NEW DELHI (AP) — India’s Adani Group launched a share offering for retail investors Friday as it mulled taking legal action against U.S.-based short-selling firm Hindenburg Research over a report that led investors to dump its shares, with some stocks in the group falling up to 20% on Friday.
The market value of Adani’s companies has soared in recent years, one of the reasons Hindenburg said it judged the seven key Adani listed companies to have an “85% downside, purely on a fundamental basis owing to sky-high valuations.”
Its report, “Adani Group: How the World’s 3rd Richest Man is Pulling the Largest Con in Corporate History,” said Hindenburg was betting against shares in companies within the Adani empire, founded by Asia’s richest man, coal magnate Gautam Adani.
Hindenburg’s report prompted selloffs on Wednesday and Friday that have wiped out tens of billions of dollars’ worth of market value. Markets in India were closed on Thursday for a holiday.
Jatin Jalundhwala, head of the Adani group’s legal department, said late Thursday that the group “was evaluating the relevant provisions under U.S. and Indian laws for remedial action against Hindenburg Research.”
“Clearly, the report and its unsubstantiated contents were designed to have a deleterious effect on the share values of Adani Group companies as Hindenburg Research by their own admission, is positioned to benefit from a slide in Adani shares,” Jalundhwala said.
Jalundhwala said the allegations were an attempt by Hindenburg to sabotage Adani’s share offering, which is expected to raise about $2.4 billion. Hindenburg Research said in a rebuttal that it would welcome legal action by the Adani group.
“We fully stand by our report and believe any legal action taken against us would be meritless,” it said in a statement.
Adani made a vast fortune mining coal as energy-hungry India grew swiftly after its economy was liberalized in the 1990s. Businesses in the conglomerate span industries including construction, data transmission, media, renewable energy, defense manufacturing and agriculture.
Hindenburg said its report followed a two-year investigation and “listed 88 questions it invited the company (Adani) to answer.” Most of the allegations involved concerns about the group’s debt levels, activities of its top executives, use of offshore shell companies and past investigations into fraud. So far, Adani had answered none of these questions,’’ it said.
Adani set a price range of 3,112 rupees-3,276 rupees ($38.22-$40) a share for the offering, which closes on Tuesday. Shares in the flagship company Adani Enterprises were trading down 15.8% at 2,853 rupees mid-afternoon Friday. Its shares fell 1.6% on Wednesday.
Some of the companies have suffered even bigger hits.
Shares in Adani Transmission plunged 20% on Friday after sinking 8.1% on Wednesday. Adani Ports and Special Economic Zone Ltd. sank 16% on Friday after shedding 6.1% on Wednesday. Other group companies fell between 5% to 20%.
It is unclear if Adani’s woes might have wider repercussions. India’s Sensex index was down 1.8% on Friday.