Adani Group denies “brazen stock manipulation and accounting fraud” accusations
Adani Group has denied allegations of being overleveraged and involved in “brazen stock manipulation and accounting fraud scheme over the course of decades” made by US-based short-seller Hindenburg Research. The accusations, which were published in a report on January 24, have resulted in a significant drop in the stocks of Adani companies in the past two trading days.
In response, Adani Enterprises, the flagship company of the Adani Group, released a “notice to investors” in its follow-on public offer (FPO) on Saturday, stating that it has “categorically denied all the allegations made in the report and considers the same to be misconceived and baseless.” The FPO, which runs from January 27-31, will proceed as planned, with no changes to the price band, the company said. The company aims to raise as much as $2.7 billion.
In the 18-page presentation filed with the bourses on Friday evening, the Adani Group addressed the 21 questions raised by Hindenburg on related party transactions and court cases involving the company. The group stated that these questions were nothing but public disclosures made by group companies as early as 2015. The company also addressed allegations of accounting lapses, stating that out of the group’s nine listed companies, eight were audited by one of the “Big 6” leading global audit firms.
The Adani Group also dismissed concerns of being overleveraged, stating that about 100 of the companies that account for almost all of the group’s EBITDA were rated by 10 global and domestic rating agencies. The group’s nine listed companies were all rated A and above by domestic rating agencies, implying that the companies were in a financially sound position. The overall promoter leverage was less than 4% of promoter holding, the presentation stated.
In its report, Hindenburg Research had also disclosed that it has taken a short position against Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments. Adani Enterprises is selling shares in the FPO at a price band of $42.57 – $44.23 apiece. The stock ended at $36.90 on the BSE Friday, down 18.5%.
Despite the accusations and the drop in stock prices, the Adani Group remains confident in the success of its FPO and maintains that its stakeholders, including bankers and investors, have full faith in the offering. It remains to be seen how the market will respond to the company’s response to the Hindenburg report and whether it can recover from the recent drop in stock prices.
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