Nine months on from Hindenburg Research’s shocking Adani Group short-sell report, Adani Gas has become the first entity within the Indian conglomerate to achieve the 85% downside suggested by Hindenburg.
When Hinderburg laid out its 30,000-word anti-investment thesis against Adani, the New York-based firm had this to say: “Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations.”
Since then, Adani Gas’ share price has collapsed from 3,901 Indian rupees (INR) on January 23 (one day before Hindenburg’s calamitous report), to just 572 INR today.
In dollar terms, Adani Gas’ market value has shrunk from around $50 billion to $7.6 billion.
Adani Enterprises as a whole has fared better, having managed to recover a sizeable chunk of its valuation on the National Stock Exchange in Mumbai.
Adani Enterprises’ share price initially fell below 1,120 INR, but has since recovered back above 2,304 INR.
At its lowest point, Adani Group had lost $150 billion in market value.
Hindenburg was particularly sceptical of Adani Gas’ auditor credentials in the initial report, pointing out that the audit partner at Shah Dhandharia who signed off on Adani Gas’ annual audits was 23 years old when he began approving the audits.
“He had just finished university. Is that individual really in a position to scrutinise and hold to account the financials of a firm controlled by one of the world’s most powerful individuals?” Hindenburg wondered.
Researchers were also suspicious of Adani Gas’ executive-level churn, particularly the rate of turnover in the chief financial officer position.
However, that was only light criticism compared to Hindenburg’s accusations of “brazen stock manipulation and accounting fraud” over the course of a decade within Adani Group.
Hindenburg also criticised the level of debt taken on across Adani Group subsidiaries.
Despite the crumbing Adani Gas valuation, founder and chairman Gautam Adani recently managed to secure a $3.5 billion financing agreement from 10 major banks including Barclays PLC (LSE:LON:BARC), BNP Paribas (EPA:BNPP) and Deutsche Bank (ETR:DBKGn).