Investors in group’s bonds run for exits

A sell-off in dollar bonds tied to Indian billionaire Gautam Adani intensified on Thursday as a short seller’s accusation of stock manipulation and accounting fraud revived concerns about the conglomerate’s debt woes.

At least eight notes issued by Adani Group companies were lower in Hong Kong on Thursday, with losses ranging from 0.3c to about 5c on the dollar, Bloomberg-compiled prices show. The retreat started on Wednesday after Nathan Anderson’s Hindenburg Research said it had taken a short position via US-traded notes and derivative instruments traded outside India.

Hindenburg’s attack comes at a critical time for Adani as he seeks to raise his international profile and is aggressively branching into new businesses.

Adani Enterprises is seeking to raise 200-billion rupees ($2.5bn), with the flagship saying on Wednesday that it allocated 18.27-billion shares to investors.

The broadside, which has so far wiped $12bn off the conglomerate’s stocks, coincides with a key share sale from Adani’s flagship company.

While some of Hindenburg’s allegations against Adani aren’t new, including bubbly stock valuations and concentrated holdings by Mauritius-based investors, the short seller’s bets are an ominous reminder of long-held concerns about the group’s elevated debt load.

“A lot of the negatives and uncertainties surrounding Adani Group entities like leverage and corporate governance that the report focused on were already known, but the detail and extent of the research and timing of the release, with several Asian markets still out, saw a large impact,” said Kaveh Namazie, a credit analyst at Australia & New Zealand Banking Group.

Among the biggest losers are Adani Ports and Special Economic Zone’s 2024 notes, which fell by 3.7c on the dollar, the biggest single-day drop since April 2020, Bloomberg-compiled prices show. Adani Group entities saw their bond prices fall anywhere between about 1c and 14c on the dollar on Wednesday, according to Bloomberg’s BVAL valuation service.

Hindenburg Research alleges a web of Adani family-controlled shell entities in tax havens in the Caribbean, Mauritius and the United Arab Emirates. It says these were used to facilitate corruption, money laundering and taxpayer theft, while siphoning money from the group’s listed companies.

Adani Group is “evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research”, Adani Group’s legal head, Jatin Jalundhwala, said on Thursday. Jalundhwala called it “intentional and reckless attempt by a foreign entity to mislead the investor community and the general public”.

As investors digest the news and its fallout, selling in the bonds associated with the conglomerate may become less indiscriminate. “I would expect more differential between the various Adani Group [dollar] issuers, with Adani Ports’ fundamentals making it more attractive than its sister companies,” Namazie said.