Adani shares take a $7.7 billion hit after Hindenburg bets against the group

Shares of listed companies linked to India’s sprawling Adani Group shed $7.7 billion after short seller Hindenburg Research released a report targeting the conglomerate controlled by billionaire business tycoon Gautam Adani.

Shares of seven listed companies in the Adani Group fell by around 4% on average in late morning Mumbai, with those of flagship Adani Enterprises falling as much as 3.7%. These falls brought the combined loss in market capitalization for Adani Group shares to around 625 billion rupees ($7.7 billion).

Adani’s businesses are growing rapidly. The self-made tycoon started as a commodities trader in the 1980s before eventually building India’s largest private infrastructure group with a dozen ports and eight airports. The group has several subsidiaries covering sectors such as data and defence.

The report comes as Adani, whose net worth of around $118 billion ranks him as Asia’s richest person, according to Bloomberg, continues fundraising to fuel the rapid expansion of his industrial equipment and existing fossil fuels as well as green energy companies.

Adani Group chief financial officer Jugeshinder Singh said the conglomerate was “shocked” by the Hindenburg report, describing it as “a malicious combination of selective misinformation and outdated, baseless and discredited allegations”.

Singh said the timing of the report, days before a follow-up stock offering from Adani Enterprises, was intended to “undermine the reputation of the Adani Group” and hurt demand for the upcoming offering. He added that the group “has always been in compliance with all laws”.

Hindenburg’s report, released Wednesday morning before the market opened in Mumbai, claims that “even if you ignore the findings of our investigation. . .[Adani Group’s]major listed companies are down 85% on a purely fundamental basis due to exorbitant valuations”.

Hindenburg said it took a short position in Adani Group companies “through US-traded bonds and non-India-traded derivatives.”

The billionaire businessman argued that his companies’ valuations were justified.

Adani last year announced plans to increase the number of freely traded shares in Adani Enterprises after the company’s share price gained more than 3,300% in three years. Public bidding for an Adani Enterprises share offering to raise up to Rs 200 billion is expected to start on Friday.

The holdings of several Mauritius-based investment funds that have held stakes in Adani Enterprises and other Adani Group listed companies for years have come under scrutiny from Indian regulators in the past.

Analysts have raised concerns about Adani Group’s debt-fueled growth, noting that the conglomerate’s total debts of almost Rs2tn (about $24 billion) equate to nearly seven times pre-adjusted earnings.

In December, the billionaire businessman told the Financial Times that some analysts “didn’t understand [his businesses] in real terms”.

“Who understands, these are my lenders, my banks, my global investors. Every time Adani comes into the market, they like to invest. And that’s how we continually grow,” he said.

Adani Group, which derives much of its revenue from coal mining and combustion, has pledged to become one of the world’s largest green energy companies by investing $70 billion in by 2030 in everything from green hydrogen to solar panel manufacturing.

Adani launched a hostile takeover of Indian broadcaster NDTV last year, with the aim of creating a media company.

Additional reporting by Benjamin Parkin, South Asia correspondent

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