Adani Enterprises has decided not to proceed with its fully subscribed Follow-on Public Offer (FPO), the conglomerate said in a statement late on Wednesday, hours after the shares of the firm nosedived 28.45% to close at ₹2,128.70 on the BSE.

Citing market volatility and “the unprecedented situation”, the company attributed its abrupt decision to a need to protect its investors by returning their proceeds.

“The Board takes this opportunity to thank all the investors for support and commitment to our FPO,” Adani Enterprises chairman Gautam Adani said in the statement.

“The board felt that going ahead with the issue will not be morally correct,” he said, amid a rout sparked by allegations of fraud in a report by US short-seller Hindenburg Research.

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On Wednesday, despite the ₹20,000-crore share sale sailing through on the last day on Tuesday after non-retail investors bid in big volumes, all the group companies settled in negative territory with shares of three companies hitting their lowest price band.

The counter of Adani Ports and Special Economic Zone plunged 19.69%, Adani Total Gas slumped 10%, Adani Green Energy declined 5.78%, Adani Wilmar fell 4.99%, Adani Wilmar went down 4.99%, Adani Power dropped 4.98% and Adani Transmission (2.46%)In addition, Ambuja Cements tanked 16.56%, while ACC plunged 6.34% and NDTV went down 4.98%.

Taken together, the decline is about 38% compared to the market valuation of the group companies at the end of trading on January 24, the day when the report was released.

The company in its statement asserted “our balance sheet is very healthy with strong cashflows and secure assets”.

“The decision will not have any impact on our existing operations and future plans. Once the market stabilizes, we will review our capital market strategy,” it said.

The company said that it is working with its Book Running Lead Managers (BRLMs) to refund the proceeds received in escrow and to also release the amounts blocked in Investors bank accounts for subscription to this issue.

The stock losses saw Gautam Adani slip to 15th on Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries Ltd who ranks ninth with a net worth of $83.7 billion.

Before the critical report Hindenburg, Adani had ranked third.

The report by Hindenburg Research on January 24 alleged improper use of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuation of the seven listed Adani companies.

The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.

In a 413-page rebuttal filed late on Sunday night, the Adani group labelled the US short seller as the “Madoffs of Manhattan” and said the report was a calculated attack on India and its growth story.

In response, Hindenburg said, “Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised.”

“In short, the Adani group has attempted to conflate its meteoric rise and the wealth of its chairman, Gautam Adani, with the success of India itself. We disagree. To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation,” Hindenburg said.

Earlier in the day, people familiar with the matter said that market regulator Securities and Exchange Board of India (SEBI) is examining the crash in shares of Adani Group and looking into any possible irregularities in a share sale by its flagship company.

SEBI is undertaking a full-scale examination of the fall in shares, a Reuters reports quoted one of the people cited above as saying.

“All key departments — corporate finance, surveillance department at the regulator are examining the share price fall. Exchanges are also sending a report,” Reuters quoted a second person as saying.

The first person added that SEBI was also looking into allegations of dealings between Adani Group and related entities that were cited in the Hindenburg report.

India’s benchmark Nifty index has fallen 2.7% since the Hindenburg report. Data also shows that foreign investors sold a net $1.5 billion worth of Indian equities after the Hindenburg report — the biggest outflow over four consecutive days since September 30.

On Wednesday, Sensex and Nifty ended on a mixed note after finance minister Nirmala Sitharaman raised the personal income tax rebate limit, doled out sops on small savings and announced one of the biggest hikes in capital spending in the past decade in Budget 2023-24.

The 30-share BSE benchmark Sensex climbed 158.18 points or 0.27% to settle at 59,708.08. In contrast, the broader NSE Nifty declined 45.85 points or 0.26% to end at 17,616.30.