Adani Overhang Easing: Bernstein Report

New Delhi, May 24 (PTI) Brokerage firm Bernstein said concerns surrounding the Adani Group following the 2023 short-seller episode and subsequent US regulatory developments now appear largely behind the group, potentially paving the way for a revival in foreign funding and broader investor participation.

In a report covering four listed Adani companies - Adani Ports and Special Economic Zone, Adani Green Energy, Adani Power and Ambuja Cements - Bernstein said many global funds had stayed away from the group pending clarity on US-related developments, leaving several stocks under-owned despite strong operational execution.

The report said the settlement of the US SEC case and moves by US prosecutors to drop charges against the group had removed a major overhang on Adani stocks, many of which still trade below pre-crisis levels despite a sharp recovery from earlier declines.

"The group has gone through two big events in the last 4 years - the short seller event in January 2023 and US SEC-DoJ related developments starting November 2024. With the latest news from the US, both seem to be behind," it said.

The group is highly debated - many funds stayed away till clarity on the US developments came, and most stocks are still under-owned. "What was never debated though is their execution prowess (except in cement), and how important they are to build Infra in India."

The Adani Group had come under intense scrutiny in January 2023 after US-based short seller Hindenburg Research alleged stock manipulation, improper use of offshore tax havens and accounting irregularities across group companies.

While the ports-to-energy conglomerate repeatedly denied the allegations, calling them baseless and malicious, the report triggered a sharp selloff in Adani stocks, wiped out billions of dollars in market value and led to heightened concerns over leverage and corporate governance.

However, most Adani stocks subsequently recovered part of their losses as the group cut promoter share pledges, reduced debt concerns and restored investor confidence through continued operational growth. SEBI told the Supreme Court of India that it had completed most of its probes and found no evidence warranting cancellation of licenses or broader market intervention, while a limited number of investigations remained ongoing.

Hindenburg later ceased operations and is no longer active.


Separately, in November 2024, US authorities, including the US Department of Justice and the US Securities and Exchange Commission, initiated proceedings linked to alleged disclosures and fundraising practices involving Adani entities.

However, earlier this month a settlement was reached on the SEC-related matter and US prosecutors moved to drop charges against the group, having eased a major overhang on the conglomerate and improved prospects for renewed foreign investor participation and dollar funding access.

The brokerage said the group's core strength remained its ability to execute large-scale infrastructure projects efficiently and gain market share from state-run incumbents across sectors such as ports, logistics, thermal power and renewables.

Bernstein highlighted the group's access to large contiguous land parcels, execution speed and operational scale as key competitive advantages, noting that Adani-controlled assets now account for around 50 per cent of India's container port market.

The report said concerns over promoter share pledges, a major issue during the January 2023 short-seller crisis, had eased significantly, with pledged shares across group firms declining sharply since 2022.

While net group debt has increased by roughly Rs 1 trillion since September 2024 due to aggressive capital expenditure-led growth, particularly at Adani Green and unlisted entities, Bernstein said earnings growth remained strong, with group EBITDA rising at a compound annual growth rate of 22 per cent between FY23 and FY26.

The brokerage noted that the group's net debt-to-EBITDA ratio, which had fallen to 2.7 times during the US-related developments, had risen again to 3.9 times by March 2026, though it remained below levels seen during the short-seller episode.

Bernstein added that the Adani Group had significantly diversified its funding profile over the years, reducing dependence on domestic banks while increasing bond financing. It said access to dollar funding, which had slowed following the regulatory overhang, could improve again after recent developments in the US.

The report said debt repayment schedules, particularly at Adani Green, appeared manageable with no significant near-term maturities, while bond yields had eased and were now below Indian five-year government bond yields.