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Adani shares take $9.4bn hit after Hindenburg bets against group

Shares in public companies linked to India’s sprawling Adani Group lost $9.4 billion in value after short-seller Hindenburg Research released a report on the conglomerate controlled by billionaire business tycoon Gautam Adani.

Shares of seven listed companies of the Adani Group fell an average of 4.6 percent during afternoon trading in Mumbai, while those of flagship company Adani Enterprises fell as much as 3.7 percent. Those declines brought the combined market capitalization loss for shares of Adani Group to about Rs 762 billion ($9.4 billion).

Adani’s businesses are expanding rapidly. The self-made tycoon started out 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 multiple subsidiaries across sectors including data and defense.

The report comes as Adani, whose net worth of about $118 billion makes him Asia’s richest person according to Bloomberg, is moving ahead with a fundraising effort to boost the rapid expansion of his existing industrial and fossil fuel outfits and green energy businesses.

In the report, Hindenburg claims Adani Group has engaged in stock price manipulation and accounting fraud over decades, presenting a list of 88 questions related to those allegations that “we hope the Adani Group will be happy to answer.”

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

Singh said the timing of the report, coming days ahead of a share offer by Adani Enterprises, was intended to “undermine the reputation of the Adani Group” and hurt demand for the forthcoming offering. He added that the group has “always followed all the laws”.

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Hindenburg’s report, published on Wednesday morning ahead of the Mumbai market opening, claims that “even if you ignore the findings of our investigation. . .[Adani Group’s]major listed companies are down 85 percent purely on a fundamental basis due to skyrocketing valuations.”

Hindenburg said it had taken a short position on Adani Group companies “through US-traded bonds and non-Indian-traded derivatives”.

The billionaire businessman has maintained his companies’ valuations are warranted.

Adani last year announced plans to increase the number of free float shares in Adani Enterprises after the company’s stock price rose more than 3,300 percent in three years. The public tender offer by Adani Enterprises, which aims to raise Rs200bn, is expected to begin on Friday.

The holdings of several Mauritius-based investment funds in Adani Enterprises and other listed Adani Group companies 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 debt of nearly Rs2tn (about $24 billion) is equivalent to nearly seven times its pre-adjusted earnings.

In December, the billionaire businessman told the Financial Times that some analysts “have not got it [his businesses] in real terms”.

“Who understands are my lenders, my banks, my global investors. Every time Adani enters the market, they like to invest. And so we are constantly growing,” he said.

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

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Adani launched a hostile takeover of Indian broadcaster NDTV last year in an attempt to build a media company.

Additional reporting by Benjamin Parkin, correspondent for South Asia

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