Home Markets India’s Adani Group Fails to Halt Short-Seller Driven Decline

India’s Adani Group Fails to Halt Short-Seller Driven Decline

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A giant Indian conglomerate couldn’t stop the freefall in its shares and bonds set off by an American short seller in what has grown into a bitter fight over the empire created by one of India’s richest and politically connected businesspeople.

Adani Group, an energy and infrastructure company, released its 413-page rebuttal to the short seller’s claims just as the trading week began in Asia. Investors weren’t convinced and dumped shares of the company on Monday, bringing the total value lost to $64 billion since last week.

The fight could have wide implications for India’s power industry and for its transition to clean energy. It has also caused billions of dollars in losses for Indian investors who have helped drive up the company’s share price to stratospheric levels.

Investors in Adani are rushing to its aid. One of Adani’s companies was in the midst of selling shares when the short seller report hit. On Monday, International Holding Co., an Abu Dhabi-based conglomerate, said it would purchase $400 million worth of shares in the public offering. That amounts to about 16% of the total deal. IHC last year invested $2 billion in three Adani companies, including

Adani Enterprises Ltd.

512599 4.21%

, the group’s flagship.

The company, the namesake of India’s richest man,

Gautam Adani,

looked a lot like the American tech stocks that soared during the pandemic. Shares of Adani Enterprises rose 3,000% in the past five years, pushing valuations to extreme levels.

“Clearly there’s a disconnect between valuations and fundamentals,” said James Thom, senior investment director of Asian equities at investment firm


Short seller Hindenburg Research pricked the bubble with claims of stock-market manipulation and questionable business and accounting practices. Hindenburg, founded by Nathan Anderson, hoped to profit by betting against Adani companies’ U.S.-traded bonds and derivatives that aren’t traded in India.

Hindenburg alleges that Adani has been able to manipulate the price of its shares by owning them in offshore entities, it says the stocks are overvalued and debt levels too high, and it says that a large number of Adani family members are working for the company’s various branches. 

Adani Group has fought back, calling the short seller’s report “nothing but a lie.” The company called it “a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India.” It said most of the 88 questions raised by Hindenburg had already been addressed through public disclosures, and it included answers to each of them.

Hindenburg responded within hours, saying that Adani Group’s rebuttal stoked nationalist sentiment and failed to adequately address the issues it had raised.

Shares of six of the seven companies bearing Adani’s name extended their losses on Monday on India’s domestic market.

Adani Total Gas Ltd.

ATGL -20.00%


Adani Green Energy Ltd.


each fell 20%—the maximum single-day decline permitted by the exchange for those stocks. The seven companies have now lost the equivalent of around $64 billion in market value since last Tuesday’s close and are now worth $169 billion, according to FactSet data.

Adani Enterprises, which is pushing ahead with plans to sell new shares, bucked the trend with a 4.2% gain, but its shares remained below the price floor for the deal. Retail subscriptions for the offering, which the company is hoping will raise the equivalent of $2.5 billion, are scheduled to close on Tuesday.

Adani Group plays a major role in India’s economy as an important coal supplier, a big developer of renewable energy and generator of electricity.

Bid prices of two closely watched U.S. dollar bonds issued by Adani companies tumbled to about 73 cents on the dollar on Monday, reflecting growing concerns among investors that the company couldn’t pay off its debt. The yield on an Adani Green bond with a 4.375% coupon that comes due in 2024 soared above 20%, according to Tradeweb data.

In an interview with an Indian television network that was shown on Monday, Adani Group Chief Financial Officer

Jugeshinder Singh

said the conglomerate hasn’t seen any large, strategic investors exiting their positions in its listed companies.

“We believe that this volatility will pass,” he said, adding that the group will release its quarterly results in about a week’s time.

Mr. Anderson has likely already made a solid profit on his investment. In just a few years, Hindenburg has notched a string of victories against highflying companies.

In 2020, Hindenburg grabbed headlines and scored a win after publishing research on hydrogen-truck company

Nikola Corp.

and its founder

Trevor Milton.

Nikola’s shares had skyrocketed that summer, driven in part by claims Mr. Milton made about the company and its products on social media. Hindenburg alleged that Mr. Milton had misrepresented the company’s technology on several occasions, most memorably in a video where an undrivable truck was rolled down a Utah hillside to appear as if it was driving.

Nikola paid $125 million to settle an investigation with the Securities and Exchange Commission. Mr. Milton stepped down from his role at the company within two weeks of publication and was convicted last year on three counts of fraud. Lawyers for Mr. Milton have said he is innocent and will continue fighting the charges.

It is not the first time that Hindenburg has built a trade around one of the world’s richest men. Last year, Hindenburg said it shorted shares in Twitter Inc. thinking

Elon Musk

would try to back out of his proposed acquisition of the company after a market swoon made his offer price seem quite rich. The firm said it then went long, anticipating that court proceedings in Delaware would force Mr. Musk to close the deal. Both trades were successful, Mr. Anderson told The Wall Street Journal at the time.

Hindenburg also bet against another Indian business last year, payments company

Ebix Inc.,

publishing a critical report in June that sent its shares tumbling. Ebix said Hindenburg’s report was “grossly misleading and erroneous” and filed defamation claims against Mr. Anderson in a Delhi court. The company also had a judge ban the report’s physical and virtual dissemination within India.

“Until Ebix responds substantively to the issues we raised, a prospect that seems to be dimming by the day, we’ll keep posting our research regardless of how many times they complain to Indian courts about it,” Mr. Anderson said last year.

Mr. Adani hasn’t made any public comments about Hindenburg’s allegations. The 60-year-old industrialist, who is known to be well-connected politically in India, has accumulated tremendous wealth over the past few decades through companies that own coal mines, ports, cement producers and other assets.

Write to Weilun Soon at [email protected]

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