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India’s Adani Group Rebuts Hindenburg Report, Claims To Have Made All Required Disclosures

India’s Adani Group Rebuts Hindenburg Report, Claims To Have Made All Required Disclosures
India's Adani Group released a comprehensive rebuttal to a Hindenburg Research report that triggered a $48 billion drop in its stock, claiming that the conglomerate companies with all local laws and have made all required regulatory disclosures.
The conglomerate led by Asia's richest man, Indian billionaire Gautam Adani, claimed last week's Hindenburg report was intended to allow the U.S.-based short seller to book profits, but provided no evidence.
The stock market crash has been a dramatic setback for Adani, 60, a school dropout who rose quickly in recent years to become the world's third richest man before falling last week to seventh on Forbes' rich list.
Adani Group's response comes as its flagship company, Adani Enterprises, prepares to sell $2.5 billion in stock. Hindenburg's report, which raised concerns about debt levels and the use of tax havens, overshadowed this.
"All transactions entered into by us with entities who qualify as 'related parties' under Indian laws and accounting standards have been duly disclosed by us," Adani said in the 413-page response issued late on Sunday.
"This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors," it added.
On its website, Hindenburg stated that Adani's "response largely confirmed our findings while ignoring our key questions." It reiterated its short position in the Adani group via US-traded bonds and non-Indian-traded derivative instruments.
Its report questioned how the Adani Group used offshore entities in tax havens such as Mauritius and the Caribbean islands, adding that certain offshore funds and shell companies "secretly" own stock in Adani's listed companies.
Adani claimed that the research report made "misleading claims about offshore entities" without providing any evidence.
Hindenburg said it "found Adani's lack of direct and transparent answers" on the allegations of use of offshore entities "telling".
Adani said on Thursday that it is considering legal action against Hindenburg, which responded the same day by saying that such a move would be welcomed.
According to the Hindenburg report, five of seven most important listed companies of the Adani Group have reported current ratios, a key performance indicator of liquid assets minus near-term liabilities, of less than 1 which the report claimed suggested "a heightened short-term liquidity risk".
The report further claimed that the key listed Adani companies had "substantial debt" which has pitted the entire conglomerate on a "precarious financial footing" and that shares in seven Adani listed companies have an 85% downside due to what it called "sky-high valuations".
According to Adani's response, its group companies have "consistently de-levered" over the last decade.
In defending its practice of pledging its promoters' - or key shareholders' - shares as collateral, the Adani Group stated that raising financing against shares as collateral is common practice globally, and loans are granted by large institutions and banks based on thorough credit analysis.
According to the group, there is a robust disclosure system in place in India, and its promoter pledge positions across portfolio companies have dropped from more than 50% in some listed stocks in March 2020 to less than 20% in December 2022.
The Hindenburg report and its aftermath are viewed as one of the billionaire's most significant career challenges, with interests ranging from ports, airports, mining, and power to media and cement.
Adani's response included over 350 pages of annexes containing excerpts from annual reports, public disclosures, and previous court rulings.
Adani stated that Hindenburg sought answers to 88 questions in its report, but 65 of them were related to matters disclosed by Adani portfolio companies in annual reports.
The rest, Adani said, relate to public shareholders and third parties, and some were "baseless allegations based on imaginary fact patterns".
Hindenburg said "Adani failed to specifically answer 62 of our 88 questions."
Hindenburg is well-known for having shorted Tesla Motors and Twitter.
Adani also addressed Hindenburg's allegations about the company's auditors, stating that "all of these auditors who have been engaged by us have been duly certified and qualified by the relevant statutory bodies."
Its response comes just hours before the India stock exchange opens, when the $2.5 billion secondary share sale begins its second day of subscription. Adani Enterprises' shares fell below the issue price on Friday, raising doubts about the company's success.
Adani Group's chief financial officer, Jugeshinder Singh, said in a separate statement on Sunday that the company is focused on the share sale and is confident it will be successful. He also stated that its anchor investors have shown faith and continue to invest.
"We are confident the FPO (follow-on public offering) will also sail through," he said.

Christopher J. Mitchell

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