Adani abandons $2.5 billion share sale in major blow to Indian tycoon

NEW DELHI, Feb 1 (Reuters) – Gautam Adani’s flagship company called off its $2.5 billion share sale in a dramatic reversal on Wednesday, as a slide sparked by criticism of a U.S. short seller wiped billions off the value of the Indian tycoon’s shares.

The withdrawal of Adani Enterprises̵[ads1]7; ( ADEL.NS ) share offering marks a stunning setback for Adani, the dropout-turned-billionaire whose fortunes have risen rapidly in recent years in line with the stock values ​​of his businesses.

“Today the market has been unprecedented and our share price has fluctuated throughout the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct,” Adani said.

“Our balance sheet is very healthy with strong cash flows and secure assets, and we have an impeccable record of servicing our debt. This decision will have no impact on our existing operations and future plans,” the billionaire added in a statement to the Indian exchange .

Adani, whose global business interests span ports, airports, mining, cement and power, is struggling to stabilize its companies and defend its reputation.

“Once the market stabilizes, we will review our capital markets strategy,” he added.

A report by Hindenburg Research last week alleged misuse of offshore tax havens and share manipulation by the Adani Group. It also raised concerns about high debt and the valuation of seven listed Adani companies.

The January 24 report has since triggered an erosion of $86 billion in the market value of seven listed Adani Group companies.

Adani Group has denied the allegations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from ignorance of Indian law. The group has always made the required regulatory disclosures, it added.

REFUND

The Adani Group worked with its bankers to refund the proceeds received from the secondary share sale to Adani Enterprises. Anchor investors that had backed the issue included Maybank Securities and Abu Dhabi Investment Authority.

The company aims to protect the interests of its investment community by returning earnings, it said.

Adani Group had gathered enough support from investors on Tuesday for the share sale to continue, in what some saw as a sign of investor confidence amid the storm.

But after a brief respite, selling in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone ( APSE.NS ) down 19%, the worst day ever for both.

The fundraising was critical for Adani not only because it would have helped cut the group’s debt, but also because it was seen by some as a measure of confidence as he faced the biggest business and reputational challenge of his career.

Wednesday’s share loss saw Adani drop to 15th on the Forbes list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries ( RELI.NS ) who ranks ninth with a net worth of 83.7 billion dollars.

The share sale had succeeded on Tuesday even as Adani Enterprises’ share price in the Mumbai markets was trading below the offer price for the share sale.

“I don’t know how the markets will behave in the short term. But this is a move to improve (Adani’s) reputation as investors were staring at a 30% loss even before the shares were allotted,” said Rajesh Baheti, managing director. Crossseas Capital Services, an algo trading firm.

Reporting by Aditya Kalra and Jahnavi Nidumolu in Bengaluru; Editing by Anil D’Silva, Kirsten Donovan and Alexander Smith

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