BENGALURU, Jan 25 (Reuters) – Hindenburg Research said on Wednesday it holds short positions in Indian group Adani, accusing the conglomerate of extensive and abusive use of entities based in offshore tax havens and raising concerns about the level high debt.
The report, which comes days before a $2.5 billion share offering by flagship Adani Enterprises (ADEL.NS), sent shares of Adani Group companies plummeting.
Hindenburg, a well-known US short seller, said the major listed companies in the group controlled by billionaire Gautam Adani had “substantial debt” which put the whole group in a “precarious financial position”.
He also said seven Adani-listed companies are down 85% on a fundamental basis due to what he called “exorbitant valuations”.
A spokesman for Adani did not immediately respond to Reuters’ request for comment on the report, which Hindenburg said was based on research involving interviews with dozens of people, including former leaders of the Adani group, as well as a review of documents.
Hindenburg said he held his short positions through US-traded bonds and non-India-traded derivatives.
Adani has repeatedly dismissed debt issues. Adani’s chief financial officer, Jugeshinder Singh, told the media on January 2. 21 “No one has told us about debt problems. No investors have.”
In the wake of the Hindenburg report, Adani Ports And Special Economic Zone (APSE.NS) slipped 7.3% to its lowest level since early July, while Adani Enterprises fell 3.7% to a low of almost three months.
Cement plants owned by Adani ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) fell 6.7% and 9.7% respectively.
Hindenburg’s report indicates that five of Adani’s seven major publicly traded companies reported current ratios – a measure of liquid assets minus current liabilities – below 1. This, according to the short seller, suggests “risk of increased short-term liquidity”.
Adani Group’s total gross debt in the financial year ended March 31, 2022 increased by 40% to Rs 2.2 trillion.
Data from Refinitiv shows that the debt of all the Adani Group’s seven major publicly traded Adani companies exceeds equity, with Adani Green Energy Ltd’s (ADNA.NS) debt exceeding equity by more than 2,000%.
CreditSights, part of the Fitch Group, described the group last September as “overleveraged” and said it was concerned about its debt. While the report later corrected some miscalculations, CreditSights said it maintained its concerns about leverage.
Hindenburg is known for shorting electric truck maker Nikola Corp (NKLA.O) and Twitter, although he later reversed his position on Twitter.
Shares of Adani Enterprises jumped 125% in 2022, while other group companies, including power and gas units, rose 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
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