomerate utilized this cash to dodge taxes, an assertion that the Adani Group has categorically refuted. The firm asserts that its offshore holding structure is transparent and in accordance with all legal requirements.

SEBI and its chairwoman, Buch, denied the charges as unjustified. SEBI released a second statement stating that the allegations made by Hindenburg against the Adani Group had been properly probed. Buch criticized the claims as an effort at “character assassination” in light of the regulator's earlier enforcement proceedings against the short seller.

Despite these denials, the effect on Adani's stock was swift. Adani Enterprises, the group's main company, saw its stock price decline by 1.1% on Monday. Other significant firms in the group, such as Adani Ports, Adani Total Gas, Adani Power, Adani Wilmar, and Adani Energy Solutions, had losses ranging from 0.6% to 4.2%. Adani Green was the exception, finishing 1% higher.

Market analysts like Sunny Agrawal, head of fundamental equity research at SBICAPS Securities, believe the market's reaction to these new charges is likely a brief knee-jerk reaction. Agrawal said that the Adani Group has faced similar claims, and substantial investigations have been conducted over the previous year and a half. He expressed optimism that the situation would eventually settle and share prices would return to normal.

Since Hindenburg's first analysis in January 2023, the Adani Group has encountered considerable hurdles in sustaining investor trust. The original revelation resulted in a dramatic decrease in the company's market value, with losses of almost $150 billion. However, significant investments from Abu Dhabi-based International Holding Company (IHC) and US boutique investment company GQG Partners have restored some trust, reducing the group's share value losses to about $32.5 billion.

In the middle of this turmoil, the Adani Group is proceeding with its commercial objectives. Adani Enterprises is planning a $1 billion equity offering by mid-September to raise funds after withdrawing a record $2.5 billion offer in the aftermath of Hindenburg's original claims. Adani Energy has recently raised $1 billion in finance from US investors and sovereign wealth funds.

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said that the recent charges against SEBI might put pressure on Adani stocks in the short to medium term. He argued that the ambiguity surrounding these allegations may have a significant impact on retail investors.

The political aspect of the problem is also gaining ground. Ravi Shankar Prasad, a Bharatiya Janata Party legislator, slammed Hindenburg's report, calling it a bogus allegation intended to divert attention away from SEBI's current enforcement action. Prasad stressed that both SEBI and Buch's family have reacted to the claims, leaving nothing further to say.

Meanwhile, opposition leader Rahul Gandhi raised alarm over the claims. In a post on X, he cautioned that the charges against its head had jeopardized the credibility of SEBI, the regulator in charge of preserving the money of small retail investors.

As the Adani Group continues to face these obstacles, the long-term implications of Hindenburg's newest analysis remain unknown. However, the conglomerate's resiliency and continuous backing from important investors indicate that it is determined to weather the storm.

FAQs

1: What triggered the recent $2.4 billion loss in Adani Group's market value？

Answer: The recent $2.4 billion loss in Adani Group's market value was triggered by new allegations from U.S.-based short seller Hindenburg Research. The report claimed that Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India (SEBI), has links to offshore funds associated with the Adani Group, which were allegedly used to avoid taxes. Despite the Adani Group's denial of these claims, the market reaction led to a significant selloff in the company's shares.

2: How did SEBI and Adani Group respond to Hindenburg's latest allegations？

Answer: SEBI and its chairperson, Madhabi Puri Buch, have strongly denied the allegations made by Hindenburg Research. SEBI stated that the claims were thoroughly investigated and found to be baseless. Buch characterized the allegations as an attempt at “character assassination” and dismissed them as unjustified, particularly in light of SEBI's earlier enforcement actions against the short seller.

4: What impact might the ongoing allegations have on Adani Group's future business plans？

Answer: The ongoing allegations could create short to medium-term pressure on Adani Group's stock prices and investor sentiment, potentially complicating its future business plans. However, despite these challenges, the Adani Group is moving forward with significant initiatives, including a $1 billion equity offering by mid-September. Despite the controversy, The group has secured $1 billion in funding from U.S. investors and sovereign wealth funds, indicating continued confidence from key investors.

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