Adani hires auditors for damage limitation
INDIA’S MARKET REGULATOR TO INVESTIGATE SHORT SELLER’S ALLEGATIONS
INDIA’S Adani Group has appointed accountancy firm Grant Thornton for independent audits of some of its companies in a bid to discredit claims by short seller Hindenburg Research that have battered its stocks and bonds, two people familiar with the matter said on Monday (13).
The appointment marks the first major effort by Adani Group to defend itself in the wake of a January 24 report by Hindenburg that accused it of improper use of offshore tax havens and stock manipulation.
The conglomerate, led by billionaire Gautam Adani, has strongly denied the allegations, but investors remain concerned.
Shares in the group’s seven listed subsidiaries have cumulatively lost about $120 billion (£98.3bn) in market value in the past three weeks. Adani Group said last week it was considering independent evaluation of issues relating to legal compliance, related party transactions and internal controls following the Hindenburg report.
Grant Thornton has been hired to conduct independent audits of some Adani Group companies, said the sources, declining to be named as the appointment is confidential.
One of the sources added that Grant Thornton would look at whether related-party transactions at the Adani Group complied with corporate governance standards.
Grant Thornton and Adani Group did not immediately respond to a request for comment.
Adani Group sought to reassure investors on Monday, saying it had strong cashflows, its business plans were fully funded and that it was “confident in the continued ability of our portfolio to deliver superior returns to shareholders.”
But regulatory pressure has been increasing. India’s market regulator confirmed on Monday it was investigating the report by Hindenburg, as well as market activity immediately before and after the report was published. The Securities and Exchange Board of India (SEBI) has been probing the market rout, including examining trade patterns and any potential irregularities in the $2.5 billion share sale of flagship company Adani Enterprises that the Adani group was forced to cancel due to the stock’s plunge.
SEBI confirmed the existence of the investigation for the first time in a Supreme Court filing.
“SEBI is already enquiring into both the allegations made in the Hindenburg report as well as the market activity immediately preceding and post the publication of the report,” the regulator said in the filing seen by Reuters, adding the matter was in early stages of examination.
During a court hearing on Monday where the Supreme Court heard public interest petitions that raise concerns about steep investor losses, India’s Solicitor General Tushar Mehta, arguing on behalf of the government and SEBI, said there was no objection if a panel was setup to examine protection mechanisms for investors. The judges told him to come back with the remit of such a panel, and scheduled a further hearing for Friday (17).
SEBI was scheduled to brief federal finance ministry officials on Wednesday (15, after Eastern Eye went to print) on its investigation into the shelved share sale, two sources told Reuters on Monday. SEBI and the finance ministry did not respond immediately to Reuters requests for comment. The US short-seller’s report said it had identified numerous “undisclosed related party transactions” by both listed and private Adani companies, alleging it was in violation of Indian disclosure laws.
In its rebuttal, Adani had said “all related party transactions are at arm’s length, properly disclosed and reviewed/audited by statutory independent auditors.”
The Adani crisis has sparked worries of financial contagion in India, protests in parliament, ratings outlook downgrades of some Adani units and cast a shadow on the group’s capital raising plans. Gautam Adani has also lost his crown as Asia’s richest person. Adani Group’s statement said “once the current market stabilises, each entity will review its own capital market strategy.”
In recent days, concerns have also arisen about exposure of Indian and foreign lenders to the Adani Group. In its rebuttal of Hindenburg’s allegations, the conglomerate had pointed to its international banking relationships as a sign of its strength.
Singapore’s DBS Group said on Monday it had a S$1.3bn ($976 million) exposure to Adani group companies, out of which S$1bn was to finance its cement business. DBS said it was not concerned about its exposure to the group. Last week, Moody’s downgraded the ratings outlook for some Adani companies, while index provider MSCI said it would cut the weightings of some in its stock
indexes.