Major investment in Adani Group fails to stop US$70bn slide in value following fraud allegations

A major investment from an Abu Dhabi company has failed to arrest a huge slide in the value of Adani Group, which has now recorded losses of more than US$70bn (£57bn) in just four trading days since allegations of fraud were published.

Abu Dhabi’s International Holding Company (IHC), a large company with ties to the royal family, will invest US$400m (£325m) in Adani Group, representing its second major investment in the group.

The show of support comes as Adani tries to complete a US$2.5bn (£2bn) share sale, one of the largest fundraising campaigns conducted by an Indian company.

While shares in the conglomerate’s listed flagship Adani Enterprises traded higher on Tuesday, losses across the group widened to more than US$70bn (£57bn) in the fallout from the report by US investor Hindenburg Research.

Shares in Adani Total Gas were down 10% on Tuesday, hitting a daily limit imposed by the Indian exchange designed to prevent rapid share price movements. Other related entities, like Adani Green Energy, were also down in early trading in Mumbai.

The funding from IHC represents about 16% of Adani’s fundraising offer. IHC is the United Arab Emirates’ largest publicly traded company and is chaired by Sheikh Tahnoon bin Zayed al-Nahyan, a prominent member of the royal family.

“Our interest in Adani Group is driven by our confidence and belief in the fundamentals of Adani Enterprises Ltd; we see a strong potential for growth from a long-term perspective and added value to our shareholders,” the chief executive of IHC, Syed Basar Shueb, said in a statement.

IHC is the dominant company on Abu Dhabi’s stock market, and it has said it wants to boost global acquisitions, with a focus on food and clean energy.

Gautam Adani, who oversees the sprawling coal, port and energy empire that is Adani Group, was the world’s third richest man a week ago; the Indian industrialist is now the world’s eighth-richest, according to Forbes.

The wild trading was sparked by a report by Hindenburg that claimed that the Adani empire was laden with debt and engaged in a “brazen stock manipulation and accounting fraud scheme”.

Amid numerous allegations, Hindenburg cited a series of transactions tied to Adani’s Carmichael coalmine and rail operations in Queensland that it claimed may have allowed it to avoid disclosing to investors that some of the Australian assets had lost value – a charge the Indian conglomerate disputes.

Hindenburg disclosed that it took a short position in Adani companies before it published its report. It is using financial instruments to profit from its falling share prices.

A strong rally in the share prices of Adani companies could squeeze Hindenburg’s position, however losses have continued to mount even after Adani published a 413-page rebuttal of Hindenburg claims early this week.

The Indian conglomerate has described the Hindenburg report as a “calculated attack on India”, while the US investor said fraud cannot be “obfuscated by nationalism”.

Investors will now focus on the results of the fundraising, due to end on Tuesday, which will affect how much debt Adani can pay down, as well as impact its expenditure plans.

An unsuccessful share sale would heap even further pressure on the conglomerate, which requires a minimum subscription of 90% to proceed with the fundraising.