Adani Stocks and Bonds Continue to Tumble; Conglomerate Trades Barbs With Short Seller

The Adani Group, named after India's richest man Gautam Adani, has responded to an American short seller's allegations. However, the group's 413-page response did not stop a decline in the shares and bonds of its companies on Monday.
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On Sunday, the energy and infrastructure group released a statement addressing the allegations of fraud and misconduct put forth last week by Hindenburg Research.

The New York-based firm, which was founded by Nathan Anderson, alleged that stock manipulation and questionable business and accounting practices had caused the market valuation of Adani’s key listed companies to appreciate sharply over the past few years.
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The Adani Group has responded to the recent short seller's report, calling it "a calculated attack on India." The group says that most of the 88 questions raised by Hindenburg Research have already been addressed through public disclosures. They have also included answers to each of the questions raised.
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Hindenburg's response came within hours, saying that the Adani Group's rebuttal had stoked nationalist sentiment and failed to adequately address the issues raised.

The firm has bearish bets on the conglomerate via U.S.-traded bonds and derivatives that aren't traded in India.
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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. was down 20%.
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Adani Green Energy Ltd. (ADANIGREEN) is down 20.00% on the day.
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The seven companies have now lost a combined total of around $64 billion in market value since last Tuesday's close, according to FactSet data. This represents a decline of 20% for each company, which is the maximum single-day decline permitted by the exchange.
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Adani Enterprises Ltd. is a publicly traded company with a market capitalization of 4.21%.
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Despite the overall trend, shares of company XYZ rose 4.2%. This company is pushing ahead with a large follow-on public stock offering, hoping to raise the equivalent of $2.5 billion. Retail subscriptions for the offering are scheduled to close on Tuesday.
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Bond prices for two Adani companies tumbled to around 73 cents on the dollar on Monday, reflecting investor concerns about a potential default. The yield on an Adani Green bond with a 4.375% coupon that comes due in 2024 soared above 20%, according to Tradeweb data.
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In an interview with an Indian television network that aired on Monday, Adani Group Chief Financial Officer Jugeshinder Singh said that the conglomerate has not seen any large, strategic investors exiting their positions in its listed companies.
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"We believe that the current volatility will eventually pass," he said. He added that the group will release its quarterly results in about a week's time.
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"I believe that our group will continue to see success in the future," he said.
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Addressing concerns about the group's ability to repay its debts, Mr. Singh said the credit profile of Adani's large companies was similar to that of India's sovereign enterprises. "We are the highest-rated infrastructure portfolio in the country, with the exception of the government of India," he said.
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Mr. Adani has not made any public comments about Hindenburg's allegations at this time. The 60-year-old industrialist has amassed a great deal of wealth over the past few decades through companies that own coal mines, ports, cement producers, and other assets. He is known to have strong political connections in India.
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The market value of the seven companies bearing Adani’s name, and two other listed industrial companies that the group controls, totaled the equivalent of around $235 billion last week. However, after Hindenburg’s report was released, that number dropped to $169 billion, according to FactSet.
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Adani's share prices have risen sharply over the last year and a half, driving up their price-to-earnings ratios to triple-digit levels. This makes the group vulnerable to attacks from short sellers, according to James Thom, senior investment director of Asian equities at Abrdn.
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"There is clearly a disconnect between valuations and fundamentals," he said.
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The recent sell-off in Adani stocks may have been triggered by worries that MSCI could exclude them from its indexes, according to Deven Choksey of KRChoksey Shares & Securities in Mumbai. He said the large declines could also trigger margin calls for traders who borrowed to purchase the shares, which could result in further selling.