Hindenburg short of India’s Adani Group, cites debt, accounting concerns


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BENGALURU – Hindenburg Research said on Wednesday it was short positions in Adani Group, accusing the Indian conglomerate of improperly extensive use of entities set up in offshore tax havens and raising concerns 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.

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

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

It also said seven Adani-listed companies have an 85% downside on a fundamental basis due to what it called “sky-high valuations”.

Adani Group CFO Jugeshinder Singh said in a statement that the company was shocked by the report, calling it a “malicious combination of selective misinformation and outdated, unsubstantiated and discredited allegations.”

“The timing of the publication of the report clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the main objective of damaging the forthcoming successor Public Offer of Adani Enterprises,” it added.

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“The Group has always complied with all laws.”

Hindenburg said his report was based on an investigation over two years that involved speaking to 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 the media on January 21, “No one has raised debt concerns with us. No single investor has.”

In the wake of the Hindenburg report, shares in Adani Ports And Special Economic Zone fell 7.3% to their lowest level since early July. Adani Enterprises fell 3.7% to a near three-month low.

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Adani-owned cement firms ACC and Ambuja Cements, which it acquired from Switzerland’s Holcim last year in a $10.5 billion deal, fell 7.2% and 9.7% respectively on Wednesday.

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

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

Refinitiv data shows that debt at Adani Group’s seven key listed Adani companies exceeds equity, with debt at Adani Green Energy Ltd exceeding equity by more than 2,000%.

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

Hindenburg is known for shorting electric truck maker Nikola Corp and Twitter, although it later reversed its position on Twitter.

Shares in Adani Enterprises rose 125% in 2022, while other group companies, including power and gas units, rose more than 100%.

(Reporting by Chris Thomas, Aditya Kalra and Mrinmay Dey; Additional reporting by Miyoung Kim; Editing by Edwina Gibbs)

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