Hindenburg Research disclosed that it has short positions in Adani Group, charging the conglomerate of exploiting offshore tax havens improperly and raising concerns about its high debt levels, which on Wednesday reduced investor worth by $11 billion.
The organisation, which is managed by Gautam Adani, the third-richest person in the world according to Forbes, denied the U.S. short-sellers’ allegations as unfounded and claimed they were timed to harm its brand before a significant share offering.
Adani Enterprises (ADEL.NS), the group’s flagship company, will begin the largest public second share offering in the nation on January 27 with the goal of raising $2.5 billion to support capital expenditures and pay down some debt.
The hedge fund Hindenburg, famous for shorting Twitter and the producer of electric trucks Nikola Corp (NKLA.O), said it has short holdings in Adani entities through foreign- and domestic-traded derivative products.
The Adani Group’s use of offshore organisations in tax havens including Mauritius and the Caribbean Islands was criticised in its scathing research report, which also claimed that specific offshore funds & shell companies connected to the Adani Group “surreptitiously” possess stock in Adani listed companies.
In addition, it said that seven of the listed Adani companies’ shares have an 85% negative on a fundamental principle because of what it dubbed sky-high valuations and “significant debt” that has left the entire group on shaky financial footing.
Jugeshinder Singh, the chief financial officer of Adani Group, stated in a statement that the business was astonished by the report and described it as a nasty amalgam of stale, unfounded, and disproven charges combined with selective falsehoods.
Without addressing the specific accusations made by Hindenburg, the business asserted that The Group had always complied with all regulations.
The timing of the report’s release shows a brazen, malicious purpose to damage the Adani Group’s reputation with the primary goal of hindering the impending follow-on public listing from Adani Enterprises, it continued.
Adani Transmission (ADAI.NS), Adani Ports & Special Economic Zone (APSE.NS), and Adani Enterprises all had declines of at least 9% in share price.
The market capitalization of the seven group companies that are publicly traded fell by $10.73 billion overall.
Tradeweb data showed the price of U.S. dollar-denominated bonds approved by Adani Green Energy (ADNA.NS) fell by almost 15 cents to just below 80 cents on the dollar, while the price of international bonds given by Adani Ports as well as Special Economic Zone; Adani Transmission & Adani Electricity also decreased.
The report was released on Wednesday, the same day that anchor investors began bidding for Adani’s subsequent share sale.
The business noted in a stock exchange filing that participation included Maybank Securities as well as the Abu Dhabi Investment Authority, among many others.
According to Hindenburg, the study report was based on a two-year investigation that entailed interacting with numerous people, including ex-Adani Group executives, and document examination.
Debt issues have been consistently disregarded by Adani. On January 21, Singh stated to the press that no one had expressed concerns about debt. None, not even one investment.
Hindenburg’s research showed five out of seven significant listed Adani companies had current ratios below 1, which is a measurement of liquid assets minus short-term liabilities. This, based on the belief of the short seller, indicated a raised short-term liquidity risk.