The Adani Group on January 25, dismissed the Hindenburg report, which claimed that key listed companies in the group had “substantial debt”, as “a malicious combination of selective misinformation and stale, baseless and discredited allegations.” Additionally, it alleged that the report’s objective is to damage the group’s upcoming FPO.
Hindenburg Research in its report held short positions in Adani Group, accusing the conglomerate of improper extensive use of entities set up in offshore tax havens and expressing concern about high debt levels.
The report, comes days ahead of a $2.5 billion share offering by flagship firm Adani Enterprises, and sent shares in Adani group firms sliding. “We are shocked that Hindenburg Research has published a report on 24 January 2023 without making any attempt to contact us or verify the factual matrix,” Adani’s Group CFO Jugeshinder Singh said in a statement.
Also Read | Warning bells: On the Adani saga
Stating that the allegations in the report “have been tested and rejected by India’s highest courts,” Mr. Singh claimed that the timing of the report’s publication “betrays a brazen, mala fide intention to undermine the Adani Group’s reputation.” He also accused that the principal objective of the report was to damage the “upcoming Follow-on Public Offering from Adani Enterprises, the biggest FPO ever in India.”
Hindenburg, a well known U.S. short-seller, said that seven Adani listed companies have an 85% downside on a fundamental basis due to what it called "sky-high valuations".
Hindenburg said it held its short positions through U.S.-traded bonds and non-Indian-traded derivative instruments.
Adani has repeatedly dismissed debt concerns, and Mr. Singh had previously told media on January 21 "Nobody has raised debt concerns to us. No single investor has."
This sentiment was reiterated in the latest statement, which read: “The investor community has always reposed faith in the Adani Group on the basis of detailed analysis and reports prepared by financial experts and leading national and international credit rating agencies. Our informed and knowledgeable investors are not influenced by one-sided, motivated and unsubstantiated 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 added.
In the wake of the Hindenburg report, Adani Ports And Special Economic Zone slid 7.3% to its lowest level since early July, while Adani Enterprises dropped 3.7% to a near three-month low.
Adani-owned cement firms ACC and Ambuja Cements fell 6.7% and 9.7% respectively.
Hindenburg's report said that five of seven key listed Adani companies have reported current ratios — a measure of liquid assets minus near-term liabilities — below 1. This, the short-seller said, suggested "a heightened short-term liquidity risk."
Adani Group's total gross debt in the financial year ending March 31, 2022, rose 40% to 2.2 trillion rupees.
Refinitiv data shows that debt at all the Adani Group's seven key listed Adani companies exceeds equity, with debt at Adani Green Energy Ltd exceeding equity by more than 2,000%.
CreditSights, part of the Fitch Group, described the group last September as "overleveraged" and said it had concerns over its debt. While the report later corrected some calculation errors, CreditSights said it maintained its concerns over leverage.
Hindenburg is known for shorting electric truck maker Nikola Corp and Twitter though it later reversed its position in Twitter.
Shares in Adani Enterprises surged 125% in 2022, while other group companies, including power and gas units, rose more than 100%.
(With inputs from Reuters)
