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Adani loses Asia’s richest crown as stock rout deepens to $84 billion
BENGALURU, Feb 1 (Reuters) – Shares in Indian tycoon Gautam Adani’s conglomerate plunged again on Wednesday as a rout in his companies deepened to $84 billion in the wake of a U.S. short-seller report, with the billionaire also losing his title as Asia’s richest person.
Wednesday’s stock losses saw Adani slip to 15th on Forbes rich list with an estimated net worth of $76.8 billion, below rival Mukesh Ambani, the chairman of Reliance Industries Ltd (RELI.NS) who ranks ninth with a net worth of $83.6 billion.
Before the critical report by U.S. short-seller Hindenburg, Adani had ranked third.
The losses mark a dramatic setback for Adani, the school-dropout-turned-billionaire whose business interests stretch from ports and airports to mining and cement. Now, the tycoon is fighting to stabilise his businesses and defend his reputation.
It comes just a day after the group managed to muster support from investors for a $2.5 billion share sale for flagship firm Adani Enterprises on Tuesday, in what some saw as a stamp of investor confidence.
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The report by Hindenburg Research last week alleged improper use by the Adani Group of offshore tax havens and stock manipulation. It also raised concerns about high debt and the valuations of seven listed Adani companies.
The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.
Shares in Adani Enterprises (ADEL.NS), often described as the incubator of Adani businesses, plunged 30% on Wednesday. Adani Power (ADAN.NS) fell 5%, while Adani Total Gas (ADAG.NS) slumped 10%, down by its daily price limit.
Adani Transmission (ADAI.NS) was down 6% and Adani Ports and Special Economic Zone (APSE.NS) dropped 20%.
Adani Total Gas, a joint venture with France’s Total (TTEF.PA), has been the biggest casualty of the short seller report, losing about $27 billion.
“There was a slight bounce yesterday after the share sale went through, after seeming improbable at a point, but now the weak market sentiment has become visible again after the bombshell Hindenburg report,” said Ambareesh Baliga, a Mumbai-based independent market analyst.
“With the stocks down despite Adani’s rebuttal, it clearly shows some damage on investor sentiment. It will take a while to stabilise,” Baliga added.
SCRUTINY
Underscoring the nervousness in some quarters, Bloomberg reported on Wednesday that Credit Suisse (CSGN.S) had stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients.
Deven Choksey, managing director of KRChoksey Shares and Securities, said this was a big factor in Wednesday’s share slides.
Credit Suisse had no immediate comment.
Scrutiny of the conglomerate is stepping up, with an Australian regulator saying on Wednesday it would review Hindenburg’s allegations to see if further enquiries were warranted.
Data also showed that foreign investors sold a net $1.5 billion worth of Indian equities after the Hindenburg report – the biggest outflow over four consecutive days since Sept. 30.
Headaches for the Adani Group are expected to continue for some time.
India’s markets regulator, which has been looking into deals by the conglomerate, has said it will add Hindenburg’s report to its own preliminary investigation.
State-run Life Insurance Corporation (LIC) (LIFI.NS)said on Monday it would seek clarifications from Adani’s management on the short seller report. The insurance giant was, however, a key investor in the Adani Enterprises share sale.
Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group.
Reporting by Chris Thomas in Bengaluru and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran and Aditya Kalra; Editing by Edwina Gibbs and Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
Adani’s $2.5 bln share offer backed by investors, despite short-seller attack
MUMBAI, Jan 31 (Reuters) – Indian billionaire Gautam Adani’s $2.5 billion share sale inched closer to full subscription on Tuesday as investors pumped in funds after a tumultuous week for his group in which its stocks were pummeled by a scathing short-seller report.
The secondary share sale of flagship Adani Enterprises (ADEL.NS) was subscribed 93% on Tuesday, including the anchor investor portion, Indian stock exchange data showed. The share sale needed at least 90% subscription to go through.
By Monday, the book building process of the country’s largest share sale had received only 3% in bids, amid swirling concerns that the share sale could struggle due to a market rout in Adani’s stocks in recent days.
The share sale is critical for Adani, not just because it is India’s largest follow-on offering and will help cut debt, but also because its success will be seen as a stamp of confidence by investors at a time the tycoon faces one of his biggest business and reputational challenges of recent times.
The offer closes days after Adani’s public faceoff with Hindenburg Research, which on Jan. 24 flagged concerns about the use of tax havens and “substantial debt” at the group. It added that shares in seven Adani listed companies have an 85% downside due to what it called “sky-high valuations”.
That has since sparked $65 billion in cumulative losses for stocks of the Adani group, which called the report baseless.
The support for Adani’s share sale came even as the flagship’s shares were trading at 2,967 rupees, up nearly 2.5% but below the lower end of the share sale price band of 3,112 rupees.
“It looks down to the wire with just a few hours remaining on the last day, but the offering should go through. Institutions seem to be subscribing to capitalise on opportunity to buy in bulk quantities outside the open market,” said Dipan Mehta, founder director of Elixir Equities.
Adani Group’s total gross debt in the financial year ended March 31, 2022, rose 40% to 2.2 trillion rupees ($26.83 billion). Adani said on Sunday – while responding to Hindenburg’s allegations – that over the past decade the group has “consistently de-levered”. Hindenburg later said Adani’s “response largely confirmed our findings and ignored our key questions.”
The group had in recent days repeatedly said investors were standing by its side and the share offering would go through, amid rising concerns that may not happen. Bankers at one point had considered tweaking the pricing of the issue, or extending the sale, Reuters had reported.
Adani even said the Hindenburg report was a “calculated attack” on the country and its institutions while its CFO compared the market rout of its stocks to a colonial-era massacre.
Demand from retail investors remained muted, garnering bids only worth around 10% of the shares on offer for that segment. On Tuesday, demand mostly came from foreign institutional investors, as well as corporates who bid in excess of 1 million rupees each, data showed.
Over the weekend and through Monday, Adani’s firm held extensive discussions with investment bankers and institutional investors to attract subscriptions, according to two sources with direct knowledge of the talks.
Abu Dhabi conglomerate International Holding Company (IHC.AD) said it will invest $400 million in the issue.
“The follow-on public offering has to go through to restore investor confidence,” said V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The Hindenburg report and its fallout have drawn global attention. Adani is now the world’s eighth richest person, down from third ranking on Forbes’ rich list last week.
Adani Transmission (ADAI.NS) rose 1.6% on Tuesday, after losing 38% since the Hindenburg report, while Adani Ports and Special Economic Zone (APSE.NS) climbed 3.2%.
Adani Total Gas (ADAG.NS) languished at its 10% lower price limit, while Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) were down 5% each.
Global index publisher FTSE Russell said on Tuesday it continues to monitor publicly available information on the group, in particular from the Indian regulatory authorities.
Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group. On Tuesday, U.S. dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their fall into a second week.
($1 = 82.0025 Indian rupees)
Reporting by M. Sriram and Chris Thomas; Editing by Aditya Kalra and Muralikumar Anantharaman
Our Standards: The Thomson Reuters Trust Principles.
Hindenburg shorts India’s Adani Group, flags debt and accounting concerns
BENGALURU, Jan 25 (Reuters) – Hindenburg Research said on Wednesday it held short positions in India’s Adani Group, accusing the conglomerate of improper extensive use of entities set up in offshore tax havens and expressing concern about high debt levels.
The report, which comes days ahead of a $2.5 billion share offering by flagship firm Adani Enterprises (ADEL.NS), sent shares in Adani group firms sliding.
Hindenburg, a well known U.S. short-seller, said key listed companies in the group controlled by billionaire Gautam Adani had “substantial debt” which has put the entire group on a “precarious financial footing”.
It also said that seven Adani listed companies have an 85% downside on a fundamental basis due to what it called “sky-high valuations”.
An Adani spokesperson did not immediately respond to Reuters request for comment on the report, which Hindenburg said was based on research that involved speaking with dozens of individuals, including former Adani Group executives as well as a review of documents.
Hindenburg said it held its short positions through U.S.-traded bonds and non-Indian-traded derivative instruments.
Adani has repeatedly dismissed debt concerns. Adani Chief Financial Officer Jugeshinder Singh told media on Jan. 21 “Nobody has raised debt concerns to us. No single investor has.”
In the wake of the Hindenburg report, Adani Ports And Special Economic Zone (APSE.NS) slid 7.3% to its lowest level since early July, while Adani Enterprises dropped 3.7% to a near three-month low.
Adani-owned cement firms ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) fell 6.7% and 9.7% respectively.
Hindenburg’s report said that five of seven key listed Adani companies have reported current ratios – a measure of liquid assets minus near-term liabilities – below 1. This, the short-seller said, suggested “a heightened short-term liquidity risk.”
Adani Group’s total gross debt in the financial year ending March 31, 2022, rose 40% to 2.2 trillion rupees.
Refinitiv data shows that debt at all the Adani Group’s seven key listed Adani companies exceeds equity, with debt at Adani Green Energy Ltd (ADNA.NS) exceeding equity by more than 2,000%.
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 is known for shorting electric truck maker Nikola Corp (NKLA.O) and Twitter though it later reversed its position in Twitter.
Shares in Adani Enterprises surged 125% in 2022, while other group companies, including power and gas units, rose more than 100%.
Reporting by Mrinmay Dey, Chris Thomas and Aditya Kalra; Additional reporting by Miyoung Kim; Editing by Dhanya Ann Thoppil and Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
U.S., Chinese regulators in talks for audit deal -sources
Chinese and U.S. flags flutter outside the building of an American company in Beijing, China January 21, 2021. REUTERS/Tingshu Wang
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HONG KONG, May 6 (Reuters) – U.S. and Chinese regulatory officials are in talks to settle a long-running dispute over the auditing compliance of U.S.-listed Chinese firms, three people briefed on the matter told Reuters.
The standoff, if not resolved, could see Chinese firms kicked off New York bourses.
The U.S. Public Company Accounting Oversight Board (PCAOB) denied an earlier Reuters report that said a team from the agency had arrived in Beijing for talks.
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This week the U.S. Securities and Exchange Commission (SEC) added over 80 firms, including e-commerce giant JD.com (9618.HK) and China Petroleum & Chemical Corp (600028.SS) to the list of companies facing possible expulsion. read more
The talks between officials from the PCAOB and their counterparts at the China Securities Regulatory Commission (CSRC) can be described as “late stage” after China made concessions in recent months, the people said.
But a PCAOB spokesperson said, “Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year to conduct face-to-face negotiations, are untrue. The PCAOB has not sent any personnel to China since 2017.”
He said the board continues to engage with the Chinese authorities but “speculation about a final agreement remains premature.” As a result, the PCAOB is planning “for various scenarios”.
The CSRC on Friday did not respond directly on the status of discussions. It referred Reuters to official statements from both sides but did not specify which statements.
The sources asked not to be identified due to the sensitivity of the issue.
Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.
But in a key concession, Chinese regulators last month proposed revising confidentiality rules for offshore listings and scrapping requirements that on-site inspections of overseas-listed Chinese firms be conducted mainly by domestic regulators. read more
Sources told Reuters last month that a preliminary framework for audit supervision cooperation between the two countries has been formed. read more
The spat over audit oversight of New York-listed Chinese companies, simmering for more than a decade, came to a head in December when the SEC finalised rules to delist Chinese companies under the Holding Foreign Companies Accountable Act. It said there were 273 companies at risk but did not name them.
As of Friday, the PCAOB has identified 128 Chinese firms as at risk of being delisted.
The issue has been a major factor dragging on American depositary receipts (ADRs) issued by Chinese firms, with the Nasdaq Golden Dragon China Index tumbling 57% over the past 12 months.
Goldman Sachs estimated in March that U.S. institutional investors held around $200 billion worth of Chinese ADRs.
In addition to the concessions by Chinese regulators, there have been other signs that a deal is in the offing.
In late March, sources said the CSRC asked some of the country’s U.S.-listed firms, including Alibaba Group Holding Ltd (9988.HK), Baidu Inc (9888.HK) and JD.com, to prepare for more audit disclosures. Late last month, Fang Xinghai, the CSRC’s vice chairman said he expected a deal in the near future.
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Reporting by Xie Yu; Additional reporting by Katanga Johnson in Washington, Selena Li in Hong Kong and Jing Xu in Beijing; Editing by Edwina Gibbs and William Mallard
Our Standards: The Thomson Reuters Trust Principles.