Adani-Hindenburg issue: Sebi has not found any irregularities yet, claims report

Market regulator Securities and Exchange Board of India (Sebi) has said that it is currently looking into the specific allegations made by US-based short seller Hindenburg Research against the Gautam Adani-led conglomerate in its report published in January. A Bloomberg report has claimed that Sebi is examining both parties' (Hindenburg and Adani Group) accusations, but has not yet found any irregularities in the documents. Sebi, however, hasn’t issued any official statement on its investigation yet.

The report said that Sebi is closely inspecting the Adani Group's listed firms, their functioning, and trading of shares. But the market regulator has clarified that its actions should not be construed as a formal investigation.

On February 13, Sebi told the Supreme Court that it is “enquiring” into the allegations made by American short seller Hindenburg Research against the Adani Group of companies and its impact on the markets. Sebi said it was looking into the market activities of the whole group “preceding and post the publication of the report”, to detect if there were violations of its regulations.

The Hindenburg report, which went public on January 24, accused the Adani Group of “brazen stock manipulation and accounting fraud for decades”. It further said that the Indian conglomerate was involved in stock manipulation and fraud using shell companies. In its report, the short seller said that key listed Adani companies have taken on substantial debt, including pledging shares of their "inflated stock" for loans, putting the entire group "on precarious financial footing".

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The report triggered a massive selloff of Adani Group stocks. The group’s market capitalisation has slipped below Rs 7 lakh crore by the end of Monday. The group’s market capitalisation eroded by another Rs 34,000 crore on Monday, taking the total market capitalisation erosion to 64 per cent or about Rs 12.37 lakh crore since the release of the Hindenburg Research report.

Flagship Adani Enterprises’ market capitalisation (mcap) stood at Rs 1.36 lakh crore, as of Monday, 65 per cent below the value of Rs 3.92 lakh crore on January 24. Adani Total Gas, Adani Green Energy and Adani Transmission have shed more than three-fourths of their value since January 24.

On Tuesday, many Adani Group stocks made a strong rebound after it was reported that the embattled group was planning to prepay or repay share-backed loans worth $690 million to $790 million by March end.

Despite the massive bloodbath in the market, S&P Global last week affirmed its rating on Adani Green Energy at 'BB+' with a stable outlook. The American credit rating agency has removed the company from under-criteria observation.

S&P said it expects the company's restricted group to help meet repayment obligations due to its strong reserving mechanism.

Adani Green's restricted group 2 includes three entities namely Wardha Solar (Maharashtra), Kodangal Solar Park, and Adani Renewable Energy (RJ).

On December 14 last year, the agency published its revised criteria for rating project finance transactions and placed Adani Green Energy Ltd under criteria observation. The agency on Friday said it has completed its review of AGEL RG2 and "believes the revised criteria does not impact our assessment of the project's creditworthiness".

Last week, even Fitch Ratings affirmed the 'BBB-' ratings on the $400-million senior secured notes issued by Adani Transmission Ltd. The outlook of the embattled Adani Group company is stable, the rating agency said.

Adani Transmission's RG1 includes six co-issuers - Barmer Power Transmission Service Limited, Chhattisgarh-WR Transmission, Hadoti Power Transmission Service, Raipur-Rajnandgaon-Warora Transmission, Sipat Transmission Limited, and Thar Power Transmission Service - and one non-issuing SPV, Adani Transmission (Rajasthan) Ltd (ATRL).

Fitch in its statement said that ATL RG1's credit assessment is not directly affected by the alleged malpractices at India's Adani group highlighted in Hindenburg Research's report due to the ringfenced nature of these assets. The offshore bondholders benefit from a robust cash flow waterfall mechanism and covenants that restrict cash upstreaming to shareholders and limit indebtedness. Moreover, ATL RG1 has a 30-year largely amortizing bond.

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Also read: Adani Group plans to repay up to $790 million share-backed loans by March-end

Also read: Adani-Hindenburg row: JPMorgan Chase's investment arm offloads ESG funds of Adani Group stocks

Also read: Adani Enterprises, Adani Green, Adani Power shares extend fall; Adani group m-cap drops below Rs 7 lakh crore mark

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