Troubles continued to mount for the Adani Group after Adani Enterprises called off its Rs 20,000 crore FPO (follow-on public offer) on Wednesday, February 1, and said it will return money to investors citing the unprecedented situation and market volatility. "Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdrawing the completed transaction," the company said in a statement.
This comes following the adverse report against the company by American short-selling firm Hindenburg Research, which has accused the Adani Group of stock manipulation and accounting fraud over the course of decades. Here are the latest developments:
The Credit Suisse Group AG, a Switzerland based investment banking company, has stopped accepting bonds of the Adani Group companies as collateral for margin loans to its private banking clients. The Swiss lender’s private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd., Bloomberg reported.
This decision by Credit Suisse may have triggered panic selling in Adani counters in bond and equity markets with the equity markets witnessing a $23 billion wipeout in one trading session on Wednesday.
Meanwhile, other banks continue to lend against Adani's debt. At least two European private banks kept the level unchanged as of now, with one of those offerings to lend between 75% to 80% for Adani Ports dollar bonds.
When a private bank assigns lending value of zero, clients typically have to top up with cash or another form of collateral, and their securities can be liquidated if they fail to do so.
Two companies that were underwriters in Adani Enterprises’ Rs 20,000 crore share offering, were accused by Hindenburg Research of assisting the Adani Group in its alleged conspiracy of accounting fraud and stock market manipulation, according to a Forbes report.
In its offer agreement for the sale, Adani Enterprises disclosed two of the 10 underwriters as Elara Capital (India) Private Limited, a subsidiary of London-based investment firm Elara Capital, and Monarch Networth Capital, an Indian brokerage firm.
The Forbes report citing Hindenburg Research states that Elara Capital’s India Opportunities Fund, an offshore vehicle that holds $3 billion worth of publicly traded stock in Adani companies (including Adani Enterprises), serves as one of Adani’s “stock parking entities” to circumvent Indian regulations.
Quoting Adani Enterprises’ published offering statement, the report states that Elara Capital’s responsibilities in the share offering consisted of “drafting and approval of all publicity material” while Monarch was tasked with “non institutional marketing” to investors.
Before the Adani Enterprises’ FPO fell through, American billionaire investor Bill Ackman had cast doubts on the FPO and suggested that it could have been rigged. "I would not find it surprising if the Adani Group offering was rigged with affiliated buyers in addition to some real institutional participants like ADIHC. This would explain the low retail participation and today’s price decline," Bill Ackman said on Twitter.
He had warned that the banks involved in the Adani Group's share sale have too much liability exposure. In another tweet, Ackman said, "I don't see how the bankers for the @AdaniOnline equity offering can allow it to close without doing due diligence on the issues identified in the @HindenburgRes report. There is just too much liability exposure for the banks.”