Adani group companies, A few days after US-based short seller Hindenburg Research tweeted about a critical study it had issued on the conglomerate, the Adani Group has cut its revenue growth objective and plans to reduce new capital investment.
After its listed firms’ market value dropped by more than $120 billion following Hindenburg’s damning report on the group, the tycoon is now trying to win back investor confidence.
In its conclusion, the US short seller report stated: “Following careful investigation, we have taken a short position in Adani Group firms using US-traded bonds and non-Indian-traded derivative instruments.”
Numerous “allegations” were made against the group in the study, which has caused a stock rout. The Adani Group, on the other hand, has dismissed the accusations, denied any misconduct, and stated that the assertions are unfounded in a 413-page reply.
According to a story, Gautam Adani’s company will now aim for revenue growth of 15% to 20% for at least the upcoming fiscal year, down from the 40% growth initially targeted.
The study also stated that capital spending plans will be reduced as the organisation prioritizes strengthening its financial stability over ambitious expansion.
The change shows how the ports-to-power giant is concentrating on cash management, debt repayment, and reclaiming pledged shares as it works to erase the harm caused by the report that was released late on January 24.
Despite the group’s denial of the American short seller’s accusations of accounting fraud and stock manipulation, the incident caused the price of its listed stocks to drop.
The company could save up to $3 billion by delaying investments for just three months, according to the newspaper, which also noted that the plans are still near.
Funds that can be used to reduce debt or increase the cash reserve were also mentioned.
The report states that the group’s plans are still being examined and will be completed in the upcoming weeks.
Additional shares are pledged by Adani group companies to a key lender-
Adani Transmission Ltd., Adani Green Energy Ltd., and Adani Ports and Special Economic Zone Ltd. have all committed additional shares for the State Bank of India (SBI).
The largest state lender in the nation, SBI, through its subsidiary, SBICAP Trustee Co., reported that it has pledges for shares worth 1% of Adani Ports, up from 0.65%; 0.55% of Adani Transmission, up from 0.44%; and 1.06% of Adani Green, up from 0.68%.
According to a statement from the bank, the new promises are part of a $300 million letter of credit that SBI gave for the Adani group’s Carmichael coal mining project in Australia. A letter of credit is a guarantee for payments that is offered by one bank to another bank.
At the end of each month, the collateral is evaluated to determine whether it needs to be topped off due to any mark-to-market losses.
‘Inter-Linkages’
Adani group companies, According to research released on February 10 by Barclays Plc analysts led by Avanti Save, “the scale and economic inter-linkages of the Adani businesses make it pertinent to examine what any slowdown in the group’s investments could entail for the economy as a whole.” The group’s investments or a disruptive conclusion to the situation “may have consequences for India’s capex cycle.”
Jugeshinder Singh, the Adani group’s chief financial officer, stated in a local newspaper last month that the company may reduce capital spending because a follow-up share sale by Adani’s flagship company was being conducted in response to the allegations made by Hindenburg.
Adani group companies, In an interview with The Hindu Business Line that was published on January 29, Singh stated that if the follow-on offer did not receive any subscriptions, “we will postpone the expansion programme for six to nine months and then implement it later.” Three days later, under pressure from investors, the deal was cancelled.
The withdrawal illustrates the huge impact Hindenburg’s attack has had on the company and represents a sharp turnabout for a billionaire who had been on a rapid, debt-fueled expansion frenzy over the previous few years.
The first-generation businessman quickly expanded his empire, which today includes ports, airports, coal mines, power plants, and utilities after starting with an agri-trading company in the 1980s. It entered the green energy, cement, media, data centers, and real estate industries in the last couple of years, leveraging itself significantly in a way that alarmed some credit analysts.
Assuage worries
Just two days before Adani Enterprises’ follow-on public offer (FPO) of 20,000 crores was set to begin trading on January 27, the Hindenburg report was released.
Adani group companies, and his businesses have been attempting to allay investor and lender concerns in the days following the stock market crash brought on by the Hindenburg disaster.
After MSCI Inc. reduced the number of shares it considers freely tradable for four of the businesses, the stock selloff resumed. This action will result in lower weightings in its indexes.
Adani Group has been concentrating on shoring up confidence and allaying worries about its financial stability.
The organisation said earlier this month that Adani and his family paid off loans totaling $1.11 billion to free pledged shares from three different companies, while the ports unit declared plans to pay off 5,000 crores in debt on February 8 in order to improve a crucial credit measure.
After some banks refused to refinance the debt, the conglomerate decided to prepay a $500 million bridge loan that was due next month. It was a component of the fundraising efforts last year to pay for the purchase of the cement assets in India owned by Holcim Ltd.
Independent audit of group companies
The company intends to work with one of the “big six” international accounting firms to assess its corporate governance and audit procedures in response to the US short seller’s charges of fraud.
According to the persons who asked to remain anonymous, the legal options will be determined when the flagship company of the group, Adani Enterprises Ltd., has completed its 20,000 crore follow-on public offering.
The primary goals of the current audit are to regain public trust and stop the decline in Adani Group stock prices.
The Adani Group replaced Deloitte as the auditor of its several companies in the UK last year with a much smaller accounting company.
After being acquired by the Indian company in 2021, Crowe UK has taken over as the auditor of UK firms, including Adani Energy Holdings Ltd.
A portfolio of renewable energy facilities in India that were sold to Adani Green Energy Limited by SoftBank Group and Bharti Enterprises in 2021 is included in the Adani Group’s UK subsidiaries. After the acquisition, Adani fired Deloitte, which had been auditing the books, and engaged Crowe UK to do so.
The ministry of corporate affairs is said to have begun a preliminary investigation of the financial statements and other regulatory submissions made over the years by the Adani Group earlier this month.
According to sources familiar with the situation, the Indian giant has appointed public relations firm Kekst CNC as its global communications adviser. According to Kekst’s website, the company has “worked against some of the most aggressive counterparties” in high-profile legal disputes.
Shares were up early last week as a result of efforts to calm investor concerns, but there are still significant challenges.
After MSCI Inc. reduced the number of shares it considers freely tradable for four of the businesses, the stock selloff resumed. This action will result in lower weightings in its indexes. In light of the recent share price decline, Moody’s Investors Service lowered its forecast for Adani Green Energy Ltd. and three other group firms on Friday.
SBICaps Trustee stated in a notice to Indian exchanges late Friday that additional shares in three Adani Group firms were pledged “for the benefit of the lenders” of Adani Enterprises.
1. The Hindenburg Report on Adani: What exactly is it?
Hindenburg claimed to have found evidence of accounting fraud, stock manipulation, and money laundering at Adani, describing the mining company as an “egregious example of corporate fraud.” According to a report. The report destroyed $117 billion, or over half the value of the Adani companies.
2. When was the Adani Hindenburg Report released?
The Hindenburg Research assessment of the Adani Group, which was published in January 2023, is a critical examination of the financial and operational procedures used by the Indian company.
3. Is Sebi investigating Adani?
The Great International Tusker Fund and Ayushmat, two Mauritius-based funds that took part in the FPO as anchor investors, are the subjects of a SEBI investigation into Adani’s relationships.
4. What amount of money did Adani lose?
Since the US short-seller Hindenburg Research published a damaging study claiming wrongdoing at the conglomerate led by Gautam Adani, the market value of Adani Group companies has fallen by $100 billion. Adani Group has vehemently refuted these claims and threatened legal action against Hindenburg.
