International Tax Panorama

The Adani Group is again embroiled in a new controversy since late January, when U.S.-based activist investor Hindenburg Research accused the group for stock manipulation.

Now an investigative report by Indian business news outlet The Ken raised questions about the group’s claim about repaying $2.15 billion in loans borrowed against its stock earlier this month.

According to the detailed report published by The Ken, the Adani group is misleading the market by publishing half-truths.

Failure to disclose release of shares to stock exchanges:

As per the laws, disclosures on the release of shares must be filed with stock exchanges by lenders within 2 working days and by promoters within 7 working days. But neither the Adani Group nor the lenders have made these disclosures to stock exchanges.

Debt still not paid in full, despite claims: 

On 6 March, the number of promoter shares in Adani Green pledged with SBI almost doubled. The same day, the promoters’ shares in Adani Transmission pledged with SBI also more than doubled. The group’s promoters had pledged these shares towards existing loans for Adani Enterprises

Adani group misrepresented in publicity material to indicate that the entire margin-linked share-backed debt had been repaid.

Despite the Adani Group’s claim of “complete” repayment of $2.15 billion in share-backed debt, regulatory filings show that banks have not released a significant portion of the promoters’ shares held as collateral, indicating that the debt has not been fully paid off

The pledged shares of Adani Green and Adani Transmission have not been released by banks even a month after the loan repayment. This is highly unusual as pledged shares are usually released immediately after the borrower settles their debts.

Quoting a banker, the report said Adani Group still need the existing pledges after the repayment of loans because of the plummeting value of pledged shares, which would be insufficient to recoup the loans in case of a default.

The group has only reduced the loan amount through partial repayment to avoid pledging more shares and any action against it by the lenders.

ET Report on another set of loans by Adani Group

Business news daily Economic Times separately reported that the Adani Group was seeking to renegotiate the terms for $4 billion worth of loans it had borrowed last year to fund its acquisition of two Indian cement companies—ACC and Ambuja Cements.

Citing multiple sources “aware of the ongoing negotiations,” the ET report added that the group is negotiating the extension of the term for a $3 billion bridge loan from 18 months to five years or longer, while also attempting to extend the tenure of $1 billion worth of mezzanine loans from 24 months to five years.

Impact of the report: 

Shares of the conglomerate’s flagship firm Adani Enterprises were down around 7% in late afternoon trading local time, while shares of the group’s other listed firms slumped around 5%.

After a media report challenged claims made by the Adani Group on debt repayment totaling $2.15 billion, stock exchanges NSE and BSE today sought clarification from the embattled group.