Tuesday, March 21, 2023

Adani Group shares are witnessing high volatility amid a battle of words between the company and Hindenburg Research

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  • All nine Adani Group stocks experienced high volatility in trading Monday as the battle between the company and New York-based Hindenburg Research continued to escalate.
  • The Adani Group’s response over the weekend primarily called the Hindenburg Research report “baseless allegations and a misleading narrative.”
  • The war of words between Adani Group and Hindenburg Research escalated Monday, with the short seller saying, “Fraud cannot be covered up by nationalism or an inflated response that ignores every major allegation we’ve put forward.”

All nine Adani Group stocks experienced high volatility in trading Monday as the war of words between the group and New York-based short seller Hindenburg Research continued. The combined market capitalization of the nine Adani Group companies has dropped by ₹5.57 lakh crore since January 24, when the report was released. On Monday, five of the nine shares of Adani Group companies closed in the red.

Shares of Adani Enterprises closed down 4.76% on Monday. However, at ₹2,893, the company’s share price is still 7% below the lower limit of the follow-up public offer (FPO) price range of ₹3,112. By the end of Friday, the first day of the FPO, only 1% had been subscribed.

The Adani Group’s response over the weekend primarily called the Hindenburg Research report “baseless allegations and a misleading narrative.”

“Out of the 88 questions asked by Hindenburg, it is pertinent to note that 68 refer to the matters which have already been duly disclosed by the Adani Group companies in their respective annual reports,” the Adani Group said in its statement. . It also said 16 questions concern public shareholders and their funding sources, while the remaining four are “baseless allegations”.

Early Monday morning, Hindenburg Research hit back by issuing a response, proverb“Our report alleged that the Adani Group has engaged in billions of dollars in suspicious transactions involving its chairman’s brother, Vinod Adani, and its labyrinth of offshore shell entities.”

In response, Adani Group said, “We are not aware of and do not need to be aware of their ‘source of funds’.”

In its response, Hindenburg Research also outlined two examples of conflict of interest – the first of a $253 million loan from a Mauritius entity of which Vinod Adani is a director, and the second of a $692.5 million investment from another Mauritius entity which is overseen by the head of the private family investment agency of Adani Group.

All in all, the company says it has identified 38 empty entities in Mauritius, controlled by Vinod Adani or other close associates of the Adani Group, in a survey it conducted over the course of two years.

Company Current market price Change Change in market capitalization
Adam Green ₹1,189 -20% – ₹47,085 Crore
Adani total gas ₹2,342.4 -20% – ₹64,405 Crore
Adani transmission ₹1,708.2 -15.19% – ₹34,129 Crore
Adani Gates & SEZ ₹597 0.01% ₹13 crore
Ambuja cements ₹387.5 1.85% ₹1,398 crore
ACC ₹1,904.15 1.3% ₹459 crore
Adani Enterprises ₹2,892.85 4.76% ₹14,950 crore
Adani power ₹235.55 -5% – ₹4,782 crore
Adani Wilmar ₹491 -5% – ₹3,359 crore

Source: NSE, current market price at 3:30 pm, 30 January 2023

Since January 24, the combined market capitalization of the group has fallen by ₹5.57 lakh crore, with a fall of ₹3.22 lakh crore on Friday alone.

Adani-Hindenburg timeline – where it all began

The battle between Adani and Hindenburg began on Jan. 24, when the New York-based shortseller kicked off with a report detailing how Gautam Adani, then the world’s third-richest man, carried out the “biggest scam in the company’s history.” committed.

The main allegations in the Hindenburg Research report included inventory manipulation, accounting fraud and significant debt.

“Our report outlined numerous irregularities and connections between suspected offshore parking companies and Adani promoters, raising important questions about whether promoter holdings were fully disclosed. Adani’s response claimed it just doesn’t know who the biggest public holders are,” Hindenburg said.

Earlier in August 2022, CreditSights, a Fitch Group company, came out with a report stating that the Adani Group is “deeply overstretched”. The research firm subsequently softened its remarks, but maintained its main conclusion regarding the company’s debts.

From ‘stock manipulation’ to ‘attack on India’ – the constant back and forth between Adani and Hindenburg

While the Hindenburg Research report kicked off the fight between David and Goliath, the Adani Group issued a statement the next day, calling the report “a malicious combination of selective information and old, baseless and discredited allegations.”

“The timing of the publication of the report clearly betrays a brazen, malicious intent to undermine the reputation of the Adani Group with the primary aim of damaging the upcoming public offering of Adani Enterprises, the largest-ever FPO in India,” said Jugeshinder Singh, chief financial officer, Adani Group, on January 25.

In response to the statement, Hindenburg hit back, saying it would welcome any legal action from the Adani Group.

“We fully support our report and believe that any legal action taken against us would be futile. If Adani is serious, it should also file a lawsuit in the US where we operate. We have a long list of documents we would demand in a legal discovery process,” said the New York-based investment research firm said in a statement.

The Adani Group had initially responded with a presentation outlining its accountants and dismissing Hindenburg Research’s allegations. However, it then posted a 413-page response revealing its financials and responding to the research firm’s allegations.

The company also said the themes of the Hindenburg report include “manipulative presentation of matters already in the public domain,” and “contempt for Indian institutions.”

Hindenburg reacted quickly, however, proverb “Fraud cannot be covered up by nationalism or an inflated response that ignores every major allegation we have made.”

Adani Group does not yet know the extent of short selling

In an interview with the Economic times, said Adani Group CFO Jugeshinder Singh, despite the bear attack, the company is proceeding with its FPO as planned. Singh also said the company does not yet know the tools used to short the company’s stock, or the magnitude of short selling due to market slowdowns.

However, Singh said the company’s institutional investors are not selling their shares in the company. “They fully support us based on our encounters and interactions with them. Our anchor book is oversubscribed. So we are very confident that we can close the gap that the retail segment will create,” said Singh.

The retail portion of Adani Enterprises FPO is worth ₹ 7,000 crore, and so far subscribed at 2% as of 12 noon while the total subscription across all categories is at 1%. With the FPO closing tomorrow, January 31, it will be interesting to see today’s subscription momentum.

$ADANIENT.NSE Response to $HindenburgReport A response of more than 400 pages, which indeed clears all doubts.Tomorrow’s focus should be on the most beaten areas in the past two business days.Banks should be on focus.A recovery expected as stated in PMA. Yesterday’s Tweet.🙏👍

— (@AyushGarg1997) January 29, 2023


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