Hindenburg Research, a well-known US short-seller, also said that seven Adani listed companies are down 85% on a fundamental basis, terming it as “sky-high valuations”. file | Photo Credit: Reuters
Hindenburg Research said on Wednesday it took short positions in India’s Adani Group, accusing the group of improperly extensive use of entities established in offshore tax havens and raising concerns about high debt levels.
The report, which came days ahead of a $2.5 billion share offer by flagship firm Adani Enterprises, sent shares of the Adani group companies plummeting.
Hindenburg, a well-known US short-seller, said the group controlled by billionaire Gautam Adani had “substantial debt” on major listed companies, which has put the entire group on a “precarious financial footing”.
It also said that seven Adani listed companies are down 85% on fundamentals, which it called “sky-high valuations”.
Adani spokesperson did not immediately respond reuters A request for comment on the report, which Hindenburg said was based on research that included interviews with dozens of individuals, including former Adani Group executives, as well as a review of documents.
Hindenburg said it held its short positions through US-traded bonds and non-Indian-traded derivative instruments.
Adani has repeatedly dismissed the debt concerns. Adani’s chief financial officer Jugshinder Singh told the media on 21 January, “No one has raised debt concerns for us. Not a single investor has.”
In the wake of the Hindenburg report, Adani Ports and Special Economic Zone fell 7.3% to its lowest level since early July, while Adani Enterprises fell 3.7% to a three-month low.
Adani-owned cement firms ACC and Ambuja Cements fell 6.7% and 9.7%, respectively.
The Hindenburg report said five of Adani’s seven major listed companies reported current ratios – a measure of liquid assets minus near-term liabilities – below 1. The short-seller said, suggesting “increased short-term liquidity risk”.
Adani Group’s total gross debt rose 40% to Rs 2.2 trillion in the fiscal year ending March 31, 2022.
Refinitiv data shows that while debt exceeds equity in all seven major listed Adani companies in the Adani Group, debt at Adani Green Energy Ltd is over 2,000%.
CreditSights, part of Fitch Group, described the group as “overleveraged” last September and said it had concerns over its debt. While the report later corrected some calculation errors, CreditSites said it retained its concerns over leverage.
Hindenburg is known for shorting electric truck maker Nikola Corp and Twitter, although it later reversed its position on Twitter.
Shares of Adani Enterprises rallied 125% in 2022, while other group companies, including power and gas units, rallied over 100%.