These allegations are startling. Hindenburg claims that offshore holding entities based in Mauritius and elsewhere are not independent investors but rather proxies for the Adani family. The report states that these entities accounted for a large portion of trading in the group’s stocks and inflated the share prices of Adani’s listed companies to astonishing levels. The short-seller further alleges that Adani used offshore instruments to conceal losses and launder money through its listed firms. In a 413-page document released on January 29th, the Adani Group rebutted these charges, arguing they had already been thrown out by India’s courts and regulators. Adani has also threatened legal action (‘bring it on,’ said Hindenburg). Yet its defence has failed to instil confidence. The share prices of Adani firms have kept falling—around $100bn has been wiped off the group’s market value. Some global banks are reportedly refusing to take Adani bonds as collateral for their private-wealth clients. Verifying the more startling charges in Hindenburg’s report is no straightforward matter, and Adani’s denials have been forceful. The allegations may ultimately be settled by legal action outside India. What seems clear is that Adani shares are closely held and thinly traded; that the group’s acquisition spree was fuelled by borrowing; and that the explosion in share prices was at odds with the capital-heavy, utility-like businesses it owns—where investors cannot expect explosive profits.

Indian Financial News, February 10, 2023 — 'Adani Group’s debt “equivalent to 1% of India’s economy”?'

Compiled by Li Mumbai Part I: Financial Focus 1. Nikkei Asia analysis states that the Adani Group’s debt “is at least equivalent to 1% of India’s economy.” According to a Nikkei Asia analysis, the Adani Group’s total debt stands at ₹3.39 trillion (US$41.1 billion), “at least equivalent to 1% of India’s economy.” Based on Nikkei’s calculations, the combined liabilities of Adani’s ten listed group companies—including ACC, Ambuja Cements, and New Delhi Television (acquired by the group last year)—amount to ₹3.39 trillion. An IMF report indicates that India’s nominal GDP stood at ₹273 trillion as of end-October. This places Adani’s debt at approximately 1.2% of the economy. The collective equity ratio of these ten listed group companies stands at 25%. According to Nikkei, as of March 2022, the equity ratio of one such company—Adani Green Energy—was merely 2%. These ten group companies collectively hold over ₹4.8 trillion in total assets, yet investors are growing increasingly concerned about this massive debt burden. The Adani Group includes numerous private companies, meaning its overall debt load could be even higher. Following a report by Hindenburg Research questioning the Adani Group’s debt levels and fund usage, the market capitalization of seven of its listed companies halved, shrinking to under US$100 billion. Adani—who saw his wealth surge rapidly in recent years—unexpectedly withdrew a ₹200-crore follow-on public offer (FPO) that had successfully closed the previous day. The cancellation of the share sale further rattled investor sentiment. The Adani Group dismissed allegations of stock manipulation as “baseless,” stemming from ignorance of Indian law. The company stated that its group companies “have been deleveraging consistently over the past decade.” Last week, the Reserve Bank of India (RBI) allayed speculation about whether India’s banking system could withstand the shock of exposure to Adani Group loans, affirming that the banking sector remains resilient and stable. “Based on the RBI’s current assessment, the banking sector remains resilient and stable. All key parameters—including capital adequacy, asset quality, liquidity, provisioning coverage, and profitability—are healthy. Banks also comply with the RBI’s guidelines on the Large Exposure Framework.” According to a recent report by CLSA, Indian banks’ exposure to Adani Group debt totals nearly ₹800 billion—approximately 40% of the group’s nearly ₹2-trillion total debt. State-owned banks, led by the State Bank of India, account for roughly three-quarters of the Indian banking system’s exposure to the group—and around 30% of the total debt. Private-sector lenders in India hold one-quarter of the exposure, representing 10% of the total loan amount. Foreign banks financed many of the group’s major acquisitions. On Wednesday, during a press conference following the RBI’s monetary policy announcement, the central bank governor downplayed the impact, stating: “The strength, scale, and resilience of India’s banking system are now far greater and stronger… than in the case of isolated events or cases like this.” He added: “The perception arises because of the market capitalization of the group’s stocks. When banks lend to a company—or a group of companies—they do not base lending decisions on that specific company’s market capitalization.”

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