On Sunday, Adani Group responded in-depth to a study by Hindenburg Research that had caused a $48 billion decline in its stock, claiming that it conforms with all local laws and has completed all required regulatory disclosures.
Without providing any supporting data, the company run by Gautam Adani, the richest man in Asia, said that the purpose of last week’s Hindenburg assessment was to allow the U.S.-based short-seller to book gains.
The stock market collapse has been a significant blow for 60-year-old Adani, a school dropout who ascended rapidly in former years to become the #3 richest man in the world before falling last week to number #7 on the Forbes rich list.
As its main firm, Adani Enterprises (ADEL.NS), moves forward with a $2.5 billion stock offering, Adani Group responds. Hindenburg’s report, which raised issues with debt levels and the usage of tax havens, has eclipsed this.
Adani stated in the 413-page response released late on Sunday that all transactions made by us with businesses that are classified as related entities under domestic laws and accounting principles have been properly disclosed.
This is fraught with conflict of interest and merely intended to feign a market in securities to allow Hindenburg, a self-avowed short seller, to illegally book substantial profits at the expense of several investors, it continued.
On its website, Hindenburg claimed that Adani’s answer essentially verified our findings and disregarded our main concerns.
It stated that it was short the Adani conglomerate through bonds sold on U.S. exchanges and derivatives traded abroad.
The Adani Group’s use of offshore organisations in tax havens including Mauritius and also the Caribbean islands was questioned in its report, which also noted that certain offshore assets and shell companies “covertly” possess stock in Adani’s listed companies.
Adani said that the research paper made false assertions about offshore entities with no supporting data.
According to Hindenburg, Adani’s lack of forthright and honest responses to the claims of the use of offshore corporations was telling.
Adani announced on Thursday that it is thinking about pursuing legal action against Hindenburg, to which the latter retorted on the same day by expressing its support for the idea.
Five of the seven major listed Adani companies, according to Hindenburg’s analysis, showed current ratios of less than 1, which the company said indicated a higher risk of short-term liquidity. The current ratio is a measure of liquid funds minus near-term obligations.
It claimed that seven Adani listed firms’ shares have an 85% negative due to what it termed sky-high valuations and that several important listed Adani companies have “significant debt” that has put the entire group on “precarious financial footing.”
Adani’s statement claimed its group firms have consistently delivered over the last ten years.
The Adani Group defended its practice of pledging the shares of its promoters, or prominent shareholders, by claiming that raising finance against stocks as collateral was a widely used practice around the world and loans are issued by large banks and financial institutions on the basis of careful credit analysis.
The firm also said that the country has a strong disclosure regime in place and that promoter pledged positions across portfolio businesses had decreased from more than 50% in some public stocks in March 2020 to less than 20% in last year’s December 2022.
It is well known that Hindenburg shorted Twitter and the maker of electric trucks Nikola Corp (NKLA.O).
In response to charges made by Hindenburg regarding the company’s auditors, Adani stated that each auditor hired by the group had received the proper certification and qualification from the applicable statutory bodies.
