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Hindenburg cuts focus on India’s Adani group, highlights debt and accounting concerns

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

The report, which comes days ahead of a $2.5 billion share offering by flagship company Adani Enterprises ( ADEL.NS ), sent shares of Adani Group companies tumbling.

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

It also said the seven Adani-listed companies were down 85 per cent on a fundamental basis due to what it 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 interviews with dozens of individuals, including former Adani Group executives, as well as a review of documents.

Hindenburg said he is holding his short positions through US-traded bonds and non-traded derivatives in India.

Adani has repeatedly dismissed debt concerns. Adani Chief Financial Officer Jugeshinder Singh told the media on January 21, “No one has raised any concerns with us about the debt. No investors have.”

After Hindenburg’s 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.

Reuters Graphics Reuters Graphics

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

The Hindenburg report said five of Adani’s seven key listed companies reported current ratios – a measure of liquid assets minus current liabilities – below 1. This, the retailer said, indicated “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 the debt of all seven core Adani Group companies on the Adani Stock Exchange exceeds equity, with Adani Green Energi Ltd’s ( ADNA.NS ) debt exceeding equity by more than 2,000%.

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

Hindenburg is known for short-circuiting electric truck maker Nikola Corp ( NKLA.O ) and Twitter, although he later reversed his position on Twitter.

Shares in Adani Enterprises are up 125% in 2022, while the group’s other companies, including the 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 Dhania Ann Thoppil and Edwina Gibbs

Our Standards: Thomson Reuters Trust Principles.

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