Indian share market witnessed a massive bloodbath when shares ended more than 1% lower to hit a three-month low on Friday as a short-seller attack on Adani Group companies triggered a selloff in its shares and of the banks, wiping off a combined $48 billion in the conglomerate’s market value over two days.
The Nifty 50 index was down 1.61% at 17,604.35 at close, while the S&P BSE Sensex (.BSESN) fell 1.45% to 59,330.90, trimming some losses in the last few minutes of trading after having hit over 2% lower earlier in the session.
Stocks of Adani Transmission and Adani Green Energy nosedived 20% each, while Adani Power dropped 5%, with all three hitting their lower circuit. The sell-off in equities was triggered by U.S. short-seller Hindenburg Research’s report on Wednesday that flagged concerns about the Adani Group’s debt levels and use of tax havens.
The world’s fourth-richest man Gautam Adani is now the target of Hindenburg Research, a US based short seller, which characterized his meteoric rise as the “the largest con in corporate history” in its recent report. The report said the Adani Group was involved in “brazen” market manipulation, accounting fraud, used offshore shells for money laundering and siphoned from listed companies.
“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,” Hindenburg said in its report. “Compared to industry peers, we see 85%+ downside purely on fundamentals.”
While the Adani Group has refuted the report — published on the day it was opening a $2.5 billion share sale for institutional investors — the charges are at best a reputational hit to the nascent global ambitions of the once-shy, self-made billionaire. Adani Group said that they have always been in compliance with all laws and that they maintain the highest standards of corporate governance. Adani Group is exploring legal options to counter this selective attack by Hindenburg Research.
However, this report has created a lot of noise, which may turn away global investors from whom Adani is seeking broader legitimacy and overseas funding. Adani Enterprises’ Rs. 20,000 FPO is set to open on January 27 and it remains to be seen whether the Hindenburg report will have an impact on the share sale. The FPO will remain open for subscribers till 31 January.
After hearing various claims of ‘remedial action’ by the Adani Group, Hindenburg has responded to the same and ‘welcomed’ a lawsuit. As per an official tweet, Hindenburg Research has said that it stands by its report and any legal action taken against the organization will be ‘meritless.’
Hindenburg Research even dared Adani Group to file a case in the USA, where it operates.
Is it a Hybrid Warfare to diminish Indian Economy?
This brazen attack on Adani group is not a mere coincidence. They will go after everyone who they know is gonna be the key driver of Indian resurgence and renaissance under PM Modi’s able leadership. It is certainly not about Adani but an attack on home grown entrepreneurs, their confidence and belief in India.
Hindenburg Research had taken short position on Adani group companies and released it report at a crucial time. That is why they played through cdx to coincide with offering by Adani group. There game is very simple: identify a large liquid group like Adani, time their utterly biased and motivated Research and release it at such a time to demolish the credibility of the group.
Hindenburg has timed it with the follow on public offering opening day issue of 20,000 Crores. It seems their idea was to create panic so that stock falls, issue devolves and they cover their shorts.
Check this report by Credit Suisse, it shows that Adani Group’s bank exposure is 18% of 2.2 lac crore, which also stayed steady for past 5 years. Several foreign banks have major exposure to Adani group, and this has been stated by the Adani himself, who said that “almost 50% of our borrowing is now through international bonds.”
Even the CLSA came out with the report that said that exposure of private banks to the Adani Group is very low and exposure levels are very much manageable.
It is indeed a hit-job by Hinderburg Research on Adani Group. They have nothing credible to claim anything with confidence, this attack is on reputation and goodwill alongwith fishing expedition. However, this needs to be investigated that on whose behest this attack has been orchestrated.
At the same time we maintain that asking questions is everyone’s right. But finding questions outlandish, ridiculous, defamatory and hence not responding or not responding in manner/style/content you want is the right of the person being questioned. Over an above, they are asking Adani group to file suit in the USA. This is a very well thought out and planned attack and same is evident in their statement.
India has been progressing well, and it has gained a reputation of the fastest developing large economy in the World. We are witnessing a massive influx of FDI and manufacturing companies in India in last couple of years, and this is certainly not going down well with a certain section. They are trying to spread the negative sentiments about Indian Economy and Indian business houses, and want to diminish the Indian economic growth at any cost.
