BENGALURU, Jan 25 (Reuters) – Hindenburg Research stated it held brief positions in India’s Adani Group, accusing the conglomerate of improper use of offshore tax havens and flagging considerations about excessive debt that eroded $11 billion in investor wealth on Wednesday.

The group, which is led by Gautam Adani, the world’s third richest particular person in accordance with Forbes, dismissed the U.S. short-seller’s claims as baseless, saying it was timed to wreck its status forward of a big share providing.

The group’s flagship agency, Adani Enterprises (ADEL.NS), will on Jan. 27 launch the nation’s greatest public secondary share providing, aiming to lift $2.5 billion to fund capital expenditure and repay some debt.

Hindenburg, identified for having shorted electrical truck maker Nikola Corp (NKLA.O) and Twitter, stated it holds brief positions in Adani firms via U.S.-traded bonds and non-Indian-traded spinoff devices.

Its scathing analysis report questioned how the Adani Group has used offshore entities in offshore tax havens like Mauritius and the Caribbean Islands, including that sure offshore funds and shell firms tied to the Adani Group “surreptitiously” personal inventory in Adani listed corporations.

It additionally stated key listed Adani firms had “substantial debt” which has put all the group on a “precarious financial footing” and asserted that shares in seven Adani listed firms have an 85% draw back on a elementary foundation because of what it referred to as “sky-high valuations”.

Adani Group’s Chief Financial Officer, Jugeshinder Singh, stated in an announcement the corporate was shocked by the report, calling it a “malicious combination of selective misinformation and stale, baseless and discredited allegations.”

“The Group has always been in compliance with all laws,” the corporate stated, with out addressing particular allegations made by Hindenburg.

“The timing of the report’s publication clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming follow-on Public Offering from Adani Enterprises,” it added.

Shares in Adani Transmission (ADAI.NS) fell 9%, Adani Ports And Special Economic Zone (APSE.NS) slipped 6.3% and Adani Enterprises ended down 1.5%. Collectively, the seven listed group firms misplaced $10.73 billion in market capitalisation.

On bond markets, U.S. dollar-denominated bonds issued by Adani Green Energy (ADNA.NS) dropped almost 15 cents to only below 80 cents on the greenback, Tradeweb knowledge confirmed , whereas worldwide bonds issued by Adani Ports And Special Economic Zone, Adani Transmission and Adani Electricity Mumbai noticed related declines.

The report coincided with bidding for Adani’s secondary share sale by anchor traders on Wednesday, with the corporate noting in a inventory trade submitting participation from Maybank Securities and Abu Dhabi Investment Authority amongst others.

The analysis report, Hindenburg stated, was based mostly on an investigation over two years that concerned talking with dozens of people, together with former Adani Group executives in addition to a overview of paperwork.

India’s capital markets regulator, the Securities and Exchange Board of India, didn’t instantly reply to a request for remark.

Adani has repeatedly dismissed debt considerations. Singh told media on Jan. 21 “Nobody has raised debt concerns to us. No single investor has.”

Hindenburg’s report stated 5 of seven key listed Adani firms have reported present ratios – a measure of liquid property minus near-term liabilities – beneath 1. This, the short-seller stated, steered “a heightened short-term liquidity risk”.

Adani Group’s complete gross debt within the monetary yr ended March 31, 2022, rose 40% to 2.2 trillion rupees.

Refinitiv knowledge reveals debt at Adani Group’s seven key listed Adani firms exceeds fairness, with debt at Adani Green Energy Ltd (ADNA.NS) exceeding fairness by greater than 2,000%.

CreditSights, a part of the Fitch Group, described the group final September as “overleveraged”. While the report later corrected some calculation errors, CreditSights stated it continued to be involved about Adani Group’s leverage.

Hindenburg additionally stated it was involved {that a} excessive proportion of fairness held by promoters or key shareholders in Adani Group listed firms has been pledged for loans.

“Equity share pledges are an inherently unstable source of lending collateral,” it stated within the report. Founded by Nathan Anderson in 2017, Hindenburg seems to be for “man-made disasters” in firms, comparable to accounting irregularities and mismanagement.

Last yr, the Adani Group purchased cement corporations ACC (ACC.NS) and Ambuja Cements (ABUJ.NS) from Switzerland’s Holcim (HOLN.S) for $10.5 billion. Days later, it pledged shares within the two corporations, value about $12.5 billion on the time, to banks in a non-disposal settlement that forestalls it from offloading the shares till lenders agree that money owed are paid.

ACC and Ambuja shares every fell greater than 7% on Wednesday.

Reporting by Chris Thomas, Aditya Kalra and Mrinmay Dey; Additional reporting by Miyoung Kim; Editing by Edwina Gibbs, Louise Heavens and Kirsten Donovan

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