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Business News/ Companies / News/  Each one of Hindenburg’s allegations is a lie: Adani’s Jugeshinder Singh

Each one of Hindenburg’s allegations is a lie: Adani’s Jugeshinder Singh

The Adani Group CFO put up a confident front, stating that the follow-on public offer (FPO) of flagship Adani Enterprises will continue as scheduled

 Jugeshinder Singh, chief financial officer, Adani GroupPremium
Jugeshinder Singh, chief financial officer, Adani Group

Still bristling at the allegations made by self-proclaimed short-seller Hindenburg Research, Jugeshinder “Robbie" Singh, the chief financial officer of Adani Group, put up a confident front on Sunday evening, stating that the follow on public offer (FPO) of flagship Adani Enterprises will continue as scheduled.

“If you are in a match of kickboxing, to expect that there will be no kick landing on you is a false assumption. These things happen, and you are mentally prepared for this. It hasn’t altered anything," Singh said in an interview. These days, only chairman Gautam Adani and Singh are the faces of the group when it comes to media interactions.

Explaining that Adani Group has had three unexpected event risks in recent years, which caught them unawares: the global pandemic, the Russia-Ukraine war and the ambush by Hindenburg, Singh said each of these was a learning experience and will help in handling future situations better.

The Adani group has launched a full-scale operation to redeem its image, with the group CFO revealing that by late Sunday evening, it will file before regulators, stock exchanges, and other stakeholders “documentary evidence" that the (Hindenburg) report is a “litany of misrepresentations, falsehood" and an attempt by the short-sellers to use publicly disclosed data to create an event by which a “particular set of people" (read short sellers) can benefit at the expense of investors.

Hindenburg’s representation of these disclosures, in some cases ignore a Supreme Court (judgement), “in another case, the high court making a judgement, and ignoring those and still raising questions," Singh fulminated. “It raises malicious intent and the deliberate attempt to mislead the public and other stakeholders. “We will provide in full documentary form, and that is why our core long-term strategic institutional investors have reposed faith, and we are continuing with the FPO as scheduled." As for Singh, an Australian citizen with a Person of Indian Origin card, his daily calendar, even after the Hindenburg ambush, is unchanged and includes a morning and evening tryst at the gym. Edited Excerpts:

Is there a plan B for the FPO because the share price is at an 11% discount to the offer price? Why will investors apply when the stock is available cheaper?

There are two aspects to it. The question is relevant to retail investors, and it may put a significant dent in retail participation. But from a strategic, long-term institutional participation, the value of Adani Enterprises going up or down 5-10% is less relevant because fundamentally, the valuation is in the airports business, in Adani New Industries in data centres, value sits in the road business, etc., and those businesses are going perfectly well. At the portfolio level, this Sunday, the group made 1,100 crore in Ebitda. Next week, the group will make another 1,100 crore Ebitda. The long-term investor will look at the value of these businesses, and that is still exactly the same. As Adani Enterprises shareholders, they will get those businesses as shares. That’s where the value is, and they will eventually get the value. They understand that value is not going to come today. Those businesses will be demerged in 3-5 years’ time. That value is intact even today.

Who do you think are the forces behind Hindenburg?

We don’t want to speculate. That will be known in the fullness of time. As senior executives, our focus always remains on the core business. We say on every third page of our group presentations that our main focus is creating good quality assets and running them in a world-class manner, and making sure that those assets are properly funded. That remains our focus. We don’t want to get into speculation as to who is behind it or who is not behind it. Our objective remains one, to highlight to stakeholders and investors that the report is just a collection of misrepresentations and, secondly, to continue with the FPO, which showcases the support of institutional investors.

You had said you would pursue legal options, to which Hindenburg said it would welcome a lawsuit in the US. Are you moving ahead?

The legal process will be evaluated in the fullness of time. There is no rush to do anything. As highlighted in the statement, we will evaluate all legal options. Their entire report is based on our disclosures. All documents are already public and you will see that in our comprehensive response. We will see what course the legal team wishes to take, but it will happen in the fullness of time.

What gives you the confidence to go through with the FPO? Do you have investors willing to come in and bridge any shortfall?

We have the information based on our roadshow. And we are confident about that.

Have you entered into any underwriting agreements to bridge the shortfall, if any?

FPOs are not underwritten. There is no specific requirement for this. That’s not a contingency for us anyways. Our focus remains on the fact that long-term strategic investors are looking at the value of the underlying assets, and that value is still there today, irrespective of what happens to Adani Enterprises’ share price. Strategic investors want to invest in AEL because they believe that sometime in future, they will get Adani Airport shares and Adani New Industries shares. That value is still there as it is. That has not been affected by any of this share movement.

Do you expect the HNI and retail investor categories to get fully subscribed?

We believe there will be significantly lesser participation. But once you have institutional participation, how retail behaves and how HNIs behave is a different matter. From an FPO point of view, it is not a relevant factor as to which category is investing how much. What matters is that the total FPO gets subscribed.

On FPO roadshows, you mentioned that one of the intents was to expand the shareholder register. That target is unlikely to be met.

It expands the institutional investor base. You are correct, it might not expand the HNI, ultra HNI, or family office investor base. But we will see how it pans out over the next two days.

Are you disconcerted by the fact that the market was ready to believe the Hindenburg report? That there is a perception deficit when it comes to corporate governance with the Adani group.

I’m a student of history and I come from Punjab. It doesn’t surprise me. In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians. So am I surprised by the behaviour of some fellow Indians? No. A white person gave an order that some Indians should fire is a possibility. It happened in my state, and we memorialize that day.

A lot of people say Adanis are too big to fail. So have you received feelers from the government or the regulators on this situation?

No. FPO is proceeding on the basis of the roadshows done by the company executives. We are in an open-free society, and the group stands on its merits. The government’s job is from a policy and strategy perspective, which they are doing a great job, and we expect that to continue. Our job is to run a good business, which we will continue doing. And we are confident in doing it through our own strength and on our own merit.

On the MSCI index, have you received any communication after the tremors faced in the Adani counters?

That is a normal response to volatility. Index managers tend to check and get market feedback, so we will wait for that.

While you said most assertions in the report are based on your own disclosures, there are certain other aspects, such as round-tripping allegations

One round-tripping, they say, is that $1 billion was provided to Adani Power by one of the family companies, and they have asked the question of where that one billion came from, and their insinuation is that it is round-tripping. In that transaction, Adani Power acquired Essar Mahan from the IBC process. The committee of creditors accepted that bid, and it was approved by the NCLT and was subject to NCLT judgement. Within that process, the resolution professional came up with the sustainable debt numbers, and that number was of Indian domestic banks. There was an ECB debt provided to Essar Mahan, which was considered unsustainable and therefore was worth only $100. ECB debt cannot be acquired by domestic corporate. And, therefore, from a disclosed entity, we acquired that debt for $100. And this is what they call round tripping of $1 billion. If they had done any research, they would have known that it was an NCLT order. And therefore, they have deliberately done this to buttress the case of round-tripping. This is a factual misrepresentation and almost bordering on a deliberate lie. We will respond to each one of them. Each one of them is such a lie.

There are concerns about the Adani group’s debt exposure to Indian banks. Bank stocks were also hit badly. How would you reassure people that banks will not be hit?

First, for somebody like State Bank of India, we are 0.5% of their exposure. Second, almost 100% of that exposure is asset-based. Even though this report is full of misrepresentations and falsehoods, even in that report, they could not find anything wrong in any of our operating entities. So there is no issue with any of the operating entities with respect to their ability to service debt. They have been doing that for the past 30 years, and they will continue doing that for the next 30 years.

We have zero corporate borrowings, so the need for borrowing additional funds and putting them into the companies is not there. 100% of our borrowings are asset-based. We are classical infrastructure finance. We don’t borrow on a corporate basis. If you look at Adani Transmission, its credit rating is the same as SBI bank itself. All our businesses are close or equal to sovereign credit rating. Against a portfolio Ebitda of $8 billion, our net debt is approximately $26 billion. Even if you put a 10% cost of funds, our annual interest payment will be $2.6 billion against a cash flow of $8 billion. Our debt service is close to three times in relation to the debt service coverage ratio.

How have been the last 72 hours for you at a personal level, given the firefighting you may have had to do?

These things tend to happen sometime in a professional career. If you are in a match of kickboxing, to expect that there will be no kick landing on you is a false assumption. These things happen, and you are mentally prepared for this. It hasn’t altered anything. The day-to-day work continues the same way. The personal routine doesn’t change. I wake up at 5.30 am, and I go to the gym at five minutes to six. Takes me about 45 minutes to finish my session. I have exactly the same thing every morning—two boiled eggs, egg white only, and half a cup of coffee. And then I am at work. If I’m at home, I take my kids to school, walk with them to school, and then I go to my office. I finish work by 9.30-10 pm, and then I’ll go and do my evening gym session. I have a pending folder of emails, and I make sure that all pending emails get cleared, and then I go to sleep.

Did this take you by surprise?

We have a specific risk program by which we plan for what we call event risk. For us as a group, in the last three years, there have been three such events, one was specific to us, then the event of covid and the event of the Ukraine war. We always assume an event can occur. Mentally we are prepared for an event in the sense that we look at the fact that if a significant global event were to occur, how it would impact us and what are our threshold risk scenarios. From that point of view, we are fully prepared. Yes, this event is unique in terms of its own characteristics, and we will pick up the learnings from this and build them into our risk models.

Given this episode’s impact on retail investors, what sort of communication are you engaged in with the regulators?

That is what bothers us; we are not sellers of equity. We have not sold a single share. Why are we preparing a 400-page report? Our core concern is about the damage it has caused to retail investors. We have to do a proper analysis and provide proper feedback to the regulators. One feedback that will go to the regulators today is that falsehoods can be presented in the Indian market and that falsehoods can travel so much without any investigation in India. Now the next part is what we have to do. We are making that risk assessment. As we go through that risk assessment, we will look at the data, especially around trading. We will do an analysis of F&O trading and short selling. Once we do that analysis and we believe that the data is relevant, then it will go to the regulators. Our report today will go to the regulators in India, banks, credit rating agencies, to the public. We can’t just go have a dialogue with the regulators. We have to handle this in a mature, calm and sensible manner and make a comprehensive response. Because it impacts the common man, and we owe it to them to make a comprehensive change if it is required. What I assure you is that we will include it in our risk modelling.

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Updated: 30 Jan 2023, 06:28 AM IST
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