Shares in India’s Adani Group, run by Asia’s richest man, extended their sharp declines on Monday, as the conglomerate’s response to a report by a U.S. short-seller failed to calm investors, driving stock market losses for the companies to around $65 billion over three days.

Led by Gautam Adani, the conglomerate has locked horns with Hindenburg Research and on Sunday hit back at the short-seller's report of last week that flagged concerns about its debt levels and the use of tax havens. Adani said it complies with all local laws and had made the necessary regulatory disclosures.

It called Hindenburg’s report alleging fraud and other malfeasance "malicious," "baseless" and full of "selective misinformation."

Flagship Adani Enterprises, which is facing a crucial test this week with a follow-on share offering, swung between gains and losses before settling 4.8% higher. It stayed well below the offer price of the issue, which if successful will be the largest such share offering ever in India.

Adani Transmission, Adani Total Gas, Adani Green Energy, Adani Power, Adani Wilmar and Adani Ports and Special Economic Zone fell between 5% and 20% on Monday.

In a 400-page rebuttal issued late Sunday, Adani accused Hindenburg of a "calculated attack" on India and its institutions and of breaking securities and foreign exchange laws, while a senior executive has compared a rout of its stocks with a colonial-era massacre.

The group also accused Hindenburg, which said it was betting against the group's companies, of trying to derail a share sale originally expected to bring in about $2.5 billion.

"This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India," Adani's statement said.

'Colonial-era massacre'

Adani's chief financial officer, Jugeshinder Singh, likened the behavior of Indian investors participating in the sell-off to the colonial-era Jallianwala Bagh massacre in Amritsar city.

On April 13, 1919, a British officer ordered about 50 Indian army soldiers to shoot at unarmed civilians who were taking part in a peaceful protest. At least 379 people were killed, according to the official record, although local residents have said in the past the toll was far higher.

"In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians. So am I surprised by the behavior of some fellow Indians? No," Singh told the Mint business daily in an interview published on Monday, when asked why the market believed the Hindenburg report.

In response, the Hindenburg firm denied the accusations and said Adani's response largely confirmed its findings and failed to address key questions. It said the group was trying to conflate its rise with the success of India itself.

"We believe India is a vibrant democracy and emerging superpower with an exciting future. We also believe India's future is being held back by the Adani Group. We also believe that fraud is fraud, even when it's perpetrated by one of the wealthiest individuals in the world," Hindenburg said in a statement.

Adani Enterprises' $2.5 billion secondary share sale entered its second day on Monday amid weak investor sentiment. The stock closed at 2,892.85 Rupees, 7% below the 3,112 Rupees lower end of the offer price band. The upper band is 3,276 Rupees.

Data from stock exchanges on Monday showed Adani has now received bids for 1.4 million shares, or just over 3%, of the 45.5 million shares on offer. The deal closes on Tuesday.

Foreign and domestic institutional investors, as well as mutual funds, have made no bids so far, according to the data.

"Retail participation is likely to have a shortfall with current market prices still trailing the offer price and sentiment taking a hit due to the Hindenburg controversy. While there is a risk that the share sale does not go through, it will be crucial today to wait and see how institutional investors participate," said Hemang Jani, equity strategist at Motilal Oswal Financial Services.

Abu Dhabi conglomerate International Holding Company said on Monday it would invest 1.4 billion dirhams ($381.17 million) in the offering.

Adani Group told Reuters in a statement on Saturday that the sale remains on schedule at the planned issue price, even as sources said bankers of the country's largest secondary share sale were considering extending the timeline beyond Jan. 31, or tweaking the price due to the fall in its share price.

Indian regulations say the share offering must receive a minimum subscription of 90%, and if it does not the issuer must refund the entire amount. Maybank Securities and Abu Dhabi Investment Authority are among the investors who bid for the anchor portion of the issue.

Maybank said in a statement "there is no financial impact" on it as the subscription to Adani's offer was fully funded by client funds.

State-run insurance behemoth Life Insurance Corporation (LIC) told Reuters on Monday it was reviewing the Adani group's response to Hindenburg's report and would hold talks with the management within days.

LIC took 5% of the anchor portion, worth around $734 million. It already holds a 4.23% stake in the flagship Adani firm, while its other exposures include a 9.14% stake in Adani Ports and 5.96% in Adani Total Gas.

"Since we are a large investor we have the right to ask relevant questions," said LIC Managing Director Raj Kumar.

Debt, de-leveraging

Index provider MSCI has said it was seeking feedback from market participants on Adani and was monitoring the factors that "may impact the eligibility of those relevant securities" in MSCI indexes.

In its response on Sunday, Adani highlighted its relations with local and international banks and touted its access to diverse funding sources and structures, listing U.S. banks Citigroup and JPMorgan Chase & Co and European lenders such as BNP Paribas, Credit Suisse and Deutsche Bank.

Responding to Adani's rebuttal, Hindenburg said the "response largely confirmed our findings and ignored our key questions."

It said that Adani companies had "substantial debt" and that shares in seven Adani-listed companies have an 85% downside due to what it called "sky-high valuations."

Adani's response stated that over the past decade, its group companies have "consistently de-levered."

The stock market meltdown is a dramatic setback for 60-year-old Adani. The school-dropout's stunning rise came with over 1,500% gains in some of his group stocks over three years, making him the world's third richest man before he slipped to rank eighth on the Forbes list on Monday.

Gautam Adani and his family have built a vast fortune mining coal to fuel energy-hungry India's fast-growing economy. Businesses in the conglomerate span industries including infrastructure, ports, data transmission, media, renewable energy, defense manufacturing and agriculture.