More than three months after short-seller Hindenberg Research accused Indian mogul Gautam Adani’s conglomerate of engaging in stock manipulation and accounting fraud, the company’s profits are evidence of its business strength. I claim there is.
“It is unfortunate that we had to receive this political and malicious report,” he said. Adani Group Chief Financial Officer Juge Cinder “Robbie” Singh gave an earnings call last week for flagship company Adani Enterprises. “But you see numbers.”
Adani Enterprises’ after-tax profit more than doubled to Rs 7.8 billion ($95 million) in the three months to March compared to the same period last year, with coal trading and mining profits almost doubling before interest and tax .
But the conglomerate, which has thrived on soaring government contracts and years of takeover spree, has had to adapt in many ways after the short-selling attack. Adani was forced to pull back to save cash after the report wiped nearly $100 billion from the group’s market capitalization and Adani Enterprises halted its $2.4 billion additional public offering. I was.
Adani Enterprises said in a stock exchange filing on Wednesday that it was considering selling new shares to raise capital, but did not disclose the amount. That board will meet to decide on Saturday.
Groups that deny Hindenburg’s claims are slowing down acquisitions and buying back bonds to boost confidence.
The company has told investors and market analysts that its head-on growth into new sectors, including media and data centers, has paused. Lacuna, director of infrastructure and projects team at Fitch Ratings “Management understands that they are trying to delay capital spending across the board,” Jain said. “And even in the core areas they’re trying to slow down growth.”
In 2022, Singh said Adani Enterprises will spend $5.3 billion on capital expenditures in fiscal year 2024. This month, he lowered his estimate to $3.8 billion.
Adani Ports and Special Economic Zone, the logistics arm of the conglomerate, has cut capital spending in half this year compared to last year and has begun a $650 million bond buyback. Adani’s Ambuja Cement said this month it had canceled an engineering contract worth 18 billion rupees.
The group also appears to have refrained from seeking government bids. Adani Green Energy, the group’s renewable power arm, failed to win any of the 30 new renewable power bid proposals issued in India in April, according to Gurgaon-based consultancy JMK Research. .
Asked about the company’s failure to participate in new tenders on this month’s earnings call, Adani Green Energy’s head of business development said: . . we already have quite a bit of capacity. As such, we focus on and time the opportunities for increased value. Not necessarily aggressive in the market right now. ”
A spokeswoman for Adani said the group has not changed its overall strategy for participating in the tender or investment plans for its core infrastructure business. A Short Selling Report spokesperson added, “Capital spending in new non-core investment areas is being revalued in the near term as we continue to work with stakeholders to address the economic impact.” .
Dealmaking is also on the back burner. Adani said he canceled his $847 million purchase of a coal-fired power plant in India in February and has refrained from taking on new deals since. impacting the market.
A Mumbai banker said Adani built his empire on a “blitzkrieg” of acquisitions. A period of silence for the big man “will certainly affect investment bank earnings as he is important to the business,” the banker added, adding, “It’s like the Chennai Super Kings leaving the Indian Premier League.” he said, referring to his second-place team in the top cricket league.
Following the short-selling attack, analysts expect Adani to struggle to secure new funding. Adani Green Energy, which is developing a 25GW renewable energy portfolio, on a quarterly basis he is making a profit of Rs 50 crore and in 2024 he will repay $1.25 billion in two bonds. I have to.
“Reports like Hindenburg raise more questions in the minds of investors,” said the analyst, who requested anonymity for fear of repercussions from Adani. It makes it difficult.”
“They will pay attention to things like corporate governance because people are watching them very closely,” said Anish Teri, managing partner at Mumbai-based fund manager QED Capital.
On Friday, index provider MSCI announced that it would reduce the weight of two Adani stocks. Adani Total Gas, the city gas business of Adani and Total Energies, and power company Adani Transmission have revalued their float sizes from 25 to 14 percent and from 25 to 10 percent. . cents, respectively. MSCI calculates stock weights based on free float.
Adani said he is “working on increasing its depth” [the] shareholder register and [the] Free float across our company portfolio”.
Despite rejecting Hindenburg’s findings, Adani responded to one criticism by changing one company’s auditors. The Hindenburg report criticized Shah Dhandharia, auditor of Adani Enterprises and Adani Total Gas, as a “small company” that “appears to have little ability to undertake complex audit work.”
Last week, Adani Total Gas replaced its Ahmedabad-based auditor four years before it expired, and announced Walker Chandiok, an Indian affiliate of London-based auditor Grant Thornton, as the new auditor.
Sharmila Gopinath, expert adviser to India at the Asian Corporate Governance Association, said, “If you want some reassurance in the audit process, you have to rely on a large auditor. It is particularly important for investors, he added.
A spokeswoman for Adani said Adani Total Gas intended to change auditors before the Hindenburg report.
India’s home supreme court in March directed India’s market regulator, Sebi, to investigate the conglomerate.
The short-selling report has also had an impact on Indian politics. The opposition seized on the issue to intimidate Prime Minister Narendra Modi a year before the national election.
Modi and Adani, both from Gujarat, are widely perceived to have a close relationship that analysts say is now the political responsibility of the prime minister.
Shruti Kapila, professor of history and political science at the University of Cambridge, said, “Modi should not be too complacent about the Adani problem.”
Kapila said how Modi handles the Hindenburg report “will really matter, especially how he punishes opposition leaders.” “It can backfire.”
Additional reporting by John Reid of Bengaluru
