NEW DELHI, Jan 30 (Reuters) – India’s Adani Group said on Sunday it complied with all local laws and made necessary regulatory disclosures to a Hindenburg Research report that caused a $48 billion loss in its shares.
The conglomerate, led by Indian billionaire Gautam Adani, Asia’s richest man, said last week that the Hindenburg report was aimed at allowing the US-based short seller to profit without citing evidence.
The stock market crash for Adani, 60, was a dramatic setback for the dropout, who had risen rapidly 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 comes in the form of its flagship company, Adani Enterprises (ADEL.NS)It is moving forward with $2.5 billion share sale. It was overshadowed by the Hindenburg report noted concerns on debt levels and the use of tax havens.
“All our transactions with entities classified as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us,” Adani said in a 413-page response published late on Sunday.
“It is fraught with conflicts of interest and is only intended to create a false market in securities so that the admitted short-seller Hindenburg can make huge financial gains through illegal means at the expense of countless investors.”
Hindenburg did not immediately respond to a request for comment on Adani’s response on Sunday.
The report questioned how the Adani Group used offshore entities in tax havens such as Mauritius and Caribbean islands, adding that some offshore funds and shell companies “secretly” held shares in Adani’s listed firms.
According to Adani, the investigative report made “misleading claims about offshore entities” without any evidence.
On Thursday, Adani said it was considering action against the Hindenburg, which responded the same day by saying it would welcome such action.
The Hindenburg report also noted that five of Adani’s seven major listed companies reported current ratios, a measure of liquid assets minus current liabilities, below 1, suggesting “increased short-term liquidity risk”.
He said the main listed Adani companies had “significant debt” that put the whole group in “uncertain financial condition” and that the shares of the seven Adani listed companies were 85% negative due to what he called “sky-high valuations”.
Adani’s response stated that its group companies have been “persistently under-leveraged” over the past decade.
Defending the practice of pledging shares of its promoters or major shareholders, Adani Group said that raising financing against shares as collateral is a global practice and loans are granted by large institutions and banks based on thorough credit analysis.
The group added that there is a robust disclosure system in place in India and promoter collateral positions among its portfolio companies have fallen to over 50% in some listed stocks in March 2020 and below 20% in December 2022.
‘Swim’
The Hindenburg report and its findings are seen as one of the biggest career challenges facing the billionaire, whose business interests range from ports, airports, mining and power to media and cement.
Adani’s response consisted of more than 350 pages of appendices containing excerpts from annual reports, public statements and previous court decisions.
Hindenburg said Adani sought answers to 88 questions in its report, but 65 of these related to issues disclosed in annual reports by Adani portfolio companies.
The rest, according to Adani, relate to public shareholders and third parties, and some are “baseless claims based on fictitious factual patterns”.
Hindenburg, electric truck maker Nikola Corp (NKLA.O) and Twitter said it has short positions in Adani companies through bonds traded in the U.S. and derivatives not traded in India.
Adani also responded to Hindenburg’s claims about the company’s auditors, saying “all these auditors engaged by us are duly certified and qualified by the relevant legislative bodies”.
His response comes hours before the Indian market opens, when the $2.5 billion secondary share sale begins its second day of subscription. Friday’s decline pushed Adani Enterprises shares below their issue price and raised doubts about its success.
In a separate statement on Sunday, Adani Group Chief Financial Officer Jugeshinder Singh said he was focusing on the share sale and was confident it would be successful. He also said his anchor investors had shown faith and continued to invest.
“We are confident that the FPO (consecutive public offer) will also go through,” he said.
Reporting by Aditya Kalra, Aditi Shah, Jayshree Upadhyay and Anirudh Saligrama in Bengaluru; Edited by Kevin Liffey and Alexander Smith
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