NEW DELHI: Billionaire Gautam Adani-promoted Adani Group on Wednesday said that they are shocked that Hindenburg Research published its report without making any attempt to contact them or verify the factual matrix.
The Hindenburg, a US-based investment research firm that specialises in activist short-selling, said its two-year investigation reveals that "the Rs 17.8 trillion (USD 218 billion) conglomerate has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.
Jugeshinder Singh, CFO of Adani Group, said that the report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.
He added that the timing of the report’s publication clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming Follow-on Public Offering (FPO) from Adani Enterprises, the biggest FPO ever in India.
“The investor community has always reposed faith in the Adani Group on the basis of detailed analysis and reports prepared by financial experts and leading national and international credit rating agencies. Our informed and knowledgeable investors are not influenced by one-sided, motivated and unsubstantiated reports with vested interests,” said Singh.
Short Seller Hindenburg Research in a report published on November 24 said that Adani Group’s 7 key listed companies at face value have 85% downside purely on a fundamental basis owing to sky-high valuations.
"Gautam Adani, founder and chairman of Adani Group, has amassed a net worth of roughly USD 120 billion, adding over USD 100 billion in the past 3 years largely through stock price appreciation in the group's seven key listed companies, which have spiked an average of 819 per cent in that period," the US researcher's report said.
It said that even before examining the evidence put forward in this report and based solely on financials taken directly from its companies, the Adani Group appears to be highly overvalued.
“Infrastructure firms are generally relatively sleepy, low growth, low multiple enterprises, yet valuation metrics of the Adani listed companies are comparable to the frothiest of high-growth tech companies. On a blended basis, compared to industry peers, we see 85%+ downside purely on fundamentals,” the report said.
Hindenburg also said that it holds short positions in Adani Group companies through U.S.-traded bonds and non-Indian-traded derivative instruments. It also said that Adani Group Companies’ use Of extreme leverage spells danger for Creditors.
“From a solvency perspective, multiple listed entities in the group are highly leveraged relative to industry averages: Four of 7 of these entities have negative free cash flow, indicating that the situation is worsening,” the report said.
Adani Group stocks fell up to 6% on Wednesday afternoon trade and Group’s market capitalisation came down by about Rs 45,000 crore.
Adani Group CFO, however, said that they are India’s leader in infrastructure and job creation. “Adani Group is a diverse portfolio of market-leading businesses managed by CEOs of the highest professional calibre and overseen by experts in various fields for several decades. The Group has always been in compliance with all laws, regardless of jurisdiction, and maintains the highest standards of corporate governance,” said Singh.
CreditSights, part of the Fitch Group, had in September last year described the group as "overleveraged". It later corrected some calculation errors but maintained that it had "concerns" over its debt.
Adani Group had responded to CreditSights' original report saying debt ratios of its companies "continue to be healthy and are in line with the industry benchmarks of the respective sectors".
(With PTI inputs)