(Bloomberg) -- Hedge funds and distressed debt specialists have scooped up bonds related to Gautam Adani’s business empire, a potential sign of encouragement for the group as it seeks to shore up confidence in the wake of a scathing short-seller report.

Oaktree Capital Management, one of the world’s largest opportunistic debt firms, and Davidson Kempner Capital Management were among those buying the debt in recent weeks, according to people familiar with the matter, who asked not to be named as the deals aren’t public. Hindenburg Research had said in its critique of the Adani companies that it took a short position through US-traded bonds. 

The purchases add to nascent signs that a rout in the Indian conglomerate’s securities is easing after some of its bonds fell into distressed territory and more than $100 billion of equity value was erased. The Adani group has stepped up its defense measures this week by prepaying loans and pledging to reduce debt ratios, helping to stem a three-week selloff.

“The dichotomy between equity markets and bond markets seems to re-emerge, with bond markets stabilizing, highlighting a reduced risk of default on debt,” Sanford C. Bernstein analysts Nikhil Nigania and Anusha Madireddy wrote in a note Tuesday. “We would think debt market should ideally be a leading indicator here if debt is the concern.” 

Across the board, there are signs of pressure easing following Hindenburg’s allegations that the group had inflated revenue and stock prices, which Adani has repeatedly denied. Shares of Adani Enterprises Ltd., the flagship company, jumped more than 13% in early Mumbai trading on Wednesday after a similar gain in the previous session. Seven of the conglomerate’s other nine stocks also rose. 

Some of Adani’s dollar bonds fell into distressed territory following the release of the Hindenburg report on Jan. 24, pushing debt investors to hold initial talks with financial advisers and lawyers to weigh options.

More recently the securities clawed back some of the losses. Nine of 15 dollar bonds issued by the group rose Tuesday, according to data compiled by Bloomberg. 

Distressed funds have been actively trading the bonds from their Asian offices, according to a person familiar with the matter. It’s not clear whether the firms already held Adani bonds prior to Hindenburg Research’s scathing report. Representatives for Oaktree and Davidson Kempner declined to comment. The Economic Times earlier reported details of distressed funds buying Adani’s bonds. 

While the purchases may be encouraging, the involvement of distressed debt firms is also an indication of how far the bonds have fallen.  

On a call with clients last week, trading executives at Goldman Sachs Group Inc. said Adani securities had drawn interest from opportunistic investors amid the slump. 

The Goldman Sachs traders said Adani debt had hit a floor in the short term and bonds of Adani Ports & Special Economic Zone Ltd. had become interesting at the current price. The price of those bonds rose in the following days as investors looked to capitalize on the potential for a rebound. 

Earnings Reports

There were more encouraging signs for traders this week. 

Adani Ports & Special Economic Zone Ltd. said Tuesday it will repay around 50 billion rupees ($605 million) of debt to improve its leverage metrics. That came a day after the billionaire and his family prepaid $1.11 billion worth of borrowings backed by shares in three group companies, including Adani Ports.

Some of the indebted conglomerate’s companies also reaffirmed their strength in earnings reports this week. Strong earnings show Adani Green Energy Ltd. has a “robust capital management program with leverage well aligned with the business model,” Chief Executive Officer Vneet S. Jaain said Tuesday. 

“In the last few days, this has been further reaffirmed by the ratings agencies, equity and credit research analysts and various banks, financial institutions, long term investors and other key stakeholders,” Jaain said.

There were also earning beats by Ambuja Cements Ltd. and Adani Transmission Ltd., though the ports unit missed estimates. 

Adani Enterprises shelved a plan to raise as much as 10 billion rupees via its first-ever public sale of bonds following the market rout, according to people familiar with the matter.

While Adani Ports and Special Economic Zone Ltd. was said to have met its coupon payments last Thursday, other tests loom. On Friday, it was reported that India’s Ministry of Corporate Affairs has started a preliminary review of Adani Group’s financial statements. 

--With assistance from Catherine Bosley, Divya Patil, Rajesh Kumar Singh, Harry Suhartono, Ishika Mookerjee and Shikhar Balwani.

(Updates with Wednesday’s stock performance in the fifth paragraph.)

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