Hindenburg Research said on Wednesday it held short positions in India's Adani Group, accusing the conglomerate of improper extensive use of entities set up in offshore tax havens and expressing concern about high debt levels.
The report, which comes days ahead of a $2.5 billion share offering by flagship firm Adani Enterprises, sent shares in Adani group firms sliding.
Hindenburg, a well known US short-seller, said key listed companies in the group controlled by billionaire Gautam Adani had "substantial debt" which has put the entire group on a "precarious financial footing".
It also said that seven Adani listed companies have an 85% downside on a fundamental basis due to what it called "sky-high valuations".
An Adani spokesperson did not immediately respond to Reuters request for comment on the report, which Hindenburg said was based on research that involved speaking with dozens of individuals, including former Adani Group executives as well as a review of documents.
Hindenburg said it held its short positions through US-traded bonds and non-Indian-traded derivative instruments.
Adani has repeatedly dismissed debt concerns. Adani Chief Financial Officer Jugeshinder Singh told media on Jan. 21 "Nobody has raised debt concerns to us. No single investor has."
In the wake of the Hindenburg report, Adani Ports And Special Economic Zone APSE.NS slid 7.3% to its lowest level since early July, while Adani Enterprises dropped 3.7% to a near three-month low.
Adani-owned cement firms ACC and Ambuja Cements fell 6.7% and 9.7% respectively.
Hindenburg's report said that five of seven key listed Adani companies have reported current ratios - a measure of liquid assets minus near-term liabilities - below 1. This, the short-seller said, suggested "a heightened short-term liquidity risk."
Adani Group's total gross debt in the financial year ending March 31, 2022, rose 40% to 2.2 trillion rupees.
Refinitiv data shows that debt at all the Adani Group's seven key listed Adani companies exceeds equity, with debt at Adani Green Energy Ltd exceeding equity by more than 2,000%.
CreditSights, part of the Fitch Group, described the group last September as "overleveraged" and said it had concerns over its debt. While the report later corrected some calculation errors, CreditSights said it maintained its concerns over leverage.
Hindenburg is known for shorting electric truck maker Nikola Corp and Twitter though it later reversed its position in Twitter.
Shares in Adani Enterprises surged 125% in 2022, while other group companies, including power and gas units, rose more than 100%.