- The US-based short seller has expressed concerns about Adani debt and financial stocks
- Adani Group denies allegations, calling them unfounded
- Adani Group has dismissed concerns about high levels of debt in the past
- Shares of Adani companies slide
BENGALURU, Jan. 25 (Reuters) – Hindenburg Research said on Wednesday it had held short positions in Adani Group, accusing the Indian conglomerate of abusive extensive use of companies set up in offshore tax havens and expressing concerns about high levels of debt .
The group, which is led by Gautam Adani, the third richest man in the world according to Forbes, dismissed the US short seller’s claims as baseless.
The report, which comes days ahead of a $2.5 billion share offering by flagship Adani Enterprises (ADEL.NS), sparked a sharp decline in shares of Adani group companies.
Hindenburg, which holds short positions in Adani companies through US-traded bonds and non-India-traded derivative instruments, said key listed companies in the group had “significant debt,” putting the entire group on a “precarious financial footing.” brought.
It also said seven companies listed on the Adani Stock Exchange are down 85% on a fundamental basis due to so-called “sky high valuations”.
Adani Group Chief Financial Officer Jugeshinder Singh said in a statement the company was shocked by the report, calling it a “malicious combination of selective misinformation and outdated, unsubstantiated and discredited allegations”.
“The timing of the report’s release clearly betrays a brazen, malicious intent to undermine the Adani Group’s reputation, with the primary aim of damaging Adani Enterprises’ forthcoming follow-up public offering,” he added.
“The group has always obeyed all laws.”
Hindenburg said his report was based on a two-year investigation that included interviews with dozens of people, including former Adani Group executives, and a review of documents.
India’s capital markets regulator, the Securities and Exchange Board of India, did not immediately respond to a request for comment.
Adani has repeatedly dismissed debt concerns. Singh told the media on January 21: “No one has raised any concerns about the debt we have. No single investor has done this.”
Following the Hindenburg report, shares in Adani Ports And Special Economic Zone (APSE.NS) fell 7.3% to their lowest level since early July. Adani Enterprises fell 3.7% to a near three-month low.
Adani-owned cement companies ACC (ACC.NS) and Ambuja Cements (ABUJ.NS), which they acquired from Swiss-based Holcim (HOLN.S) in a $10.5 billion deal last year, fell 7.2% and 9.7% respectively on Wednesday.
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Hindenburg’s report said five out of seven major Adani publicly traded companies reported current ratios – a measure of liquid assets less current liabilities – below 1. This, according to the short seller, indicates “an increased short-term liquidity risk”.
Adani Group’s total gross debt increased by 40% to Rs. 2.2 trillion for the year ended 31 March 2022.
Refinitiv data shows that the Adani Group’s seven main listed Adani companies have debt exceeding equity, with Adani Green Energy Ltd (ADNA.NS) debt exceeding equity by more than 2,000%.
CreditSights, part of the Fitch Group, described the group as “over-leveraged” last September and said it had concerns about its debt. While the report later corrected some calculation errors, CreditSights said it maintains its concerns about Adani’s leverage.
Hindenburg is known for short-circuiting electric truck maker Nikola Corp (NKLA.O) and Twitter, although it later reversed its position on Twitter.
Adani Enterprises shares surged 125% in 2022, while other group companies, including power and gas units, gained more than 100%.
Reporting by Chris Thomas, Aditya Kalra and Mrinmay Dey; Additional reporting by Miyoung Kim; Editing by Edwina Gibbs
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