Adani Group issued a detailed response on Sunday to the Hindenburg Research report that prompted a $48 billion write-off on its shares, saying it was complying with all local laws and had made the necessary regulatory disclosures. The conglomerate, led by Asia’s richest man, Indian billionaire Gautam Adani, said last week’s Hindenburg report was intended to allow the US-based short seller to book profits without providing evidence.
For 60-year-old Adani, the stock market crash was a dramatic setback for a school dropout who had quickly climbed to become the world’s third-richest man in recent years before slipping to seventh on the Forbes rich list last week. Adani Group’s reaction comes as its flagship company, Adani Enterprises, continues a $2.5 billion share sale. This was overshadowed by the Hindenburg Report, which flagged concerns about debt levels and the use of tax havens.
Adani said to Hindenburg
Adani said “We have properly disclosed all transactions we entered into with entities that qualify as ‘related parties’ under Indian laws and accounting standards,” Adani said in a 413-page response issued late on Sunday. This is fraught with a conflict of interest and is only intended to create a bogus stock market to allow Hindenburg, an admitted short seller, to book a massive financial gain through unauthorized means at the expense of countless investors,” he added.
Hindenburg said on its website that “Adani’s response largely confirmed our findings and ignored our key questions”. It reiterated that it is short the Adani group through US-traded bonds and non-Indian-traded derivatives.
Her report questioned Adani Group’s use of offshore entities in tax havens such as Mauritius and the Caribbean islands, adding that some offshore funds and shell companies “stealthfully” own shares in Adani’s listed companies.
The research report, Adani said, contained “misleading claims about offshore entities” without any evidence. Hindenburg said he had “found Adani’s lack of direct and transparent answers” to allegations of using offshore entities a “narrative”.
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Adani said on Thursday it was considering taking action against Hindenburg, who responded the same day by saying he would welcome such action. The Hindenburg report also said five of Adani’s seven core listed companies showed current ratios, a measure of liquid assets minus current liabilities, below 1, which it said indicated “increased short-term liquidity risk”.
It said Adani’s key listed companies have “significant debt” which has put the whole group in a “precarious financial situation” and that shares in Adani’s seven listed companies are down 85% due to what they call “high valuations”. Adani’s response said its group companies had “consistently deleveraged” over the past decade.
Adani Group, defending its practice of pledging the shares of its promoters – or key shareholders – said that raising finance based on shares as collateral is a common practice worldwide and loans are made by large institutions and banks based on thorough credit analysis.
The group added that there is a robust disclosure system in place in India and its promoter positions in portfolio companies have fallen from over 50% in March 2020 in some listed stocks to less than 20% in December 2022.
The Hindenburg report and its fallout are seen as one of the biggest career challenges facing the billionaire, whose business interests range from ports, airports, mining and energy to media and cement. Adani’s response included more than 350 pages of appendices, which contained excerpts from annual reports, disclosures and earlier court decisions.
Hindenburg, Adani said, sought answers to 88 questions in its report, but 65 of them related to matters disclosed in annual reports by Adani’s portfolio companies. The rest, Adani said, involved public shareholders and third parties and some were “baseless allegations based on imaginary fact patterns”.
Hindenburg said: “Adani failed to specifically answer 62 of our 88 questions.” Hindenburg is known for short-circuiting electric truck maker Nikola Corp and Twitter.
Adani also responded to Hindenburg’s allegations regarding the company’s auditors, stating that “all such auditors that we have engaged have been duly certified and qualified by the relevant statutory bodies”. His response comes just hours before the Indian market opens, when a $2.5 billion secondary sale of shares begins on the second day of subscription. Friday’s plunge pushed shares of Adani Enterprises below its issue price, raising doubts about its success.
In a separate statement on Sunday, Adani Group Chief Financial Officer Jugeshinder Singh said he was focused on selling the stock and was confident it would succeed. He also said his major investors have shown faith and remain invested. We are confident that the FPO (subsequent public offer) will also go through.
Written by : Vaishali Verma
