Hindenburg shorts India’s Adani Group over debt, accounting

REUTERS: Hindenburg Research yesterday said it held short positions in Adani Group, accusing the Indian conglomerate of improper extensive use of entities set up in offshore tax havens and expressing concern about high debt levels.

The group, which is led by Gautam Adani, the world’s third richest man according to Forbes, dismissed the US short-seller’s claims as baseless.

The report, which comes days ahead of a US $ 2.5 billion share offering by flagship firm Adani Enterprises, sparked sharp falls in shares of Adani group firms.

Hindenburg, which has short positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments, said key listed companies in the group had “substantial debt”, which has put the entire group on a “precarious financial footing”.

It also said that seven Adani listed companies have an 85 percent downside on a fundamental basis due to what it called “sky-high valuations”. Adani Group Chief Financial Officer Jugeshinder Singh said in a statement that the company was shocked by the report, calling it a “malicious combination of selective misinformation and stale, baseless and discredited allegations”. “The timing of the report’s publication clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming follow-on public offering from Adani Enterprises,” it added.  “The group has always been in compliance with all laws.”  Hindenburg said its report was based on an investigation over two years that involved speaking with dozens of individuals, including former Adani Group executives as well as a review of documents. India’s capital markets regulator, the Securities and Exchange Board of India, did not immediately respond to a request for comment. Adani has repeatedly dismissed debt concerns.

Singh told media on January 21, “Nobody has raised debt concerns to us. No single investor has.” In the wake of the Hindenburg report, shares in Adani Ports And Special Economic Zone fell 7.3 percent to their lowest level since early July.  Adani Enterprises dropped 3.7 percent to a near three-month low.  Adani-owned cement firms ACC and Ambuja Cements, which it acquired from Switzerland’s Holcim last year in a US $ 10.5 billion deal, fell 7.2 percent and 9.7 percent, respectively today.