Adani Group Chairman Gautam Adani. file. , Photo Credit: PTI
Adani Group sacked on 25 January Hindenburg Report, which claimed that the group’s major listed companies had “substantial debt”, using “a malicious combination of selective misinformation and stale, unfounded and discredited allegations.” Additionally, it alleged that the report was aimed at maligning the group’s upcoming FPO.
Hindenburg Research in its report slammed short positions in the Adani group, accusing the group of undue extensive use of entities established in offshore tax havens and raising concerns about high debt levels.
The report comes days ahead of a $2.5 billion share offer by flagship firm Adani Enterprises, and has sent shares in Adani group firms sliding. “We are shocked that Hindenburg Research has published a report dated 24 January 2023 without making any effort to contact us or verify the factual matrix,” Adani’s Group CFO Jugeshinder Singh said in a statement.
Asserting that the allegations in the report “have been examined and rejected by the highest courts of India,” Mr. Singh claimed that the timing of the report’s publication was “a brazen, blatant attempt to tarnish the reputation of the Adani Group”. betrays malicious intent.” He also alleged that the main objective of the report was to damage the “upcoming follow-on public offering of Adani Enterprises, the largest ever FPO in India”.
Noted US-based short-seller Hindenburg said seven Adani-listed companies are down 85% on fundamentals, at what it termed “sky-high valuations”.
Hindenburg said it held its short positions through US-traded bonds and non-Indian-traded derivative instruments.
Adani has repeatedly dismissed the debt concerns, and Mr. Singh previously told the media on 21 January, “Nobody has raised debt concerns with us. Not a single investor has.”
The sentiment was reiterated in the latest statement, which read: “The investor community has always reposed faith in the Adani Group, based on detailed analysis and reports prepared by financial experts and leading national and international credit rating agencies. Our informed and knowledgeable investors are not swayed by one-sided, motivated and baseless reports with vested interests.
“The group has always been in compliance with all laws, regardless of jurisdiction, and maintains the highest standards of corporate governance,” the statement said.
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%.
(with inputs from Reuters)