Adanis rejects US companies’ claims

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Shares of Adani Group companies fell as much as 8.1% on Wednesday, eroding the combined market capitalization by nearly 87,000 crores, after US forensic financial research firm Hindenburg Research released a 103-page report alleging accounting fraud, stock manipulation and misuse. offshore tax havens by the group.

The Adanis, however, dismissed the report. “We are shocked that Hindenburg Research released a report on January 24, 2023 without attempting to contact us or verify the factual matrix. The report is a malicious combination of selective misinformation and outdated, baseless and discredited claims that have been tested and dismissed by India’s highest courts,” Adani Group Chief Financial Officer Jugeshinder Singh said in a statement Wednesday after -noon.

Adani Enterprises (AEL), the flagship entity of the Adani Group, slipped 1.5% on the day of the launch of its 20,000 crore follow-on offering.

Adani Transmission fell 8%, while Adani Ports and SEZ fell 6%. ACC and Ambuja Cements lost around 7% each.

The Hindenburg Report said Gautam Adani, Founder and Chairman of the Adani Group, has amassed a net worth of approximately $120 billion, adding more than $100 billion over the past three years, largely through share price appreciation in the group’s seven key listed companies, which rose by an average of 819% over this period.

The findings were part of a two-year investigation by Hindenburg Research, which took a short position in Adani Group companies through US-traded bonds and non-India-traded derivatives.

Major publicly listed Adani companies had incurred substantial debt, including pledging shares of their inflated stock for loans, putting the entire group in a precarious financial position, he said. Five of the seven major listed companies reported current ratios below 1, indicating pressure on short-term liquidity.

“Even if you ignore the findings of our investigation and take Adani Group’s financials at face value, its top seven listed companies are down 85% on a fundamental basis alone due to exorbitant valuations,” the report said.

Three of the Adani Group companies – Adani Wilmar, Adani Power and Adani Total Gas – have gained more than 100% in the past year. Flagship Adani Enterprises is up nearly 95% despite Wednesday’s drop and recent wobble ahead of its FPO.

Hindenburg Research further alleged that many public funds had glaring irregularities, such as being Mauritian or offshore entities, often shells, with beneficial ownership concealed through appointed administrators, and with little or no diversification, holding portfolios almost exclusively comprised of shares of Adani. listed companies. The funds are still part of an ongoing investigation by Sebi.

“Our analysis revealed that suspected stock-parking offshore entities accounted for as much as 30-47% of annual delivery volume at several Adani-listed companies, a glaring irregularity indicating Adani stock likely made the biggest hit. subject to fictitious transactions or other forms of manipulative transactions via the Suspicious Offshore Entities,” the report states.

In his statement, Adanis Singh said the timing of the reports clearly betrayed a brazen and bad faith intent to undermine the reputation of the Adani Group with the primary purpose of harming the upcoming FPO of Adani Enterprises.

“The investment community has always trusted the Adani Group based on detailed analyzes and reports prepared by financial experts and leading national and international credit rating agencies. Our informed and well-informed investors are not swayed by one-sided, motivated and unfounded reports with vested interests,” he said.

This is the second time in recent times that an international organization has published an unfavorable report on the Adani Group. In August last year, the Fitch Group unit’s CreditSights report said the Adani Group is deeply overleveraged and could fall into a debt trap. However, following a meeting with conglomerate executives, CreditSights later admitted that it had made some errors in judgment in its report.

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