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Indian tycoon Gautam Adani’s listed businesses have regained $46bn in market capitalisation over the past month, representing nearly half the losses incurred after Hindenburg Research released a damaging short-seller report almost a year ago.
The sprawling infrastructure conglomerate has been rebuilding its stock market value after the report in January last year accused Adani of accounting fraud and stock market manipulation.
The allegations plunged the group into a public relations crisis, forced it to call off a $2.4bn share sale and wiped as much as $150bn from its market capitalisation despite Adani’s strong denials.
India’s political opposition also seized on the report to attack Prime Minister Narendra Modi, widely perceived to be close to Adani. The billionaire denies benefiting from any personal connection with Modi but says the group aligns itself with the Indian government’s development priorities.
Following a brief recovery rally in March, the market capitalisation of Adani’s 10 listed companies has languished at about Rs10tn ($120bn) for most of the year, roughly half their value prior to Hindenburg’s report.
But since November 24, the stocks have posted average gains of 36 per cent, delivering a recovery of Rs3.8tn in market value and paring overall losses for 2023 to about 25 per cent.
Most of the gains came after a decision on November 24 by the Securities and Exchange Board of India not to request more time for its probe into Adani businesses from India’s Supreme Court, with one official telling justices the regulator had finished investigating all but two of two dozen cases related to the group.
An Asia-based equities analyst at one large European asset manager said the regulator’s decision was “not quite a clean bill of health, but Sebi at least declined to say anything was off after looking into the accusations that were levelled against Adani”.
He added that the market value of the group’s listed companies was unlikely to fully recover from the short-seller report “because the unwelcome publicity from Hindenburg has probably highlighted to even retail investors how richly valued some of these companies were”.
The gains for Adani stocks follow a broader rally for India’s stock marketwith the country’s benchmark Nifty 50 index up 20 per cent over the past year. Sentiment towards the group’s listings was also buoyed in early November, when the US government announced it was lending $553mn to an Adani-led container terminal development project in Sri Lanka.
As its share prices tumbled in the weeks following the short-seller report, Adani moved to reassure its bankers by paying off more than $2bn in share-backed loans that had been taken by the Adani family. It launched a bond buyback at its ports unit and found a new investor — US-based firm GQG — which initially bought $1.9bn worth of stock in March.
“They needed a few billion dollars on a personal level to pay off those loans,” said Samir Arora, founder and fund manager of Helios Capital, who has also invested in Adani stocks. “To get $2bn-$3bn was not an issue and then of course GQG came and solved it for them.”
Adani has insisted the Hindenburg report has not changed operations at his companies, which include ports, airports, cement processors, data centres and even apple farms.
“After the first few days of confusion and market volatility, life inside the organisation continued as normal,” said an Adani executive who asked not to be named. “There was never any cost-cutting that happened. We have only hired more people.
“The first thing he [Adani] did was that he called all the business CEOs and said that they could focus on the businesses and he will take care of the market noise,” the executive added.
The group has pointed to its financial performance as proof that Hindenburg’s attack has not harmed its operating business. The company said its earnings grew by 47 per cent — its best performance — in the first six months of India’s financial year, which begins in April.
The group has also brought its net debt down to 2.5 times its annual earnings, compared with 3.3 times before the short-seller report.
Adani has sold some assets, including shares in his businesses, with one deal involving the sale of shadow bank Adani Capital to US private equity group Bain Capital.
However, the group has also made some acquisitions, buying cement company Sanghi Industries and the news agency IANS.
