Hindenburg clashed with India’s Adani Group, citing debt and accounting concerns

BENGALURU, Jan 25 (Reuters) – Hindenburg Research said on Wednesday it was shorting India’s Adani Group, accusing the conglomerate of making extensive use of businesses set up in offshore tax havens and raising concerns about high debt levels.

The report, which comes days before a 2.5 billion dollars share offering by flagship firm Adani Enterprises (ADEL.NS)sent shares of Adani group companies tumbling.

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

He also said seven Adani-listed companies were down 85% on a fundamental basis due to what he called “sky-high valuations”.

An Adani spokesman did not immediately respond to a Reuters request for comment on the report, which Hindenburg said was based on research that included conversations with dozens of individuals, including former Adani Group executives, as well as a review of documents.

Hindenburg said it maintains its short positions through US-traded bonds and non-Indian-traded derivatives.

Adani has repeatedly dismissed debt concerns. Adani’s chief financial officer Jugeshinder Singh told the media on January 21, “No one has raised any concerns about our debt. No investor has done that.”

After 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 near three-month low.

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Adani-owned cement firms ACC (ACC.NS) and Ambuja cements (ABUJ.NS) fell by 6.7% and 9.7% respectively.

The Hindenburg report said five of seven key Adani listed companies reported current ratios – a measure of liquid assets minus short-term liabilities – below 1. This, the short seller said, suggested “increased short-term liquidity risk”.

Adani Group’s total gross debt in the financial year ending March 31, 2022 rose 40% to 2.2 trillion rupees.

Refinitiv data shows that all seven of Adani’s Adani Group’s key listed companies have debt in excess of equity, with Adani Green Energy Ltd’s debt (ADNA.NS) exceeding equity by more than 2,000%.

CreditSights, part of Fitch Group, last September described the group as “overleveraged” and said it had concerns about its debt. Although the report later corrected some calculation errors, CreditSights said it maintained its concerns about leverage.

The Hindenburg is known for short-circuiting electric truck maker Nikola Corp (NKLA.O) and Twitter, although it later changed its position on Twitter.

Shares of Adani Enterprises have jumped 125% in 2022, while other companies in the group, including power and gas units, are up more than 100%.

Reporting by Mrinmay Dey, Chris Thomas and Aditya Kalra; Additional reporting by Miyoung Kim; Editing by Dhanya Ann Thoppil and Edwina Gibbs

Our standards: Thomson Reuters Trust Principles.

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