Adani Group Tries To Reassure Market, Saying Its Companies’ Balance Sheets Are ‘Very Healthy.’
The Adani Group on Monday issued a new statement in response to claims of pricing manipulation and accounting fraud made by US short-seller Hindenburg Research, claiming that the financial sheets of each of our independent portfolio firms are quite robust. The Adani Group declared that its growth plans are unaltered, its business plans are fully funded, and it is still confident in its ability to reward shareholders with profits.
Adani Group Tries To Reassure Market, Saying Its Companies’ Balance Sheets Are ‘Very Healthy.’
The Adani Group on Monday issued a new statement in response to claims of pricing manipulation and accounting fraud made by US short-seller Hindenburg Research, claiming that the financial sheets of each of our independent portfolio firms are quite robust. The Adani Group declared that its growth plans are unaltered, its business plans are fully funded, and it is still confident in its ability to reward shareholders with profits.
The Adani Group on Monday released a new statement as the Securities Exchange Board of India (Sebi) prepares to provide an update on its investigations into the Adani Group’s cancelled follow-on public offering. The Adani Group asserted that the financial statements of each of its independent portfolio companies are substantial in its statement on Monday evening.
This comes in response to claims that the business would postpone new capital investments and has cut its sales growth ambition in half. According to a remark from The Adani Group in the media, “Our business plan is fully funded, and we have market-leading development skills, good corporate governance, secure assets, and robust cash flows.”
“Each entity will assess its capital market strategy once the current market stabilises. You may be sure that we are still confident in our portfolio’s ability to give our shareholders good returns, as the business was cited as saying by the media.
According to the report, the Sebi is anticipated to meet with Finance Minister Nirmala Sitharaman on February 15.
The finance minister will get advice from the Sebi board regarding the regulatory body’s surveillance measures implemented amid the recent decrease in Adani Group share prices. Following accusations published by the American research company Hindenburg Research on January 24, the shares of Adani Group companies have sharply fallen. The Adani Group has lost over $120 billion due to allegations of “stock fraud and financial malfeasance” made against the business.
The claims have significantly reduced market confidence and negatively impacted equity performance. According to an article, the Adani Group has significantly decreased its projected revenue growth goal for the upcoming fiscal year from 40% to 15% to 20%. According to the report, the company will cut down on some of its anticipated capital investments to put financial stability ahead of growth.
In light of the decline in the conglomerate’s stock market valuation, Moody’s Investors Service cut the outlook for Adani Green Energy and three other businesses supported by Indian businessman Gautam Adani on Friday. It was recently announced by Morgan Stanley Capital International (MSCI) that it would limit the number of openly traded shares used in its computations.
MSCI predicts that the free float of Adani Enterprises Ltd, Adani Transmission Ltd, Adani Total Gas Ltd, and ACC Ltd. will be affected. The revised regulations will become operative on March 1, 2023. On January 30, 2019, this group of businesses accounted for 0.4% of the MSCI Emerging Markets Index’s total weight. MSCI made the call after deciding to investigate investor worries about the free-float market status of companies in the Adani Group.
Adani Group Companies Pledge More Shares For A Key Lender.
Share commitments have been made by Adani Transmission Ltd., Adani Green Energy Ltd., and Adani Ports and Special Economic Zone Ltd. to the State Bank of India (SBI). The largest state lender in the nation, SBI, through its subsidiary SBICAP Trustee Co., reported that it had pledged 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%.
The bank asserted in a statement that the new commitments are part of a $300 million letter of credit issued to the Adani company for its Carmichael coal mining project in Australia. A letter of credit is a promise provided by one bank to another to make payments. At the end of each month, the collateral is evaluated to determine whether it needs to be topped off due to mark-to-market losses.
Assuage Concerns
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 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 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 totalling $1.11 billion to free pledged shares from three different companies. At the same time, the ports unit declared plans to pay off 5,000 crores in debt on February 8 to improve a crucial credit measure.
After some banks refused to refinance the debt, the conglomerate decided to prepay a $500 million bridge loan due next month. Last year, it was a component of the fundraising efforts to pay for purchasing cement assets in India owned by Holcim Ltd.
Independent Evaluation Of The Group Firms
Following claims of fraud by the US short seller, the conglomerate intends to hire one of the “big six” international accounting firms to assess its corporate governance and audit procedures. According to the persons, who asked to remain anonymous, the independent audit will be ordered following the completion of the 20,000 crores follow-on public offering by the group’s flagship Adani Enterprises Ltd.
The primary goals of the new audit are to regain public trust and stop the stock decline of the Adani group. Last year, the Adani Group in the UK replaced Deloitte as the auditor of its many companies with a much smaller accounting company.
After the Indian company acquired them in 2021, Crowe UK became the auditor of UK firms, including Adani Energy Holdings Ltd.
Adani Green Energy Limited, a wholly owned subsidiary of Adani Group headquartered in the United Kingdom, has a portfolio of renewable energy plants in India that was sold to it by SoftBank Group and Bharti Enterprises in 2021. After finalising the purchase, Adani brought Crowe UK as the new auditors instead of keeping with Deloitte.
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.
‘Reassure Investors’ Efforts.
Last week, index provider MSCI announced it would reduce several weightings in its stock indices while Moody’s lowered the credit outlook for some Adani companies. All of the Adani group’s stocks experienced pressure on Monday. While Adani Total Gas, Adani Power, and Adani Transmission each had a 5% decline, Adani Enterprises plummeted by 7%.
Since the release of the Hindenburg study, Adani Total, a joint venture with TotalEnergies of France, has lost 70% of its value, while Adani Enterprises has lost 50%. Adani Group has promised to evaluate the short-sellers claims independently. It has repaid a portion of its $25 billion debt since publishing the Hindenburg report, but the destruction of its securities has persisted.
“It will take three to six months for the effects of management’s efforts to reassure investors to start manifesting in share prices. Price damage has been considerable, according to Profitmart Securities’ head of research Avinash Gorakshakar. One hundred Communist Party of India political operators and activists protested in Mumbai, chanting anti-Adani slogans and holding posters picturing Adani and Narendra Modi.
Critics in the opposition charge that Modi’s administration has given the Adani Group excessive favours. Both the government and Adani dispute having unduly intimate relations. According to Feroze Mithiborwala, among the protesters, “the consequence of our actions is clear because Adani stocks continue to plunge.”
Concerns regarding the vulnerability of Indian and foreign lenders to the Adani Group have also surfaced recently. The firm had disputed Hindenburg’s claims and cited its connections to foreign banks as evidence of its resilience.
The DBS Group of Singapore reported on Monday that it had 1.3 billion Singapore dollars ($979 million) in exposure to Adani group entities, of which 1 billion ($756 million) was used to finance the cement industry. DBS asserted that it has no worries about being exposed to the organisation.
edited and proofread by nikita sharma
