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Adani’s market losses top $100 billion as shelved share sale spooks investors

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NEW DELHI/MUMBAI, Feb 2 (Reuters) – India’s Adani group shares sank on Thursday after it abandoned its flagship company’s $2.5 billion stock offering, swelling the conglomerate’s market losses to more than $100 billion and sparking worries about the potential systemic impact.

The withdrawal of Adani Enterprises’ (ADEL.NS) share sale caps a dramatic setback for Gautam Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years but dwindled over the past one week after a U.S.-based short-seller published a critical research report.

The events are an embarrassing turn for Adani who has forged partnerships with foreign giants such as France’s TotalEnergies (TTEF.PA) and investors such as Abu Dhabi’s International Holding Company as he pursues a global expansion of businesses that stretch from ports and mining to cement and power.

Adani late on Wednesday called off the share sale as a stocks rout sparked by short-seller Hindenburg’s criticisms intensified, despite the offer being fully subscribed on Tuesday.

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Adani Enterprises plunged nearly 20% on Thursday, trading at its lowest since March 2022. Other group companies were also under pressure – Adani Ports and Special Economic Zone (APSE.NS) was down 5%, while Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Transmission (ADAI.NS) lost 10% each.

Since Hindenburg’s report was released on Jan. 24, group companies have lost nearly half their combined market value. Adani Enterprises – described as an incubator of Adani’s businesses – alone has lost $24 billion in market capitalisation.

Adani, 60, is also no longer Asia’s richest person, having slid in the rankings of the world’s wealthiest to 16th, as per Forbes’ list, from third last week.

Reuters Graphics

“Unless Adani is able to regain the confidence of institutional investors, stocks will be in freefall,” said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities.

Adani’s plummeting stocks have raised concerns about the likelihood of a wider impact on India’s financial system.

India’s central bank has asked local banks for details of their exposure to the Adani group of companies, government and banking sources told Reuters on Thursday. CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion rupees ($24.53 billion) of Adani group’s debt in the fiscal year to March 2022. read more

Citigroup’s (C.N) wealth unit has stopped extending margin loans to its clients against securities of Adani group and decided to cut the loan-to-value ratio for credit against Adani securities to zero on Thursday, said a source.

“We see the market is losing confidence on how to gauge where the bottom can be and although there will be short-covering rebounds, we expect more fundamental downside risks given more private banks (are) likely to cut or reduce margin,” Monica Hsiao, Chief Investment Officer of Hong Kong-based credit fund Triada Capital, said.

In New Delhi, opposition lawmakers submitted notices in the Indian parliament, demanding discussion on the U.S. short-seller’s report. The Congress party demanded setting up a Joint Parliamentary Committee or a Supreme Court monitored investigation into the matter.

ADANI VS HINDENBURG

Hindenburg’s report last week alleged an improper use of offshore tax havens and stock manipulation by the Adani group. It also raised concerns about high debt and the valuations of seven listed Adani companies.

The Adani group has denied the accusations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.

Earlier this week, the Adani group said it had the complete support of investors, but investor confidence has tapered in recent days.

As shares plunged after the Hindenburg report publication, Adani managed to secure the share sale subscriptions on Tuesday even though the stock’s market price was below the issue’s offer price. But on Wednesday, stocks plunged again.

Maybank Securities and Abu Dhabi Investment Authority, as well as India’s Life Insurance Corporation (LIFI.NS), had bid for the anchor portion of the issue. Those investments will now be returned by Adani.

In a late night announcement on Wednesday, the billionaire said he was withdrawing the share sale as the company’s “stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct.”

Early on Thursday, Adani said in a video address the “interest of my investors is paramount and everything is secondary. Hence, to insulate the investors from potential losses we have withdrawn” the share sale.

Reporting by Chris Thomas, Nallur Sethuraman, Tanvi Madan, Ira Dugal, Aftab Ahmed, Sumeet Chatterjee, Anshuman Daga, Summer Zhen; Writing by Aditya Kalra; Editing by Muralikumar Anantharaman

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Hindenburg bet against India’s Adani puzzles rival U.S. short sellers

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Feb 1 (Reuters) – When Hindenburg Research revealed a short position in Adani Group last week, some U.S. investors said they were intrigued about the actual mechanics of its trade, because Indian securities rules make it hard for foreigners to bet against companies there.

Hindenburg’s bet has been lucrative so far. Its allegations, which the Indian conglomerate has denied, have wiped out more than $80 billion of market value from its seven listed companies and knocked billionaire Gautam Adani from his perch as the world’s third-richest man. On Wednesday, a $2.5 billion sale of shares by one of its companies Adani Enterprises ADEL.NS was called off.

The short seller has said it held its position, which profits from the fall in the value of Adani Group shares and bonds, “through U.S.-traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities.” But it has revealed little else about the size of its bets and the kind of derivatives and reference securities it used, leaving rivals wondering how the trade worked.

“I wanted to short it myself, but I was not able to find a way to do it with my prime broker,” said Citron Research founder Andrew Left, referring to Adani Enterprises and other companies .

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Hindenburg declined to comment to Reuters on the method it used to place its bets against Adani. Adani Group and the stock market regulator the Securities and Exchange Board of India (SEBI) did not respond to a request for comment.

DIFFICULT TO SHORT

Typically, investors who want to bet that the company’s stock will fall borrow shares in the market and sell them, hoping to buy them back at a lower price, in a practice called short selling.

Short sellers such as Hindenburg like to build positions quietly before unveiling their thesis about the company to maximize profits. Discretion is necessary for them, as word of their presence in the stock sometimes can be enough to cause the shares to fall.

In India, however, securities rules make it hard to quietly build positions. Institutional investors are required to disclose their short positions upfront and there are other restrictions and registration requirements on foreign investors.

With the Adani Group, there are added complications: the shareholding is concentrated in the hands of the Adani family and its shares do not trade on exchanges abroad.

Nathan Anderson, Hindenburg’s founder, has been coy even with peers about his bet against Adani. Left and Carson Block, the founder of Muddy Waters Research and another prominent short seller, told Reuters that they got a single word response – ‘thanks’ – to messages of congratulations they sent to Anderson, when usually they would talk shop.

Cracking the code of how Hindenburg did the trade could lead to more short sellers taking positions against Indian companies, which have been rare, analysts said.

“Once these things (short-seller attacks) begin there are others who could be looking,” said Amit Tandon, managing director of proxy and governance firm Institutional Investor Advisory Services (IiAS) in India.

DERIVATIVE TRADES

Reuters could not learn details of Hindenburg’s trades. But several bankers familiar with trading in Indian securities said the more profitable piece of the short seller’s bet would likely lie in the derivative trades it had placed.

Some of Adani’s U.S. dollar corporate bonds , , fell 15-20 cents in the days after the report was released, which would make that bet profitable.

But there are limits. Only a few billion dollars of bonds in total were outstanding and they were not easily available to borrow, one debt banker said.

A more profitable way, these bankers said, would be to place the bet via participatory notes, or P-notes, which are lightly regulated offshore derivatives based off shares of Indian companies.

The entities that create the P-notes are registered with the Indian stock market regulator, but anyone can invest in them without having to directly register with SEBI. An investor can further use intermediaries to obscure its position.

Moreover, the market for P-notes is large. Billions of dollars’ worth of P-notes are traded every year, regulatory data shows, making it possible to place large bets, the bankers said.

(This story has been refiled to add dropped word ‘to’ in the lead paragraph)

Reporting by Shankar Ramakrishnan, Svea Herbst-Bayliss and Carolina Mandl; additional reporting by Jayshree Pyasi in Mumbai and Anshuman Daga in Singapore; Editing by Paritosh Bansal and Anna Driver

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Adani abandons $2.5 billion share sale in big blow to Indian tycoon

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NEW DELHI, Feb 1 (Reuters) – Gautam Adani’s flagship firm called off its $2.5 billion share sale in a dramatic reversal on Wednesday as a rout sparked by a U.S. short-seller’s criticisms wiped billions more off the value of the Indian tycoon’s stocks.

The withdrawal of the Adani Enterprises (ADEL.NS) share offering marks a stunning setback for Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years in line with stock values of his businesses.

“Today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct,” Adani said.

“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans,” the billionaire added in a statement to Indian exchanges.

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Adani, whose global business interests span ports, airports, mining, cement and power, is battling to stabilise his companies and defend his reputation.

“Once the market stabilizes, we will review our capital market strategy,” he added.

A report by Hindenburg Research last week alleged improper use by the of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies.

The Jan. 24 report has since triggered a $86 billion erosion in market capitalisation of seven listed Adani Group companies.

Adani Group has denied the allegations, saying the short-seller’s allegation of stock manipulation has “no basis” and stems from an ignorance of Indian law. The group has always made the necessary regulatory disclosures, it added.

REFUNDS

Adani Group was working with its bankers to refund the proceeds received by in the secondary share sale of Adani Enterprises. Anchor investors who had supported the issue included Maybank Securities and Abu Dhabi Investment Authority.

The company aims to protect the interests of its investing community by returning the proceeds, it said.

Adani Group had on Tuesday mustered enough support from investors for the share sale to proceed, in what some saw as a stamp of investor confidence amid the storm.

But after a brief respite, the selloff in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone (APSE.NS) dropping 19%, the worst day on record for both.

The fundraising was critical for Adani, not just because it would have helped cut his group’s debt, but also because it was being seen by some as a gauge of confidence as he faced the biggest business and reputational challenge of his career.

Wednesday’s stock losses saw Adani slip to 15th on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, the chairman of Reliance Industries (RELI.NS) who ranks ninth with a net worth of $83.7 billion.

The share sale had succeeded on Tuesday even when the Adani Enterprises stock price in Mumbai markets traded below the offer price of the share sale.

“I do not know how the markets will behave in short term. But this is a measure to enhance (Adani’s) reputation since the investors were staring at a 30% loss even before the shares were alloted,” said Rajesh Baheti, chief executive, Crossseas Capital Services, an algo trading firm.

Reporting by Aditya Kalra and Jahnavi Nidumolu in Bengaluru; Editing by Anil D’Silva, Kirsten Donovan and Alexander Smith

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Adani loses Asia’s richest crown as stock rout deepens to $84 billion

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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.

Reuters Graphics

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.

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Adani’s $2.5 bln share offer backed by investors, despite short-seller attack

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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.”

Reuters Graphics

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.

Reuters Graphics

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

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Adani’s $2.5 billion share sale faces crucial day after rout

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NEW DELHI, Jan 29 (Reuters) – Gautam Adani faces a critical day on Monday with his flagship company’s $2.5 billion share sale’s second day of bidding overshadowed by a $48 billion rout in the Indian billionaire’s stocks which was sparked by a U.S. short seller’s report.

Seven listed companies belonging to the Adani conglomerate, which is led by Asia’s richest man, saw sharp falls in their values after Hindenburg Research report last week flagged concerns about high debt levels and the use of tax havens.

Adani Group issued a detailed response late on Sunday, saying it complies with all local laws and had made necessary regulatory disclosures. It has called the report baseless and said it was considering taking action against Hindenburg.

For 60-year-old Adani, the stock market meltdown has been a dramatic setback for a school-dropout who rose swiftly in recent years to become the world’s third richest man, before slipping to rank seventh on the Forbes list last week.

The secondary share sale by Adani Enterprises (ADEL.NS) opened for retail and institutional investors on Friday, but saw only 1% subscriptions as the company’s stock fell 11% below the minimum offer price.

Adani Group told Reuters in a statement on Saturday that the sale remains on schedule at the planned issue price, even as sources said bankers on the country’s largest secondary share sale were considering extending the timeline beyond Jan. 31, or tweaking the price due to the fall in its share price.

“It is important for the Adani Group to ensure the share sale goes through — If they stick to the price and don’t reduce it, and the stock doesn’t bounce back, nobody will be keen to apply,” said Mumbai-based market analyst, Ambareesh Baliga, who advises various family offices.

“Monday’s trade will be critical.”

In a separate statement on Sunday, Adani Group’s chief financial officer Jugeshinder Singh said it is focused on the share sale and is confident it will sail through. He also said its anchor investors have shown faith and remain invested.

‘FREE FALL’

Some Adani Group stocks have surged more than 1,500% in the last three years amid aggressive expansion in businesses that include ports, power generation, airports and mining.

Adani Enterprises has set a floor price of 3,112 rupees per share and a cap of 3,276 rupees for the secondary share sale – well above their close of 2,761.45 rupees on Friday.

Arun Kejriwal, founder of Kejriwal Research & Investment, said investors were likely to wait until the last day of the share sale to see if the price band is tweaked.

“I expect that the free fall seen of Friday may abate but recovery back towards a level prior to this fall may be difficult,” he added.

Indian regulations say the share offering must receive minimum subscription of 90%, and if it does not the issuer must refund the entire amount.

Maybank Securities and Abu Dhabi Investment Authority are among investors who bid for the anchor portion of the issue.

On Saturday, index provider MSCI said it was seeking feedback from market participants on Adani and was monitoring the factors that “may impact the eligibility of those relevant securities” in MSCI indexes.

There are at least six Adani Group companies in the MSCI India Index, with a cumulative weight of 4.31%.

Reporting by Aditya Kalra, Ira Dugal, Jayshree P Upadhyay and Chris Thomas; Editing by Alexander Smith

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Adani hits back at Hindenburg, says it made all disclosures

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  • Adani issues 413-page rebuttal to Hindenburg report
  • U.S. short-seller’s report sparked falls in Adani shares
  • Adani says complies with laws, necessary disclosures
  • Adani CFO confident $2.5 bln share sale will succeed

NEW DELHI, Jan 30 (Reuters) – India’s Adani Group issued a detailed riposte on Sunday to a Hindenburg Research report that sparked a $48 billion rout in its stocks, saying it complies with all local laws and had made the necessary regulatory disclosures.

The conglomerate led by Asia’s richest man, the Indian billionaire Gautam Adani, said last week’s Hindenburg report was intended to enable the U.S.-based short seller to book gains, without citing evidence.

For 60-year-old Adani, the stock market meltdown has been a dramatic setback for a school-dropout who rose swiftly in recent years to become the world’s third richest man, before slipping last week to rank seventh on the Forbes rich list.

Adani Group’s response comes as its flagship company, Adani Enterprises (ADEL.NS), pushes ahead with a $2.5 billion share sale. This has been overshadowed by Hindenburg’s report, which flagged concerns about debt levels and the use of tax havens.

“All transactions entered into by us with entities who qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us,” Adani said in the 413-page response issued late on Sunday.

“This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors,” it added.

Hindenburg did not immediately respond to a request for comment on the Adani response on Sunday.

Its report had questioned how the Adani Group has used offshore entities in tax havens such as Mauritius and the Caribbean islands, adding that certain offshore funds and shell companies “surreptitiously” own stock in Adani’s listed firms.

The research report, Adani said, made “misleading claims around offshore entities” without any evidence whatsoever.

Adani said on Thursday that it is considering taking action against Hindenburg, which responded on the same day by saying it would welcome such a move.

Hindenburg’s report also said five of seven key listed Adani companies have reported current ratios, a measure of liquid assets minus near-term liabilities, of below 1 which it said suggested “a heightened short-term liquidity risk”.

It said key listed Adani companies had “substantial debt” which has put the entire group on a “precarious financial footing” and that shares in seven Adani listed companies have an 85% downside due to what it called “sky-high valuations”.

Adani’s response stated that over the past decade, its group companies have “consistently de-levered”.

Defending its practice on pledging shares of its promoters – or key shareholders – the Adani Group said that raising financing against shares as collateral was common practice globally and loans are given by large institutions and banks on the back of thorough credit analysis.

The group added there is a robust disclosure system in place in India and its promoter pledge positions across portfolio companies had dropped from more than 50% in March 2020 in some listed stocks, to less than 20% in December 2022.

‘SAIL THROUGH’

The Hindenburg report, and its fallout, is seen as one of the biggest career challenges to face the billionaire, whose business interests range from ports, airports, mining and power to media and cement.

Adani’s response included more than 350 pages of annexes that included snippets from annual reports, public disclosures and earlier court rulings.

Hindenburg, Adani said, had sought answers to 88 questions in its report, but 65 of them were related to matters that have been disclosed by Adani portfolio companies in annual reports.

The rest, Adani said, relate to public shareholders and third parties, and some were “baseless allegations based on imaginary fact patterns”.

Hindenburg, known for having shorted electric truck maker Nikola Corp (NKLA.O) and Twitter, said it holds short positions in Adani companies through U.S.-traded bonds and non-Indian-traded derivative instruments.

Adani also responded to allegations by Hindenburg relating to the company’s auditors, saying “all these auditors who have been engaged by us have been duly certified and qualified by the relevant statutory bodies.”

Its response comes just hours ahead of India market opening, when the $2.5 billion secondary share sale begins its second day of subscription. Friday’s plunge took Adani Enterprises shares below the issue price, raising doubts about its success.

In a separate statement on Sunday, Adani Group’s chief financial officer Jugeshinder Singh said it is focused on the share sale and is confident it will succeed. He also said its anchor investors have shown faith and remain invested.

“We are confident the FPO (follow-on public offering) will also sail through,” he said.

Reporting by Aditya Kalra, Aditi Shah, Jayshree Upadhyay and Anirudh Saligrama in Bengaluru; Editing by Kevin Liffey and Alexander Smith

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India’s Adani begins record share sale as short seller triggers $44 billion rout

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MUMBAI, Jan 27 (Reuters) – Shares of India’s Adani Enterprises (ADEL.NS) sank 15% on Friday as a scathing report by a U.S. short seller triggered a rout in the conglomerate’s listed firms, casting doubts on how investors will respond to the company’s record $2.45 billion secondary sale.

Seven listed companies of the Adani conglomerate – controlled by one of the world’s richest men Gautam Adani – have lost a combined $43.5 billion in market capitalisation since Wednesday, with U.S. bonds of Adani firms also falling after Hindenburg Research flagged concerns in a Jan. 24 report about debt levels and the use of tax havens.

Adani Group has dismissed the report as baseless and said it is considering whether to take legal action against the New York-based firm.

“There were heavy positions in Adani group (shares), the way they have risen in the last couple of years,” said Neeraj Dewan, director at Quantum Securities in New Delhi.

“This is a classic case of panic selling…,” he said, noting the concerns were also spreading to Indian banks with exposure to Adani group’s debt.

The index tracking state-run banks (.NIFTYPSU) was down 4.6%, while the main Nifty Bank index (.NSEBANK) fell 2.7%.

CLSA estimates that Indian banks were exposed to about 40% of the 2 trillion Indian rupees ($24.53 billion) of Adani group debt in the fiscal year to March 2022.

The stunning selloff has cast a shadow over Adani Enterprises’ secondary sale which began on Friday. The anchor portion of the sale saw participation from investors including the Abu Dhabi Investment Authority on Wednesday.

The firm has set a floor price of 3,112 rupees ($38.22) a share and a cap of 3,276 rupees. But by midday on Friday, the stock had slumped to 2,875 rupees – well below the lower end of the price offering.

As of 0700 GMT, investors, mostly retail, had bid for around 200,000 shares, compared with the 45.5 million on offer, according to BSE exchange data. Bidding for retail investors will close on Jan. 31.

Shares of other listed Adani firms also plummetted, with Adani Transmission Ltd (ADAI.NS) Adani Total Gas (ADAG.NS), Adani Green Energy (ADNA.NS) and Adani Ports (APSE.NS) sinking 20% each.

In its report, Hindenburg said key listed Adani Group companies had “substantial debt”, putting the conglomerate on a “precarious financial footing”, and that “sky-high valuations” had pushed the share prices of seven listed Adani companies as much as 85% beyond actual value.

Billionaire U.S. investor Bill Ackman said on Thursday that he found the Hindenburg report “highly credible and extremely well researched.”

Hindenburg said it held short positions in Adani through its U.S.-traded bonds and non-Indian-traded derivative instruments, meaning it is betting that their price would fall.

Adani Group has repeatedly faced and dismissed concern about debt levels. It defended itself in a presentation titled “Myths of Short Seller” on Thursday, saying deleveraging by promoters – or key shareholders – was “in a high growth phase”.

Jefferies in a client note said Adani Group had shared details of debt and leverage levels, and that it does not “see material risk arising to the Indian banking sector”.

Adani Group’s consolidated gross debt stood at 1.9 trillion rupees ($23.34 billion), Jefferies said.

Adani has said its debt is at a manageable level and that no investor has raised any concern.

Adani Enterprises’ net profit for the period ended Sept. 30, 2022 doubled to 9 billion Indian rupees ($110.31 million) while its total income nearly tripled to 795 billion Indian rupees, according to its share sale prospectus.

The company’s total liabilities as of September 2022 stood at 869 billion rupees ($10.64 billion), the prospectus showed.

The Adani conglomerate has been diversifying its business interests and last year bought cement firms ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) from Switzerland’s Holcim (HOLN.S) for $10.5 billion. ACC was down 15% on Friday, while Ambuja plunged up to 25%.

Reporting by M. Sriram and Chris Thomas; Editing by Aditya Kalra, Christopher Cushing and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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Business

Hindenburg shorts India’s Adani Group, flags debt and accounting concerns

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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.

Reuters Graphics Reuters Graphics

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

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Business

Crypto lending unit of Genesis files for U.S. bankruptcy

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Jan 20 (Reuters) – The lending unit of crypto firm Genesis filed for U.S. bankruptcy protection on Thursday, owing creditors at least $3.4 billion, after being toppled by a market rout along with the likes of exchange FTX and lender BlockFi.

Genesis Global Capital, one of the largest crypto lenders, froze customer redemptions on Nov. 16 after the collapse of major exchange FTX sent shockwaves through the crypto asset industry, fuelling concern that other companies could implode.

Genesis is owned by venture capital firm Digital Currency Group (DCG).

Its bankruptcy filing is the latest in a string of crypto failures triggered by a market collapse that wiped about $1.3 trillion off the value of crypto tokens last year. While bitcoin has rallied so far in 2023, the impact of the market collapse has continued to hit companies in the highly interconnected sector.

The bankruptcy “doesn’t come as a shock to the markets,” said Ivan Kachkovski, currency and crypto strategist at UBS. “It remains to be seen if the chain effect would go on.”

“However, given that the funds have already been frozen for over two months and no other large crypto company reported an associated weakness, it’s likely that the contagion would be limited.”

Genesis’ lending unit said it had both assets and liabilities in the range of $1 billion to $10 billion, and estimated it had more than 100,000 creditors in its filing with the U.S. Bankruptcy Court for the Southern District of New York.

Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit Genesis Asia Pacific.

Genesis Global Holdco said in a statement that it would contemplate a potential sale, or a stock-related transaction, to pay creditors, and that it had $150 million in cash to support the restructuring.

It added that Genesis’ derivatives and spot trading, broker dealer and custody businesses were not part of the bankruptcy process, and would continue their client trading operations.

CREDITORS’ CLAIMS

Genesis owes its 50 biggest creditors $3.4 billion, according to Reuters’ calculations from the bankruptcy filing. Its largest creditor is crypto exchange Gemini, which it owes $765.9 million. Gemini was founded by the identical twin cryptocurrency pioneers Cameron and Tyler Winklevoss.

Genesis was already locked in a dispute with Gemini over a crypto lending product called Earn that the two firms jointly offered to Gemini customers.

The Winklevoss twins have said Genesis owed more than $900 million to some 340,000 Earn investors. On Jan. 10, Cameron Winklevoss called for the removal of Barry Silbert as the chief executive of Digital Currency Group.

Representations of cryptocurrencies are seen in front of displayed decreasing stock graph in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration

About an hour after the bankruptcy filing, Cameron Winklevoss tweeted that Silbert and Digital Currency Group continued to deny creditors a fair deal.

“Unless Barry (Silbert) and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently,” Winklevoss said in his tweet thread.

DCG did not immediately respond to a Reuters request for comment on the tweets.

Amsterdam-based crypto exchange Bitvavo, said in December it was trying to recover 280 million euros ($302.93 million) which it had lent to Genesis.

Bitvavo said in a blog post on Friday that talks on the repayment “have not yet led to an overall agreement that works for all parties concerned” and that it would continue to negotiate.

The bankruptcy filing “brings the process of negotiations to calmer waters,” Bitvavo said.

LENDING BUSINESS

Genesis brokered digital assets for financial institutions such as hedge funds and asset managers and had almost $3 billion in total active loans at the end of the third quarter, down from $11.1 billion a year earlier, according to its website.

Last year, Genesis extended $130.6 billion in crypto loans and traded $116.5 billion in assets, according to its website.

Its two biggest borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company closely affiliated with FTX, a source told Reuters. Both are in bankruptcy proceedings.

Three Arrows debt to Genesis was assumed by its parent company Digital Currency Group (DCG), which then filed a claim against Three Arrows. DCG’s portfolio companies also include crypto asset manager Grayscale and news service CoinDesk.

Crypto lenders, which acted as the de facto banks, boomed during the pandemic. But unlike traditional banks, they are not required to hold capital cushions. Earlier this year, a shortfall of collateral forced some lenders – and their customers – to shoulder large losses.

($1 = 0.9243 euros)

Reporting by Tom Hals in Wilmington, Delaware, Akanksha Khushi, and Elizabeth Howcroft in London; Editing by Lananh Nguyen, Clarence Fernandez, Kim Coghill, Ira Iosebashvili and Sharon Singleton

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