Not one of these 88 questions is based on independent or journalistic fact finding. They are simply selective regurgitations of public disclosures or rhetorical innuendos colouring rumours as fact.
The report seeks answers to “88 questions” – 65 of these relate to matters that have been duly disclosed by Adani Portfolio companies in their annual reports available on their websites, offering memorandums, financial statements and stock exchange disclosures from time to time. Of the balance 20 questions, 18 relate to public shareholders and third parties (and not the Adani portfolio companies), while the balance 5 are baseless allegations based on imaginary fact patterns.
Nonetheless, we have responded to all these questions, to the best of our ability, summarised below:
Disclosed, discredited and disproven allegations: Allegations
no. 1, 2, 3, 27, 28, 29, 30, 31, 72, 73, 74, 75, 76, 77, 78, 79, 80 present no new findings and only dredge up allegations, which have been judicially disproven and have also been disclosed by us to our investors and the regulators.
By way of an example, there are multiple false narratives being created in relation to certain allegations concerning diamond exports, which matters have all been closed by the Appellate Tribunal (CESTAT) in our favour. This decision has been further confirmed by the Supreme Court itself twice over, a fact which has been deliberately ignored and concealed in the Hindenburg report (which shockingly raises questions on the competence of the Appellate Tribunal with baseless claims that it has ignored evidence).
Baseless allegations around transactions which are in fact, compliant with law, fully disclosed and on proper commercial terms:
Allegation no. 9, 15, 19, 24, 25, 32, 33, 35, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 53, 54, 55, 56, 57, 58, 59, 60, 61, 81, 82 & 83 are again a selective regurgitation of disclosures from the financial statements of Adani entities to paint a biased picture. These disclosures have already been approved by third parties who are qualified and competent to review these (rather than an unknown overseas shortseller) and are in line with applicable accounting standards and applicable law.
In fact, the mala fide intent of Hindenburg can be clearly seen from it peddling structures that would not be in compliance with corporate governance. By way of example, a fully disclosed transaction (see allegation 61 of the Hindenburg Report) of Adani Enterprises with NQXT to pay a standard security deposit (a common feature under long term take or pay contracts) for use of terminals has been questioned.
Hindenburg seems to suggest that NQXT (a corporate entity in its own right and subject to its own regulations) should provide Adani Enterprises long term terminals for no charges at all – a transaction that would amount to providing a benefit to a related party without arm’s length terms.
In another instance (allegation 41 of the Hindenburg Report), they have falsely claimed that Emerging Market Investment DMCC gave a loan of USD 1 billion to Mahan Energen.
The simple fact of the matter is that Emerging Market acquired the USD 1 billion “unsustainable debt” of Mahan Energen from its lenders for USD 100 as part of a resolution plant duly approved by the National Company Law Tribunal under the Indian Bankruptcy Code. These are mala fide attempts to question bona fide transactions, the details of which are fully disclosed and available in the public domain, to create doubt in the minds of our stakeholders and the public.
Misleading claims around offshore entities being allegedly “related parties” without regard for applicable law and standards:
Allegation no. 4, 36, 37, 38, and 39 from the report are in reference to offshore entities. The queries make reckless statements without any evidence whatsoever and purely on unsubstantiated speculations without any understanding of the Indian laws around related parties and related party transactions.
False suggestions based on malicious misrepresentation of the governance practices inAdani portfolio :
Allegation no. 34, 62, 63, 64, 65, 66, 67, 68, 69, 70, and 71 use selective information to make insinuations, when in fact, the Adani portfolio has instituted various corporate governance policies and committees including our Corporate Responsibility Committee consisting solely of independent directors tasked with keeping the Board of Directors informed about the ESG performance of businesses. Our ESG approach is based on well-thought out goals, commitments and targets which are independently verified through an assurance process.
For instance, Hindenburg has claimed that the Adani portfolio entities have had a “difficult time” retaining our CFOs and that this is a “red flag”. The Hindenburg report conveniently fails to mention that none of the resignation have ever been made pursuant to any alleged concerns against any of the underlying companies.
Another example of where the report exposes its motives is the question around “convoluted structures” and multiplicity of subsidiaries, while failing to comprehend that in the infrastructure business, especially in a sprawling geography like India, most large corporates operate in a similar fashion because projects are housed in separate SPVs and these need to be ring fenced from a lender perspective for limited recourse project finance and in many cases on account of specific regulatory requirements. As an example, transmission projects in India are awarded under tariff based competitive bidding, in such bidding the successful bidder has to acquire the SPV which is undertaking the project. Hence, it is a regulatory requirement as part of the Electricity Act, 2003 and the regulations of the Central Electricity Regulatory Commission to execute projects in different SPVs.
Manipulated narrative around unrelated third party entities:
Allegation no. 5, 6, 7, 8, 10, 11, 12, 13, 14, 16, 17, 18, 20, 21, 22, 23, 26 and 52 from the report seek information on our public shareholders. Shares of listed companies on Indian stock exchanges are traded on a regular basis. The listed entity does not have control over who buys / sells / owns the publicly traded shares in the company. A listed company does not have nor is it required to have information on its public shareholders and investors.
Hindenburg deliberately ignores Indian legal processes and regulations in their insinuations against us. For instance, they have raised several questions around the offer for sale undertaken by Adani Green Energy Limited in 2019 while maliciously ignoring the fact that in India the process for OFS is a regulated process implemented through an automated order book matching process on the platform of the stock exchange. This is not a process which is controlled by any entity and the purchasers are not visible to anyone of the platform.
Biased and unsubstantiated rhetoric:
Allegation no. 84, 85, 86, 87, and 88 from the report are inherently biased statements around our openness to address criticism with a window dressing to garb them as questions. Criticism does not include the right to make false and defamatory statement which could damage the interests of our stakeholders. We continue to have the right to seek judicial remedy before Indian courts when such interests are threatened, and in all cases, we have exercised these rights in due compliance with law and the judicial process.
Hindenburg has sought to spotlight selective media reporting while deliberately ignoring judicial findings. For instance, in another twisting of facts, Hindenburg questions why we sought to have a “critical journalist” jailed. The fact of the matter is that he was never jailed in connection with any proceedings related to us and in fact, a nonbailable warrant had been issued to him by the judge because he failed to appear before the court despite summons an was not complying with the judicial process.
# Portfolio Credit Highlights
Adani Portfolio companies have successfully and repeatedly executed an industry beating expansion plan over the past decade. While doing so, the companies have consistently de-levered with portfolio net debt to EBITDA ratio coming down from 7.6x to 3.2x (Please see Chart A below), EBITDA has grown 22% CAGR in the last 9 years and debt has only grown by 11% CAGR during the same period.
# Equity Injection in the Adani Portfolio
Adani Portfolio has raised USD 16 bn equity under a systematic capital management plan for all the Portfolio companies over the last 3 years as a combination of primary, secondary and committed equity from marquee investors like TotalEnergies, IHC, QIA, Warburg Pincus etc.
# Banking Relationships
The portfolio has developed deep bank relationships with institutions such as JP Morgan, Bank of America Merrill Lynch, Citi, CreditSuisse, UBS, BNP Paribas, Deutsche Bank, Barclays, Standard Chartered, MUFG, DBS and Emirates NBD among others. This has strengthened access to diverse funding sources and structures. Adani Portfolio companies have demonstrated successful syndication of the banking transactions, resulting in de-risking of the banks in volatile markets. Case in point being Holcim’s Indian cement business acquisition with international banks, and Navi Mumbai Airport and Kutch Copper refinery with domestic banks.
# Accounting Process, Centralized ERP governance mechanism and Reporting system
Internal Financial control process and governance mechanism is facilitated and monitored by the group based on five key pillars namely a. Centralized ERP Governance Mechanism and Reporting System b. Periodic internal and external reviews of various processes c. Issuing Corporate guidelines and ensuring their adherence d. Appointment of competent and reputed statutory auditors for all verticals e. Capacity building programs for facilitating the controls With these 5 pillars group ensures that highest standards of governance and reporting is being maintained by all businesses across all verticals. Adani Business Excellence Team (ABEX) is a centralized team which handles accounting and financial controls of all companies across all verticals. These processes have received various six sigma and ISO awards for maintaining highest degree of compliances and governance.
# Robust mechanism for scrutiny and audit, many CFOs have donned the new roles within Adani Group
Adani Group companies also have a very strong audit process in order to prevent any deviations from the regulatory obligations and highest legal standards. The Audit Committee of each of the listed verticals is composed of 100% of Independent Directors and chaired by Independent Director. The Statutory Auditors are appointed only upon recommendation by the Audit Committee to the Board of Directors. Adani Portfolio company’s follow a stated policy of having global big 6 or regional leaders as Statutory Auditors.
Hindenburg has deliberately and repeatedly trivialised the change of CFOs to twist this into a narrative. The fact is that many of the CFOs are still part of the organisation in other capacities to take on larger responsibilities as part of our growth stories. Others have left post retirement or to pursue their own entrepreneurial endeavours and continue to work in our association. None of the resignations have ever been made pursuant to any alleged concerns and Hindenburg’s baseless narrative.
We reaffirm that Adani Group is in complete compliance with all applicable laws and regulations and continue to retain all our rights to pursue remedies to safeguard our stakeholders before all appropriate authorities. We reserve all our rights to respond further to any of the allegations or contents of the Hindenburg report or to supplement this statement
