Billionaire Adani's Empire Loses More Than $135 Billion

Nearly a month after explosive accusations were made by the short-seller Hindenburg Research, billionaire Gautam Adani's empire continues to bleed.

Adani Group still hasn't swept away the doubts and questions raised by the New York-based investment firm. Hindenburg accused the empire of the billionaire, who at the end of January was still Asia's richest man, of stock-price manipulation, fraud and money laundering. 

Adani Group rejected these accusations but hasn't reassured the markets.

This industrial group, with interests in ports, data centers, energy, airports and others, has been expanding rapidly, along with Indian Prime Minister Narendra Modi's development ambitions for the country. Founder Gautam Adani and Modi are close, according to local press.

The Stock Market Rout of Adani Group Continues

The group has seen a precipitous fall on the stock market, having lost more than $135 billion in market cap as of Feb. 20, Bloomberg News calculated. This is more than half its market value. 

This stock-market rout, which started after the publication of Hindenburg's report on Jan. 24, continues.

During the Feb. 21 trading session at the Mumbai Stock Exchange, most of the entities forming the Adani conglomerate ended lower. 

Adani Enterprises, the flagship, ended the session down 3.16%, Adani Green Energy was down 5%, Adani Total Gas dropped 5% and Adani Transmission slipped 4.99%.

This stock market bloodbath has also sharply cut into Adani's net worth. The billionaire, who started the year as one of the top five richest people in the world, is now outside the top 20. His net worth has shrunk by nearly $72 billion this year to $49.1 billion as of Feb. 20, according to the Bloomberg. Billionaires Index.

The Adani empire's collapse raises questions, experts say, about India's ability to become an alternative to China for foreign investment. The legendary investor George Soros recently asserted that this debacle weakened Modi, who must answer for what happened.

"Modi and business tycoon Adani are close allies; their fate is intertwined," Soros said during a speech at the 2023 Munich Security Conference on Feb. 16. "Adani Enterprises tried to raise funds in the stock market, but he failed. Adani is accused of stock manipulation and his stock collapsed like a house of cards." 

"Modi is silent on the subject, but he will have to answer questions from foreign investors and in parliament."

The billionaire ended his scathing criticism by saying that "I may be naïve, but I expect a democratic revival in India," said Soros, who struck at Modi by claiming that India is "a democracy, but its leader Narendra Modi is no democrat."

While Indian political parties have condemned Soros's remarks, a cloud of mistrust still envelops Adani Group. The conglomerate recently secured the services of the public relations firm Kekst CNC, which specializes in crisis communications. 

Kekst, which has offices worldwide, is known for handling the communications surrounding WeWork's valuation implosion four years ago.

Adani Group Hires a Powerful Law Firm

Adani Group has also retained the services of the powerful, and expensive, New York law firm Wachtell, Lipton, Rosen & Katz to respond to the accusations from Hindenburg Research, according to the Financial Times. 

The law firm is known for defending companies attacked by activist investors. In 2020, the law firm even wrote guidelines on the subject, a report titled 'Dealing with activist hedge funds (and other activist investors)." In it, it lists various attacks by activist investors and gives a guide on how to respond to them.

"When a company’s management and directors work together to present a compelling long-term strategy for value creation, investors will listen," the law firm concludes.

At the same time, Adani Group is trying to reassure investors about its ability to repay its debts. Investors are watching its leverage ratios and its ability to generate cash flow after it canceled a $2.5 billion share sale.

Last week executives told bondholders that the goal was to cut the group's ratio of net debt to Ebitda to below three times next year, from the current 3.2 times, according to Bloomberg News.  

Adani Power has abandoned a plan to acquire a coal plant in central India, as part of the group’s overall effort to curtail capital expenditure and conserve cash. 

The conglomerate could also sell assets.