BENGALURU, Jan 25 (Reuters) – Hindenburg Analysis stated it held quick positions in India’s Adani Group, accusing the conglomerate of improper use of offshore tax havens and flagging issues about excessive debt that eroded $11 billion in investor wealth on Wednesday.
The group, which is led by Gautam Adani, the world’s third richest particular person in keeping with Forbes, dismissed the U.S. short-seller’s claims as baseless, saying it was timed to break its popularity forward of a big share providing.
The group’s flagship agency, Adani Enterprises (ADEL.NS), will on Jan. 27 launch the nation’s greatest public secondary share providing, aiming to lift $2.5 billion to fund capital expenditure and repay some debt.
Hindenburg, recognized for having shorted electrical truck maker Nikola Corp (NKLA.O) and Twitter, stated it holds quick positions in Adani corporations by way of U.S.-traded bonds and non-Indian-traded spinoff devices.
Its scathing analysis report questioned how the Adani Group has used offshore entities in offshore tax havens like Mauritius and the Caribbean Islands, including that sure offshore funds and shell corporations tied to the Adani Group “surreptitiously” personal inventory in Adani listed companies.
It additionally stated key listed Adani corporations had “substantial debt” which has put your entire group on a “precarious monetary footing” and asserted that shares in seven Adani listed corporations have an 85% draw back on a elementary foundation because of what it referred to as “sky-high valuations”.
Adani Group’s Chief Monetary Officer, Jugeshinder Singh, stated in a press release the corporate was shocked by the report, calling it a “malicious mixture of selective misinformation and off, baseless and discredited allegations.”
“The Group has at all times been in compliance with all legal guidelines,” the corporate stated, with out addressing particular allegations made by Hindenburg.
“The timing of the report’s publication clearly betrays a brazen, mala fide intention to undermine the Adani Group’s popularity with the principal goal of damaging the upcoming follow-on Public Providing from Adani Enterprises,” it added.
Shares in Adani Transmission (ADAI.NS) fell 9%, Adani Ports And Particular Financial Zone (APSE.NS) slipped 6.3% and Adani Enterprises ended down 1.5%. Collectively, the seven listed group corporations misplaced $10.73 billion in market capitalisation.
On bond markets, U.S. dollar-denominated bonds issued by Adani Inexperienced Vitality (ADNA.NS) dropped practically 15 cents to simply beneath 80 cents on the greenback, Tradeweb information confirmed , whereas worldwide bonds issued by Adani Ports And Particular Financial Zone, Adani Transmission and Adani Electrical energy Mumbai noticed comparable declines.
The report coincided with bidding for Adani’s secondary share sale by anchor traders on Wednesday, with the corporate noting in a inventory trade submitting participation from Maybank Securities and Abu Dhabi Funding Authority amongst others.
The analysis report, Hindenburg stated, was primarily based on an investigation over two years that concerned talking with dozens of people, together with former Adani Group executives in addition to a overview of paperwork.
India’s capital markets regulator, the Securities and Alternate Board of India, didn’t instantly reply to a request for remark.
Adani has repeatedly dismissed debt issues. Singh informed media on Jan. 21 “No person has raised debt issues to us. No single investor has.”
Hindenburg’s report stated 5 of seven key listed Adani corporations have reported present ratios – a measure of liquid belongings minus near-term liabilities – beneath 1. This, the short-seller stated, prompt “a heightened short-term liquidity threat”.
Adani Group’s complete gross debt within the monetary 12 months ended March 31, 2022, rose 40% to 2.2 trillion rupees.
Refinitiv information exhibits debt at Adani Group’s seven key listed Adani corporations exceeds fairness, with debt at Adani Inexperienced Vitality Ltd (ADNA.NS) exceeding fairness by greater than 2,000%.
CreditSights, a part of the Fitch Group, described the group final September as “overleveraged”. Whereas the report later corrected some calculation errors, CreditSights stated it continued to be involved about Adani Group’s leverage.
Hindenburg additionally stated it was involved {that a} excessive proportion of fairness held by promoters or key shareholders in Adani Group listed corporations has been pledged for loans.
“Fairness share pledges are an inherently unstable supply of lending collateral,” it stated within the report. Based by Nathan Anderson in 2017, Hindenburg appears for “man-made disasters” in corporations, equivalent to accounting irregularities and mismanagement.
Final 12 months, the Adani Group purchased cement companies ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) from Switzerland’s Holcim (HOLN.S) for $10.5 billion. Days later, it pledged shares within the two companies, price about $12.5 billion on the time, to banks in a non-disposal settlement that stops it from offloading the shares till lenders agree that money owed are paid.
ACC and Ambuja shares every fell greater than 7% on Wednesday.
Reporting by Chris Thomas, Aditya Kalra and Mrinmay Dey; Extra reporting by Miyoung Kim; Enhancing by Edwina Gibbs, Louise Heavens and Kirsten Donovan
: .