Adani calls off $2.5 billion equity sale as regulatory concerns grow

Adani calls off $2.5 billion equity sale as regulatory concerns grow

A signage of Adani Group is pictured in front of Chatrapati Shivaji Mumbai International Airport in Mumbai on July 28, 2021. (Photo by Indranil MUKHERJEE/AFP) (Photo by INDRANIL MUKHERJEE/AFP via Getty Images)

Indranil Mukherjee AFP | Getty Images

On Wednesday, Gautam Adani announced that he was exiting his company’s $2.5 billion stock sale.

He withdrew the bid for shares in Adani Enterprises, the flagship of Indian conglomerate Adani Group, after the stock fell nearly 30%.

Breaking his silence on the media, Adani said, “Today the market was unprecedented and our share price has fluctuated properly throughout the day.”

In a Jan. 24 report, short seller Hindenburg Research claimed that “the Adani Group engaged in a brazen stock manipulation and accounting fraud scheme.” The report went on to raise concerns about the debt and valuations of seven Adani companies.

The Adani Group has denied the allegations, saying they have “no basis” and stem from ignorance of Indian law. The group has always made the necessary regulatory disclosures, she added.

Speculation is mounting that the Securities and Exchange Board of India (SEBI) will conduct some sort of investigation into Adani’s dealings.

“My understanding is that a cancellation would mean a mandatory SEBI investigation,” Pramit Chaudhuri, head of Eurasia Group’s South Asia practice, told CNBC.

Chaudhuri, like many others, said he was “surprised” that Adani dropped his plans after hitting the $2.5 billion target.

The stunning reversal caps a week in which Adani went on a full-on mission to ensure his stock sale was successful following the immense pressure associated with his falling share price.

Adani tapped into wealthy individuals in India and also looked to the Middle East. International Holding Co., an Abu Dhabi-based conglomerate, contributed $400 million to the deal. It was generally taken as a vote of confidence. Goldman’s trading department was also involved in the transaction, a source familiar with the matter told CNBC. Adani Enterprises shares closed higher on Tuesday after it was announced that the offering had been fully subscribed.

Investors woke up to an ugly picture on Wednesday as Adani Enterprise stock plummeted, falling as much as 28%, prompting Adani to call off its share sale.

“We are working with our Book Running Lead Managers (BRLMs) to refund the proceeds we have received in escrow and also to release the funds blocked in your bank accounts for the subscription of this issue,” added Adani.

The move also raises questions about where else Adani will look for financial support.

As CNBC reported, Adani has developed relationships with a number of international banks and private equity investors. The tycoon, once the second richest person in the world, slipped to 13th on the Bloomberg Billionaires Index on February 1.