February 8, 2023

The Hindenburg sells complaints by India’s Adani Group, citing debt and accounting concerns

BENGALURU (January 25) (Reuters) – Hindenburg Research said on Wednesday it had held short positions in India’s Adani Group, accusing the group of improperly extensive use of entities set up in offshore tax havens and expressing concern about high debt levels.

This report comes days before a $2.5 billion stock offering by leading company Adani Enterprises (ADEL.NS)Shares of Adani Group companies fell.

Hindenburg, a well-known short seller in the US, said the main companies included in the group controlled by billionaire Gautam Adani had “significant debts” which put the entire group on a “precarious financial footing”.

It also said that seven companies listed on “Adani” had a downside of 85% on an underlying basis due to what it called “high valuations”.

An Adani spokesperson did not immediately respond to a Reuters request for comment on the report, which Hindenburg said was based on research that included speaking 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-India derivatives instruments.

Adani has repeatedly dismissed debt concerns. CFO Adani Jugeshinder Singh told the media on January 21 that “Nobody has raised our debt concerns. No investor has.”

In the wake of the Hindenburg Report, Adani Ports and Special Economic Zone (APSE.NS) It fell 7.3% to its lowest level since early July, while Adani Enterprises fell 3.7% to a three-month low.

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Cement companies owned by Al-Adani ACC (ACC.NS) and Ambuja cement (ABUJ.NS) decreased by 6.7% and 9.7%, respectively.

The Hindenburg report said that five of seven major Adani-listed companies reported current ratios — a measure of liquid assets minus short-term liabilities — of less than 1. This, the short seller said, indicated “increased short-term liquidity risk.”

The total gross debt of the Adani Group in the financial year ending 31st March 2022 increased by 40% to Rs.2.2 trillion.

Refinitiv data shows debt across all seven major Adani companies included in the Adani Group exceeds equity, with debt at Adani Green Energy Ltd (ADNA.NS) Exceeding equity by more than 2000%.

CreditSights, part of Fitch Group, last September described the group as “highly indebted” and said it had concerns about its debt. And while the report later corrected some mathematical errors, CreditSights said it maintained its concerns about leverage.

The Hindenburg is best known for the electric truck maker NikolaKorp (NKLA.O) and Twitter although he later reversed his position at Twitter.

Shares of Adani Enterprises jumped 125% in 2022, while shares of other group companies, including power and gas units, rose more than 100%.

Additional reporting by Mary May Day, Chris Thomas and Aditya Kalra; Additional reporting by Myung Kim. Editing by Dania Ann Topel and Edwina Gibbs

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