India’s Adani empire crumbles under fire

(Indian) colossus with feet of clay? A sprawling empire built by a multi-billionaire Gautam AdaniHe is starting to look like he is considered to be the richest person in Asia a house of cards in an unstable balance. The combined value of its major listed companies has fallen by nearly $50 billion in the past two days.

It’s the investment research firm’s fault The Hindenburg Study, specializing in short selling, that is, betting on a stock or a basket of stocks. Disclosure of his position against the Adani group caused a stir a wave of panic among investors. Thus, the listing of various listed companies of the conglomerate had to be suspended during the session held on Friday at the Bombay Stock Exchange.

Gautam Adani also paid the price personally. About a fifth of his fortune has evaporated According to estimates of Forbes magazine, it falls under the symbolic bar of 100 billion dollars. It is so has fallen from the third place to the seventh place in the ranking of the world’s richest peopleBehind Bill Gates.

What does Hindenburg Research accuse him of? In a 100-page report released after a two-year investigation, the firm blames the Indian conglomerate. engaged in “brazen stock manipulation and accounting fraud” for decades“. And even speaks “is one of the clearest examples of corporate fraud in historyif not the most obvious”.

First observation: The prices of 7 major listed companies of the Adani group have risen “mysteriously” in the last three years.. holding Adani Enterprises – which invests in many parts of the Indian economy, such as solar energy, defense or airports – for example, saw its market capitalization drop from $4 billion before the start of the Covid-19 pandemic to around $57 billion at the end. 2022. Or An increase of over 1300%.

“7 [principales] Adani Group listed companies are rated more than 85%even if you ignore our survey and take the companies’ financials at face value,” says Hindenburg Research.

Second observation: several entities of the conglomerate are highly indebted compared to other players in its sector. “There are four of these institutions negative free cash flowwhich indicates that the situation is deteriorating.” The listed company only Adani Ports – India’s largest commercial port operator – can generate significant positive cash flow on a regular basis.

Doubts about the solvency of the Adani group have already been raised CreditSightsA subsidiary of the US rating agency Fitch, in August 2022. conglomerate ‘deeply overwhelmed’.

These criticisms, as well as those of Hindenburg Research, have been deleted by the person concerned. He said in a statement in late August that his company had “successfully and repeatedly” executed its expansion plan over the past decade while steadily reducing debt. Thus, the net debt level of the total portfolio would have fallen to 3.2 times EBITDA.7.6 times compared to 2013.

“Debt ratios of Adani Group companies remain healthy and in accordance with the references of the relevant sectors.” He will recall in a press release issued this week. all its companies are monitored by national and/or international rating agencies as well as various auditors.

The failures of this industry giant come at a very bad time. He just launched A capital increase of $2.5 billion. But the share of Adani Enterprises fell below the bid price for the transaction. This may encourage investors not to participate.

Apart from this, Gautam is planning to do AdaniIPO at least five companies between 2026 and 2028, helping his conglomerate improve debt ratios and expand its investor base. They are potentially disturbing Adani New Industries, Adani Airport Holdings Where Adani Road Transport. If doubts about the health of the group persist, these IPOs may be smaller than expected or even postponed/cancelled.