FEBRUARY 10, 2023
New Delhi: There have been numerous claims about Adani Group being in gross debt. This added to the recent allegations of accounting fraud and financial troubles by Hindenburg Research, fueled concerns among investors that the bubble might pop soon. An analysis by Nikkei Asia shows that the debts owed by the Adani Group are equivalent to at least 1 per cent of the Indian economy.
As per Nikkei, the liabilities attributed to ten of Adani’s listed companies including ACC, Ambuja Cements, and New Delhi Television, add up to 3.39 trillion rupees, calculated using data from QUICK FactSet. Nikkei says it used the latter when there were discrepancies between figures disclosed by Adani and those compiled by QUICK FactSet.
According to the International Monetary Fund, India’s nominal gross domestic product at the end of October stood at 273 trillion rupees. That puts Adani’s debts as a percentage of the economy at around 1.2 per cent.
The ten Adani Group companies that have been used in the calculation, had a collective equity ratio of 25 per cent and hold 4.8 trillion rupees in total assets, said Nikkei’s report. One of them, Adani Green Energy, had an equity ratio of just 2 per cent as of March 2022, it added.
Adani’s troubles came into the public domain on 24 January 2023 when US short seller Hindenburg Research issued a scathing report alleging accounting fraud and stock manipulation by the conglomerate over several years. As per Hindenburg, many of Adani Group companies are on “precarious financial footing” with an insufficient amount of liquid assets.
Adani Group vehemently opposed these allegations, but listed companies’ stock prices have tumbled ever since the report was published. Adani has lost nearly half its market value in roughly a week since Hindenburg published its accusations.
Adani Group’s flagship company Adani Enterprises announced on 1 February 2023 that it is stepping back from a fully subscribed follow on public offering (FPO). In a video released soon afterward, billionaire founder Gautam Adani said the move was meant to “insulate the investors from potential losses.”
“Our balance sheet is healthy and assets robust,” Gautam Adani added.
On Monday, Adani Group announced that it is paying off $1.1 billion in loans backed by the group’s shares in a bid to shore up investor confidence. However, a recent report has suggested that Gautam Adani was faced with a margin call of more than $500 million on a $1.1 billion share-backed loan.