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Hindenburg shorts Concerns about debt and accounting are raised by the Adani Group in India.

Hindenburg Research said on Wednesday that it had short positions in India’s Adani Group. It accused the conglomerate of making too much use of entities set up in tax havens outside of India and said it was worried about the company’s high levels of debt.

The report came just days before the main company, Adani Enterprises, sold $2.5 billion worth of shares. This caused shares in the Adani Group companies to fall.

Hindenburg, a well-known U.S. short-seller, said that key listed companies in the group controlled by billionaire Gautam Adani had “substantial debt,” which put the whole group on “precarious financial footing.”

Related: Adani Group of India intends to demerge more businesses and dismisses debt concerns.

It is also said that “sky-high valuations” mean that seven Adani-listed companies have a fundamental downside of 85%.

Reuters asked Adani for a comment on the report, which Hindenburg said was based on interviews with dozens of people, including former Adani Group executives, and a review of documents. A spokesperson for Adani did not respond right away.

Hindenburg said that it held its short positions through U.S. bonds and derivative instruments that were not traded in India.

Adani has repeatedly brushed off worries about debt. On January 21, Adani’s Chief Financial Officer, Jugeshinder Singh, told the media, “No one has told us to worry about debt.” “No investor has ever.”

After the Hindenburg report came out, Adani Ports and Special Economic Zone fell 7.3% to its lowest level since early July, and Adani Enterprises fell 3.7% to a level that hasn’t been seen in almost three months.

Graphic: Market cap and price changes for Adani Group stocks Market cap and price changes for Adani Group stocks

ACC and Ambuja Cements, which are both owned by Adani, fell by 6.7% and 9.7%, respectively.

Hindenburg’s report said that five of the seven most important publicly traded Adani companies had current ratios below 1. A current ratio is a measure of liquid assets minus short-term liabilities. The short seller said that this showed that there was “a higher short-term liquidity risk.”

During the financial year that ended on March 31, 2022, Adani Group’s total gross debt rose by 40% to 2.2 trillion rupees.

According to data from Refinitiv, all seven of the Adani Group’s most important publicly traded companies have more debt than equity, with Adani Green Energy Ltd.’s debt being more than 2,000% higher than its equity.

CreditSights, which is part of the Fitch Group, called the group “overleveraged” and said it was worried about its debt in September of last year. Even though the report was later updated to fix some math mistakes, CreditSights said it still had concerns about leverage.

Related: A fishing community is protesting against Indian businessman Adani’s plans for a huge port.

Hindenburg is known for shorting the electric truck company Nikola Corp. and the social media site Twitter, though it changed its mind about Twitter later.

In 2022, shares of Adani Enterprises went up by 125%, and shares of other group companies, such as power and gas units, went up by more than 100%.

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