The Adani Group has halved its revenue growth target and aims to scale down fresh capital expenditure, days after US-based short seller Hindenburg Research put out a tweet, talking about a negative report on the conglomerate that it had published.
The billionaire now seeks to rebuild investor confidence after its listed entities have lost more than $120 billion in market value post Hindenburg's scathing report about the group.
The US short seller report concluded by saying: “After extensive research, we have taken a short position in Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments."
The report made many “allegations" against the group, which has triggered a stock rout. However, the Adani Group has rejected the allegations and denied any wrongdoing, saying the claims are baseless and published a 413-page rebuttal.
Gautam Adani’s conglomerate will now shoot for revenue growth of 15% to 20% for at least the next financial year, down from the 40% growth originally targeted, said a Bloomberg report.
Meanwhile, capital expenditure plans will also be scaled down, the report added, as the group prioritises bolstering its financial health over aggressive expansion.
The shift shows how the ports-to-power conglomerate is focused on conserving cash, repaying debt and retrieving pledged shares as it scrambles to undo the damage from the report published late 24 January.
Even though the group has denied the allegations of accounting fraud and stock manipulation levied by the American short seller, the scandal triggered a fall in the price of their listed stocks.
Holding back on investments for even as little as three months could save the conglomerate as much as $3 billion, the report said, adding that the plans are still imminent.
It further said that funds that can be deployed to pay down debt or boost the cash pile.
The group’s plans are still being reviewed and are set to be finalised in the coming weeks, according to the report.
Adani group firms pledge additional shares for key lender
Three Adani group companies -- Adani Ports and Special Economic Zone, Adani Transmission Ltd and Adani Green Energy Ltd -- have pledged additional shares for State Bank of India (SBI).
SBICAP Trustee Co, a unit of the country's biggest state lender SBI, said it had pledges for shares worth 1% of Adani Ports, up from 0.65%, for 0.55% of Adani Transmission, up from 0.44%, and for 1.06% of Adani Green, up from 0.68%.
The additional pledges are part of a $300 million letter of credit -- issued by a bank to another bank as a guarantee for payments made – provided by SBI for Adani group's Carmichael coal mining project in Australia, a statement from the bank said.
The collateral is reviewed at the end of each month to assess if it needs to be topped up on account of any mark-to-market losses, SBI added.
Assuage concerns
The Hindenburg report was published just two days before 27 January, the day the follow-on public offer (FPO) of ₹20,000 crore of Adani Enterprises was ready to hit the market.
In the days following the Hindenburg-triggered stock meltdown, Adani and his companies have been working to assuage investor and lender concerns.
The stock selloff resumed after MSCI Inc slashed the amount of shares it considers freely tradable for four of the companies – a move that will result in lower weightings in its indexes.
Adani Group has been focusing on staving off concerns about its financial health and shoring up sentiment.
Earlier this month, the group said Adani and his family prepaid loans worth $1.11 billion to release pledged shares across three firms while the ports unit announced plans on 8 February to repay ₹5,000 crore debt in the year starting April to boost a key credit metric.
The conglomerate plans to prepay a $500 million bridge loan due next month after some banks balked at refinancing the debt. It was part of fundraising last year to finance the acquisition of Holcim Ltd’s India cement assets.
Independent audit of group companies
The conglomerate plans to hire one of the “big six" global accounting firms to evaluate its corporate governance and audit practices following allegations of fraud by the US short seller.
The independent audit will be commissioned after the completion of the group’s flagship Adani Enterprises Ltd’s ₹20,000 crore follow-on public offering, and based on that, the legal options will be decided, the people said, requesting anonymity.
The fresh audit is primarily meant to restore the public’s confidence and arrest the fall in Adani group stocks.
In UK, the Adani Group has dropped Deloitte as the auditor of its various subsidiaries last year, replacing it with a far smaller accountancy firm.
Crowe UK has replaced the Big Four firm as the auditor of UK entities including Adani Energy Holdings Ltd after the Indian firm bought them in 2021.
The UK subsidiaries of the Adani Group include a portfolio of renewable power plants across India that were sold to Adani Green Energy Limited by SoftBank Group and Bharti Enterprises in 2021. Adani hired Crowe UK to audit the companies after the acquisition, ditching Deloitte which used to audit the accounts.
Earlier this month, the ministry of corporate affairs has reportedly started a preliminary review of Adani Group's financial statements and other regulatory submissions made over the years.
