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Adani Group’s loss surges to $70 billion as its combat with Hindenburg intensifies

Adani group shares continued their sharp falls on Monday as the Indian conglomerate’s rebuttal of the U.S. short seller’s criticism failed to pacify investors, pushing stock market losses for the companies to nearly $70 billion in a span of over three days

by The Business Pinnacle
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Adani Group further shot back with a 413-page rebuttal on Sunday night

Adani Group, run by Asia’s richest man Gautam Adani, has been at odds with Hindenburg Research and responded on Sunday to a report from the short sellers that raised issues with the company’s debt levels and usage of tax havens. Adani asserted that it has made the required regulatory disclosures and conforms with all local regulations. Adani Enterprises, which is facing a critical test this week with a follow-on share offering, plummeted 2.5%, reversing its initial gains of as much as 10% and settling considerably below the offer price.

Source: www.adanienterprises.com

Last week, Hindenburg released a report in which it charged the Adani group with “brazen” market manipulation and financial wrongdoing. The broad charges of alleged business malfeasance mentioned a labyrinth of offshore shell companies managed by the Adani family in tax havens, including the Caribbean, Mauritius, and the United Arab Emirates.

By using derivative instruments sold outside of India and US-traded bonds, Hindenburg claimed to have taken a short position in Adani’s enterprises.

Some of their primary claims are listed below:

  • Found 38 shell companies in Mauritius that Vinod Adani, Adani’s brother, or his close friends own, in addition to companies he already controls in other tax havens.
  • The Adani Group has previously been the subject of four significant government investigations relating to charges of fraud. The offshore shell network appears to be utilised for earnings manipulation.
  • Adani Enterprises and Adani Total Gas Ltd. appear to be audited by a small firm that has only audited one other listed corporation, has no active website, four partners, and eleven staff.
  • Considering that Adani Enterprises alone has 156 subsidiaries and many more joint ventures, the auditor “hardly seems capable of difficult audit work.”The conglomerate’s public disclosures, according to Adani, address about 65 of the 88 points made by Hindenburg. Adani also referred to the short seller’s actions as “nothing short of a premeditated securities fraud under applicable law.” In a statement, the group reaffirmed its commitment to “exercising our rights to pursue remedies to safeguard our interests before the authorised authorities.”

On Monday, the stock prices of Adani Transmission, Adani Total Gas, Adani Green Energy, Adani Power, Adani Wilmar, and Adani Ports and Special Economic Zone decreased by 4.2% to 20%.

Weak investor enthusiasm entered the second day of Adani Enterprises’ $2.5 billion secondary share offering. At 2,686 rupees, the stock was trading 13.6% below the lower limit of the offer price band of 3,112 rupees. 3,276 rupees is the upper band.

According to preliminary information from stock exchanges on Monday, Adani Group has now received offers for 687,840, or 1.5%, of the 45.5 million shares that are up for sale. On Tuesday, the agreement is finalised.

According to the data, neither domestic nor international institutional investors, nor mutual funds, have placed any offers thus far.

Hemang Jani, stock strategist at Motilal Oswal Financial Services, said: “Retail participation is expected to have a shortfall with current market prices still trailing the offer price and sentiment taking a knock due to the Hindenburg issue.”

Even though there is a chance the share sale won’t go through, it will be important to watch to see how institutional investors participate right now.

In a statement released on Saturday, Adani Group informed Reuters that the sale remains on schedule at the planned issue price, even as sources said bankers of the country’s largest secondary share sale were considering extending the timeline beyond Jan. 31, or tweaking the price due to the fall in its share price.

According to Indian legislation, the share offering must receive a minimum of 90% subscription; otherwise, the issuer is required to repay the full cost. Among the investors who submitted bids for the anchor portion of the offering were Maybank Securities and the Abu Dhabi Investment Authority.

In a statement, Maybank said that because the subscription to Adani Group’s offer was entirely covered by client funds, “there is no financial impact” on it.

Debt, de-leveraging

According to MSCI, the company that creates indexes, it was monitoring the variables that “may effect the eligibility of the relevant assets” in MSCI indexes and was looking for market players’ opinions on Adani.

In its response on Sunday, Adani emphasized its connections to domestic and foreign banks and boasted about its access to a variety of funding sources and structures, naming European lenders like BNP Paribas, Credit Suisse, and Deutsche Bank as well as American banks Citigroup and JPMorgan Chase & Co.

Hindenburg responded to Adani Group’s counterargument by claiming that it “essentially verified our findings and ignored our crucial questions.”

The collapse of the stock market is a severe defeat for Adani Group. The astonishing growth of the school dropout included gains of more than 1,500% in some of his group stocks over three years, making him the world’s third richest man before he stumbled to rank eighth on the Forbes list on Monday.

Due to what Hindenburg referred to as “sky-high values,” shares in seven of Adani Group’s publicly traded companies have an 85% downside. Adani companies also have “significant debt,” according to Hindenburg.

In its answer, Adani claimed that its group firms had “consistently de-levered” during the previous ten years.

Change for Worse

Meanwhile, a decline in the dollar bonds of the Adani Group accelerated on Monday. Adani Ports & Special Economic Zone Ltd.’s 2027 note declined 5 cents, Bloomberg-recorded data show.

Several bonds issued by the group, consisting of the 2032 note of Adani Ports and Special Economic Zone Ltd., have plummeted lower than the 70 cents-on-the-dollar mark typically regarded as distressed.

Adani Enterprises

Source: www.adani.com

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