About four months after US short-seller Hindenburg Research shook Indian financial markets with a bombshell report on the Adani Group, the conglomerate’s stocks are finding it hard to shake off the impact.

While two of Adani’s 10 stocks have bounced back strongly, a full recovery to pre-Hindenburg levels looks a ways away. The group’s market value is still down more than $100 billion since Hindenburg’s January 24 report, which claimed that billionaire Gautam Adani’s empire was “pulling the largest con in corporate history.” The rout had reached $153 billion at one point.

“Adani stocks have seen a readjustment of their valuations. The froth that existed prior to Hindenburg has gone away and won’t come back,” said Abhay Agarwal, founder and fund manager at Mumbai-based investment firm Piper Serica Advisors Ltd. “While investors are less concerned about governance issues at the group now than they were in the aftermath of the Hindenburg report, it is unlikely to erase all the losses over the next three, six or even 12 months.”

Overall, the median decline in 10 Adani stocks over four months stands at 23 per cent. That’s more than a 19 per cent median loss over a similar period for shares of some other key companies targeted by Hindenburg since 2020, including Adani.

The Indian group has been one of the most high-profile targets for Nathan Anderson’s company, which has had a run of often-successful bets from electric-vehicle maker Nikola Corp. and Icahn Enterprises LP.

The short seller’s attack has left the group reassessing its grand ambitions after it racked up one of the country’s heftiest debt loads to fund fresh areas of growth. Adani — who has been closely associated with Prime Minister Narendra Modi’s nation-building efforts and has seen his conglomerate witness explosive growth since the leader came into power — is dialing back on ambitions to dive further into aluminum, steel, and road projects, Bloomberg News reported in March, citing people familiar with the group’s inner workings.

Adani has vigorously denied Hindenburg’s allegations and maintained it is fully compliant with disclosures required under local laws. The group didn’t respond to an email seeking comments for this story. Hindenburg also didn’t reply to emailed requests for comment by Bloomberg News.

Much of the Adani stocks’ revival can be attributed to a strong backing by star emerging-market investor Rajiv Jain, who serves as chief investment officer at GQG Partners LLC. The firm helped stem the rout when it bought shares in four Adani units from a family trust, and has added to its holdings further. Sentiment also got a lift after a panel appointed by India’s top court said it found no regulatory failure or signs of price manipulation in Adani stocks.

On their part, the tycoon, his family and firms have been prepaying some debt, buying back some bonds and holding investor roadshows in a bid to restore confidence. In a report Monday, the group said its key debt metrics have improved.

Crown Jewel

Leading the rebound in the equity market are cash-generating businesses that have some of Adani group’s most lucrative assets.

Adani Ports & Special Economic Zone Ltd. — touted by market watchers as the conglomerate’s crown jewel — in late May became the first group stock to briefly erase all the losses since Hindenburg’s attack. All 21 sell-side analysts tracked by Bloomberg have a buy rating on the stock. Adani Power Ltd. is roughly 6 per cent away from reclaiming lost ground. The company India’s largest private coal-based energy producer — saw its profit more than double in the year ended March.

Some more gains could come after Indian exchanges announced an increase in daily price bands for four Adani Group companies effective Wednesday. The limit for Adani Power — which has climbed in each of the last four sessions — is set to rise to 20 per cent from 5 per cent.

Down more than 80 since January 24, Adani Total Gas Ltd. has borne the brunt of the selloff in Adani shares. Adani Enterprises Ltd. is about 30 per cent below its pre-Hindenburg level. On the debt side, Adani Ports’ note due in July 2024 is the only one among the group’s 15-dollar bonds to have recouped all losses, albeit briefly.

In its report, Hindenburg said it had taken a short position in Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments.

After campaigning against Adani, Hindenburg has bet against Jack Dorsey-led Block Inc. and Icahn Enterprises, which has billionaire Carl Icahn as its chairman. Shares of the latter plummeted 20% after Anderson’s firm took a short position — with losses extending to 56% as of June 2 close.

India’s broader stock market, meanwhile, seems to have put the Adani-Hindenburg saga behind. The benchmark NSE Nifty 50 Index has rallied about 7 per cent this quarter and is close to surpassing an all-time high reached in early December.

Investors in Adani stocks are awaiting the findings of a probe by India’s markets regulator into Hindenburg’s claims. The nation’s top court has asked for the investigation to be closed by August 14. The regulator is also proposing to seek more disclosures from foreign funds with large holdings in local stocks or companies, following criticism about lack of oversight over inflows into sprawling conglomerates such as the Adani Group.

Key catalyst

For now, investments from Jain of GQG Partners appear to be a key catalyst for Adani stocks. He said last week that GQG values Adani-related holdings at about $3.5 billion after a recovery in share prices from post-Hindenburg lows.

“We are certainly interested in investing further in Adani,” GQG Partners’ Jain told Bloomberg News in an interview last week. “But it depends on a lot of things, including pricing. Nothing is written on stone.”

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