Last week US investment firm Hindenburg Research announced a short position on Adani Group's shares, accusing the conglomerate of accounting fraud and stock manipulation. In response the company's share price fell sharply. Five of Adani Group's seven publicly traded companies had fallen by 16%-20% by Friday. Overall Adani Group's seven companies saw a combined $47 billion wiped off their value after Hindenburg's report.
Despite the crisis, Adani Group founder and chairman will visit Israel this week for the ownership handover ceremony of Haifa Port from the Israeli government to the consortium of Adani Group and Israeli company Gadot. Prime Minister Benjamin Netanyahu, who is facing his own crisis with the business community due to his plans to reform the judicial system, will also participate in the ceremony, which marks the completion of the privatization process. While their respective crises weigh on both men, the ceremonial atmosphere has the potential to ease their troubles.
Israeli government ministries are not especially bothered by concerns for the business viability of Adani because Haifa port has already been purchased and the new management are respected Gadot appointees and the investment in the port is relatively small compared with Adani's global business empire.
The Adani-Gadot consortium acquired Haifa Port with a bid of NIS 3.9 billion - NIS 1 billion higher than the nearest bid. Since the tender win, financial data has been published revealing that the Adani Group is highly leveraged and concerns were raised regarding the completion of the purchase. One of Credit Suisse's companies published an assessment according to which "a bad scenario could lead it into a spiral and a massive debt trap." However, the group published a special presentation with data showing that its leverage is reasonable and its stability is sound.
The purchase of Haifa Port was completed at the beginning of the month with a NIS 1.6 billion loan at an interest rate of 7.5% over two years, and the balance from the consortium's own sources. The Adani-Gadot Group believes it has made a good deal, since Haifa Port has about NIS 1 billion in cash earmarked for upgrading the port's infrastructure.
Published by Globes, Israel business news - en.globes.co.il - on January 29, 2023.
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