On the anniversary of short seller hedge fund Hindenburg Research’s allegations against the Adani Group, billionaire Gautam Adani seems to be on a stronger wicket than ever in terms of his businesses, stock performance, investor interest in the stock while regulatory probes have given him a clean chit. 

The number of retail investors buying the group companies stocks has risen over 40 per cent since the rout in early 2023, some of the biggest global institutions such as State Street, Neuberger Berman, Jupiter and Blackrock have increased their exposure multiple times to offshore bonds by the group companies and the equity market capitalisation has swelled over $60 billion in less than two months. 

Seven Adani group stocks were underperformers in 2023 ending with losses ranging from 8 to 73 per cent; Adani Total Gas being the worst performer. However, Adani Power bucked the trend and rose 76 per cent in the year while Adani Ports too gained 27 per cent. All the stocks have been gainers this year so far. 

In the aftermath of the Hindenburg allegations dollar bonds issued by the group had crashed and several bond holders sent out advisories on not increasing exposure to the group. 

The group market cap is just about $50 billion away from fully recouping the losses that it suffered in January last year. 

The allegations and the fall-out

Exactly a year ago, Hindenburg Research came out with a litany of findings, accusing the Adani group of stock manipulation, accounting fraud, inflating valuations, siphoning out money and creating a complex web of shell companies that invested in group entities, flouting regulatory norms.

The carnage that followed wiped out over $150 billion worth of market capitalisation of the company. It also resulted in the scrapping of ₹20,000 crore follow-on public offering by Adani Enterprises to fund several new ventures and pay down debt.

The company went into damage control mode, reaching out to the media to present its side of the story and conducting roadshows for its offshore bond holders. Between March and August it raised over $4.6 billion through the sale of strategic stakes in the group companies, to GQG Partners and Qatar Investment Authority. This helped to stabilise share prices and boost investor confidence. In the interim it also paid off ₹16,500 crore worth of share-backed funds and another ₹5,600 crore taken as a bridge loan to fund the acquisition of ACC-Ambuja Cement.

Two important developments served to further increase confidence in the group. An expert panel set up by the Supreme Court to look into the allegations did not disclose any violations, while in January this year the apex court gave a clean chit to the group. 

Infusion of funds by joint venture partner TotalEnergies and financing provided by the US government-backed DFC to a port in Sri Lanka are signs that global investors are convinced about the company’s growth. 

A big impact that the case has had on the market is that it has prompted the Securities and Exchange Board of India (SEBI) to turn its lens on beneficial ownership of FPIs. Foreign investors with over 50 per cent of assets in a single corporate group and over ₹25,000 crore AUM in the Indian markets have to disclose details of ownership, economic interest and control in such funds. These regulations take effect from February 1 this year.

The incident has also served to make the Adani group more mindful of its total debt exposure as well as keep an eye on share-backed funds.