BENGALURU, Jan 25 (Reuters) – Hindenburg Research said on Wednesday it had short positions in Adani Group, accusing the Indian conglomerate of making extensive illegal use of entities set up in offshore tax havens and expressing concern over high debt levels.
The group led by Gautam Adani, the third richest man in the world according to Forbes, called the US short seller’s claims baseless.
The report is one that comes days ahead 2.5 billion dollars stake offer by flagship firm Adani Enterprises (ADEL.NS)It led to sharp declines in the shares of Adani group firms.
Hindenburg, who has short positions in Adani companies through US-traded bonds and non-traded derivatives in India, said the main listed companies in the group had “significant debt” that put the entire group in a “non-financial position”.
He also said that Adani’s seven listed companies were 85% negative on a fundamental basis due to what he called “sky-high valuations”.
In a statement, Adani Group Chief Financial Officer Jugeshinder Singh said the company was shocked by the report, calling it a “damaging combination of selective disinformation and outdated, unfounded and discredited claims”.
“The timing of the publication of the report clearly betrays a brazen, ulterior motive to malign the reputation of the Adani Group with a view to prejudicing future Public Offerings from Adani Enterprises,” it said.
“The group has always followed all the laws.”
Hindenburg said his report was based on a two-year investigation that included interviews with dozens of people, including former Adani Group executives, as well as 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 denied debt concerns. Singh awning media On January 21, “No one has raised concerns about our debt. Neither have any investors.”
After the Hindenburg report, shares in Adani Ports and Special Economic Zone (APSE.NS) It fell 7.3% to its lowest level since early July. Adani Enterprises fell 3.7% to a three-month low.
Adani owns cement firms ACC (ACC.NS) and Ambuja Cements (ABUJ.NS)bought it from Swiss company Holcim (HOLN.S) in a $10.5 billion deal last year, down 7.2% and 9.7%, respectively, on Wednesday.
The Hindenburg report notes that five of Adani’s seven major listed companies reported current ratios – a measure of liquid assets minus current liabilities – below 1.
In the fiscal year ending March 31, 2022, Adani Group’s total gross debt rose 40% to 2.2 trillion rupees.
Debts of the Adani Group’s seven major listed Adani companies exceed the equity of Adani Green Energy Ltd, Refinitiv data shows. (DNA.NS) exceeds its capital by more than 2000%.
CreditSights, part of the Fitch Group, described the group as “overburdened” last September and said it had concerns about its debt. Although the report later corrected some calculation errors, CreditSights said Adani’s leverage concerns remained.
Hindenburg is known for shorting Nikola Corp, an electric truck maker. (NKLA.O) and although Twitter later changed its position on Twitter.
Adani Enterprises shares are up 125% in 2022, while other group companies, including power and gas utilities, are up more than 100%.
Reporting by Chris Thomas, Aditya Kalra and Mrinmay Dey; Additional reporting by Miyoung Kim; Edited by Edwina Gibbs
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