- Adani issued a 413-page rebuttal to the Hindenburg report
- The US short-seller report sparked a fall in Adani shares
- Adani said that in compliance with laws, disclosure is required
- Adani CFO confident $2.5 bln share sale will succeed
NEW DELHI, Jan 30 (Reuters) – India’s Adani Group issued a detailed response on Sunday to a Hindenburg Research report that sparked a $48 billion loss in its stocks, as it complies with all local laws and makes the necessary regulatory disclosures.
The conglomerate led by Asia’s richest man, Indian billionaire Gautam Adani, said the Hindenburg report last week was intended to enable the US-based short seller to book profits, which did not cite evidence.
For 60-year-old Adani, the stock market crash was a dramatic setback for a school dropout who had risen rapidly in recent years to become the world’s third-richest man, before falling last week to ranking seventh on the Forbes rich list.
Adani Group’s response comes as its parent company, Adani Enterprises ( ADEL.NS ), pushes ahead with a $2.5 billion share sale. This was covered in Hindenburg’s report, which noted concerns about debt levels and the use of tax havens.
“All transactions we enter into with entities that qualify as ‘related parties’ under Indian laws and accounting standards have been disclosed by us,” Adani said in a 413-page response released on Sunday
“It is full of conflict of interest and is only intended to create a false market in securities to enable Hindenburg, an admitted short seller, to book huge financial gains by misrepresenting at the expense of countless investors,” it added.
Hindenburg did not immediately respond to a request for comment on Adani’s response on Sunday.
Its report questioned how the Adani Group used offshore entities in tax havens such as Mauritius and the Caribbean islands, adding that some offshore funds and shell companies “in tago” has its own stock in Adani’s listed companies.
The research report, Adani said, made “misleading claims around offshore entities” without any evidence.
Adani said on Thursday it was considering taking action against Hindenburg, responding the same day by saying it welcomed such a move.
Hindenburg’s report also said five of Adani’s seven key listed companies reported current ratios, a measure of liquid assets minus near-term liabilities, of less than 1. which suggested “a high short-term liquidity risk”.
It said Adani’s main listed companies had “huge debt” that put the entire group on a “precarious financial footing” and that the shares of Adani’s seven listed companies had 85 % failure due to so-called “sky-high valuations”.
Adani’s response said that over the past decade, its group companies have “always de-leveraged”.
Defending its practice of pledging shares to its promoters – or main shareholders – the Adani Group said that raising financing against shares as collateral is a common practice around the world and loans are given of large institutions and banks behind the full credit analysis.
The group added that there is a robust disclosure system in place in India and promoter pledge positions across portfolio companies have fallen from more than 50% in March 2020 in some listed stocks. , to less than 20% in December 2022.
The Hindenburg report, and its fallout, is seen as one of the biggest career challenges to face the billionaire, whose business interests range from ports, airports, mining and power to media and cement.
Adani’s response includes more than 350 pages of annexes that include snippets from annual reports, public disclosures and earlier court decisions.
Hindenburg, Adani said, sought answers to 88 questions in its report, but 65 of them related to matters disclosed by Adani portfolio companies in annual reports.
Some, says Adani, are related to public shareholders and third parties, and others are “baseless allegations based on imaginary standards of truth”.
Hindenburg, known for short-lived electric truck maker Nikola Corp ( NKLA.O ) and Twitter, said it had short positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments. .
Adani also responded to Hindenburg’s allegations related to the company’s auditors, saying that “all these auditors associated with us are certified and qualified by the relevant statutory bodies.”
The answer to this comes just a few hours before the opening of the Indian market, when the $ 2.5 billion sale of the second part began on the second day of subscription. Friday’s blowout took Adani Enterprises shares below the issue price, raising doubts about its success.
In a separate statement on Sunday, Adani Group chief financial officer Jugeshinder Singh said it was focused on the share sale and was confident it would succeed. He also said that its anchor investors showed faith and remained invested.
“We are confident that the FPO (follow-on public offering) will also go ahead,” he said.
Reporting by Aditya Kalra, Aditi Shah, Jayshree Upadhyay and Anirudh Saligrama in Bengaluru; Editing by Kevin Liffey and Alexander Smith
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