On Wednesday, Hindenburg Research announced that it holds short positions in Adani Group companies through U.S.-traded bonds and non-Indian-traded derivative instruments. This caused shares of companies in the Indian conglomerate to drop.
In their report, Hindenburg stated that seven Adani listed companies have an 85% downside on a fundamental basis due to sky-high valuations. The short-seller also pointed out that “key listed Adani companies have also taken on substantial debt” which has “put the entire group on precarious financial footing”.
Adani Group, which is controlled by the world’s third richest man Gautam Adani, has faced concerns about elevated debt for some time. The Hindenburg report comes at a time when Adani Enterprises is planning to raise $2.5 billion in India’s largest follow-on public offering this week.
Shares in Adani Ports (NSE: ADANIPORTS) And Special Economic Zone (NSE: ADANIPORTS) slid 4.8% on Wednesday to their lowest level since mid-July while Adani Enterprises, the group’s flagship company, dropped 2.5% to a 12-week low.
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Adani Enterprises (NSE: ADANIENT) shares had surged 125% in 2022, while other group companies, including power and gas units, rose more than 100%. However, Adani Group’s total gross debt in the financial year ending March 31, 2022, rose 40% to 2.2 trillion rupees.
CreditSights, part of the Fitch Group, described the group last September as “overleveraged” and said it had “concerns” over its debt. While the report later corrected some calculation errors, CreditSights said it maintained its concerns over leverage.
Hindenburg Research is known for shorting companies, such as electric truck maker Nikola Corp (NKLA.O) and Twitter, though it later reversed its position in Twitter.
