NEW DELHI, Jan 30 (Reuters) – India’s Adani Group on Sunday issued a detailed response to a Hindenburg Research report that triggered a $48 billion rout in its shares.
The group, led by Indian billionaire Gautam Adani, Asia’s richest man, said last week’s Hindenburg report, without citing sources, that the U.S.-based short seller intended to book gains.
The stock market crash is a dramatic setback for Adani, 60, a school dropout who rose in recent years to become the world’s third-richest person before landing seventh place on the Forbes rich list last week.
Adani Group’s answer is its flagship Adani Enterprises (ADEL.NS), moving forward with a $2.5 billion stock sale. This was overshadowed by Hindenburg’s report, which flagged concerns about debt levels and the use of tax havens.
“All transactions entered into by us with entities that qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us,” Adani said in a 413-page reply issued late on Sunday.
“It is fraught with conflict of interest and Hindenburg, an admitted short-seller, only aims to create a false market in bonds to book massive financial gains through misguided means at the expense of countless investors,” it added.
Hindenburg said on its website that Adani’s response “largely confirmed our findings and ignored our key questions”. The Adani Group reiterated its short position in US bonds and Indian non-traded derivatives.
Its report questioned how the Adani group used offshore companies in tax havens such as Mauritius and the Caribbean islands, and some offshore funds and shell companies “secretly” held stakes in Adani’s listed companies.
The audit report, Adani said, made “false claims around offshore companies” without any evidence.
Hindenburg said he found Adani’s lack of direct and transparent answers.
Adani said on Thursday it was considering action against the Hindenburg, and responded the same day by saying it welcomed such action.
Hindenburg’s report also said that five of the seven major listed Adani companies had current ratios below 1, suggesting “increased short-term liquidity risk”.
It said major listed Adani companies have “substantial debt” which puts the group as a whole in “secure financial condition” and shares of seven Adani listed companies have retreated 85% because of what it called “sky-high valuations”.
In Adani’s response, its group companies have been “constantly de-leveraging” over the past decade.
The Adani Group has defended its practice of pledging shares of its promoters or major shareholders, saying raising funds against shares is a common practice globally and loans are granted by large companies and banks based on thorough credit analysis.
The group said a robust disclosure system is in place in India and its promoter commitment levels across portfolio companies ranged from more than 50% in some listed stocks in March 2020 to less than 20% in December 2022.
‘travel through’
The Hindenburg Report and its aftermath are seen as one of the biggest industrial challenges facing the billionaire whose business interests range from ports, airports, mining and power to media and cement.
Adani’s response contained more than 350 pages of attachments, including annual reports, public disclosures and previous court rulings.
Hindenburg said Adani had sought answers to 88 questions in its report, but 65 of them related to disclosures by Adani portfolio companies in their annual reports.
The rest, Adani said, were related to public shareholders and third parties, and some were “baseless allegations based on fictitious forms of truth”.
“Adani did not specifically answer 62 of our 88 questions,” Hindenburg said.
Hindenburg is best known for electric truck maker Nicola Corp (NKLA.O) And Twitter.
Adani responded to Hindenburg’s allegations regarding the company’s auditors by saying, “All auditors engaged by us are duly certified and qualified by the relevant statutory bodies.”
The response comes hours before the Indian market opens, as the $2.5 billion secondary share sale begins its second day of subscription. Friday’s decline took Adani Enterprises shares below their issue price, raising doubts about its success.
In a separate statement on Sunday, Adani Group Chief Financial Officer Jukeshinder Singh said he was focused on the share sale and hoped it would be successful. Its anchor investors have shown confidence and continued to invest, he said.
“We believe the FPO (follow-on public offer) will also go through,” he said.
Aditya Kalra, Aditi Shah, Jayshree Upadhyay and Anirudh Saligrama report in Bangalore; Editing by Kevin Liffey, Alexander Smith and Muralikumar Anantharaman
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