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Adani Enterprises has called off its $2.4bn equity fundraising in the latest blow to Indian billionaire Gautam Adani, who has seen shares in his industrial empire tumble after a short seller made allegations of fraud and stock manipulation.

The decision to pull the share sale and refund investors marks an abrupt turn after Adani Enterprises’ shares fell 27 per cent on Wednesday, taking them well below the deal price range.

The sell-off in Adani’s listed companies has wiped more than $90bn off the value of the group since Hindenburg Research alleged last month that the company’s parent Adani Group, whose businesses stretch from ports to data centres, used offshore entities in tax havens to inflate the share prices of its listed companies, allowing them to take on more debt and “putting the entire group on a precarious financial footing”.

In a regulatory filing on Wednesday evening, Adani said that “given the unprecedented situation and the current market volatility”, it was “returning the . . . proceeds and withdraws the completed transaction”.

The Ahmedabad-based group added that it was working with its bankers to issue refunds. “Our balance sheet is very healthy with strong cash flows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans,” it said.

Adani’s efforts to ease concerns among investors, including a 413-page response rejecting the US short seller’s allegations, have failed to stem the declines in its stock price.

It sought to enlist some of India’s leading tycoons to help salvage the share sale, according to people with knowledge of the fundraising. Entities connected to Sajjan Jindal, the billionaire chair of conglomerate JSW, and Sunil Bharti Mittal, chair of Bharti Enterprises, had agreed to invest in Adani Enterprises’ share offering, two of those people said.

People involved in the fundraising said it was fully backed by investors including Abu Dhabi’s International Holding Company and London-listed Jupiter Asset Management. On Monday, IHC, a conglomerate with businesses spanning healthcare, energy and food, said it would commit $400mn to the share sale. On Tuesday, Adani said it had secured bids for more than 92 per cent of the shares, deeming the share sale a success.

But on Wednesday, Adani said in the regulatory filing that given the “extraordinary” fluctuations in its share price, its board “felt that going ahead with the issue will not be morally correct”.

Adani will effectively return about $1.25bn, the cash transferred by backers so far, according to a person with knowledge of the terms of the deal. “He has to keep a clean record,” the person said to explain the billionaire’s decision.

Adani Enterprises ended Wednesday at Rs2,179.75 a share compared to Rs3,112, the low end of the price range that the company had set for its share sale.

India’s financial regulator is examining the crash in Adani shares since the short seller allegations and any potential irregularities in the share sale, Reuters reported earlier on Wednesday. The Securities and Exchange Board of India declined to comment. The Adani Group did not respond to a request for comment on the report. 

Additional reporting by Anjli Raval in London and Ortenca Aliaj in New York