BENGALURU, Jan. 25 (Reuters) – Hindenburg Research said on Wednesday it had short positions in India’s Adani Group, accusing the conglomerate of improperly extensive use of entities set up in offshore tax havens and raising concerns about high levels of debt.
The report, which comes days before a $2.5 billion equity offering by flagship firm Adani Enterprises (ADEL.NS), sent shares of the Adani group firms slid.
Hindenburg, a well-known US short-seller, said the main listed companies in the group controlled by billionaire Gautam Adani had “significant debts” that put the entire group in a “precarious financial position”.
It also said seven listed Adani companies are down 85% fundamentally because of what it called “skyrocketing valuations”.
An Adani spokesman did not immediately respond to Reuters’ request for comment on the report, which Hindenburg said was based on research that included speaking to dozens of individuals, including former Adani Group executives, and review of documents.
Hindenburg said it held its short positions through US-traded bonds and non-Indian-traded derivatives.
Adani has repeatedly dismissed debt worries. Jugeshinder Singh, Chief Financial Officer of Adani, told media on Jan. 21, “No one has raised our concerns about debt. No investor has.”
In the wake of the Hindenburg report, Adani Ports And Special Economic Zone (APSE.NS) fell 7.3% to its lowest level since early July, while Adani Enterprises fell 3.7% to a nearly three-month low.
Adani cement companies ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) fell 6.7% and 9.7% respectively.
According to the Hindenburg report, five of the top seven listed Adani companies have reported current ratios — a measure of liquid assets minus short-term liabilities — of less than 1. This, the short-seller said, suggested “increased short-term liquidity risk term”.
The total gross debt of Adani Group in the financial year ended March 31, 2022 increased by 40% to Rs 2.2 trillion.
Refinitiv data shows that debt at all seven of the Adani Group’s major listed Adani companies exceeds equity, with debt at Adani Green Energy Ltd (ADNA.NS) exceeding equity by more than 2,000%.
CreditSights, part of the Fitch Group, described the group as “overleveraged” last September and said it was concerned about its debt. While the report later corrected some calculation errors, CreditSights said it maintained its leverage concerns.
Hindenburg is known for shorting electric truck maker Nikola Corp (NKLA.O) and Twitter, though it later reversed its position on Twitter.
Shares in Adani Enterprises rose by 125% in 2022, while other group companies, including power and gas units, rose by more than 100%.
Reporting by Mrinmay Dey, Chris Thomas and Aditya Kalra; Additional reporting by Miyoung Kim; Edited by Dhanya Ann Thoppil and Edwina Gibbs
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