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Bengaluru, Feb 1, 2010 (FBC) Indian tycoon Gautam Adani lost his title as Asia’s richest man on Wednesday, as his fortune in a foray into his conglomerate’s biggest companies rose to $84 billion following a short-selling report.

A report by Hindenburg Research last week raised concerns about the misuse of offshore tax assets and a stock fraud ring, as well as high debt and speculation about Adani’s seven listed companies.

Australia’s regulator stepped up its investigation into the conglomerate, saying on Wednesday it would review the allegations to see if further inquiries were warranted.

Adani Group has denied Hindenburg’s allegations, saying the short-seller’s share-rigging narrative is “baseless” and stemmed from ignorance of Indian law. It has always made the necessary regulatory disclosures, he added.

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Gautam Adani’s share loss on Wednesday dropped him to 10th on the Forbes Rich List with an estimated net worth of $84.1 billion, below rival Mukesh Ambani, chairman of Reliance Industries Ltd ( RELI.NS ), at $84.4 billion. Before the Hindenburg report, Adani was ranked 3rd.

The worst is yet to come, despite the group’s backing from investors to launch a stake sale in flagship company Adani Enterprises on Tuesday.

“There was a bit of a crash after the stock sell-off after it seemed impossible at one point, but now the weak market sentiment has resurfaced after the Bombshell Hindenburg report,” said Ambaresh Baliga, an independent market analyst in Mumbai.

Baliga added, “Despite Adani’s objections, when the stock falls, it clearly shows some damage to investor sentiment. It will take some time to calm down.”

Adani Enterprises ( ADEL.NS ), often described as the spinoff of Adani’s businesses, fell 20 percent on Wednesday after Hindenburg reported a loss of nearly $15 billion. Adani Power ( ADAN.NS ) fell 5%, while Adani Total Gas ( ADAG.NS ) closed 10% lower on the day.

Adani Forwarding (ADAI.NS) fell 6% and Adani Ports and Special Economic Zone (APSE.NS) fell 15%.

Adani Total Gas, a joint venture between French energy major Total ( TTEF.PA ) and Adani Group, was the biggest victim of the reported short sale, with losses reaching $27 billion.

Since the Hindenburg report, foreign investors have sold a net $1.5 billion of Indian stocks — the highest inflows in four consecutive days since September 30, data showed.

Adani Group’s headache is expected to continue for some time.

The Controller of Indian Markets, looking into deals by the conglomerate, said it would include the Hindenburg report in its own preliminary investigation.

State-run Life Insurance Corp ( LIFI.NS ) said on Monday it would seek clarification from Adani’s management on a short seller report. The insurance giant, however, was a key investor in the Adani Enterprises stake sale.

In the report, Hindenburg said it has shorted US-bonds and non-Indian derivatives of the Adani Group.

Reporting by Chris Thomas in Bengaluru and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran and Aditya Kalra; Editing by Edwina Gibbs

Our standards: The Thomson Reuters Trust Principles.

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