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Indian Prime Minister Narendra Modi's party has "nothing to hide or be afraid of" on the controversy over Adani group, the home minister said on Tuesday, responding to opposition allegations of favouring the conglomerate attacked by a U.S. short seller.

Led by billionaire Gautam Adani, the business house's seven listed companies bearing his name have together lost about $120 billion in market value since a Jan. 24 report by Hindenburg Research alleged improper use of offshore tax havens and stock manipulation. The Adani group has denied the allegations and threatened legal action against Hindenburg.

"The Supreme Court has taken cognisance of the matter. As a minister, if the Supreme Court is seized of the matter it is not right for me to comment," Amit Shah, widely considered the most powerful politician in India after Modi, told the ANI news agency.

"But in this, there is nothing for the BJP to hide and nothing to be afraid of," Shah added, referring to the ruling Bharatiya Janata Party (BJP).

He denied allegations of crony capitalism and suggested the opposition to go to court if they had proof.

The Adani crisis has stalled parliament, ignited street protests by the opposition, sparked off investigations by regulators and weighed on the broader markets in a challenge to Modi ahead of a string of state elections this year and general elections next year.

Rivals including the main opposition Congress party accuse Modi and the BJP of longstanding ties to the apples-to-airports Adani group, going back nearly two decades when Modi was chief minister of the western state of Gujarat. Gautam Adani and Shah also come from the same state.

Modi's immense popularity, however, appears intact for now, according to approval ratings.

Without referring to Adani, Modi told parliament last week that the "blessings of 1.4 billion people in the country are my protective cover and you can't destroy it with lies and abuses", as opposition lawmakers chanted "Adani, Adani".

FLAGSHIP'S RESULTS

There was some respite for the Adani group on Tuesday as shares of its flagship company Adani Enterprises (ADEL.NS) rose as much as 10% after it reported a quarterly profit versus a loss a year ago on strong performance in its key coal trading division and airports business.

Adani Enterprises, which pulled a $2.5 billion share sale earlier this month after the stock rout, reported a profit of 8.2 billion rupees ($99.12 million) for the December quarter, compared to a loss of 116.3 million rupees a year before.

"Shares are reacting to the results and reversing some shorts that might have built up due to speculation," said Sameer Kalra, equity research analyst and founder of Target Investing, adding, however, that it will be the current quarter's results that will be the one to watch.

Shares of Adani Power (ADAN.NS) and Adani Green Energy (ADNA.NS) fell 5% in a wider Mumbai market (.NSEI) that was up around 1%.

Two large companies within the Adani group are likely to repay their short-term commercial paper (CP) debt as they come due over the next few months, instead of rolling them over as is normal, two merchant bankers and a company official directly familiar with the matter told Reuters.

India's Economic Times daily reported on Tuesday that Adani group executives had been holding negotiations since last week with Abu Dhabi's International Holding Corp (IHC) for capital infusion into Adani Enterprises or other group entities.

Adani did not immediately respond to a request seeking comment. IHC declined to comment.

The Adani group has appointed accountancy firm Grant Thornton for independent audits of some of its companies, Reuters reported on Monday, citing sources, even as India's market regulator said it was investigating the report by Hindenburg, as well as market activity immediately before and after the report was published. (Reuters)