A US-based financial forensics firm has alleged that India’s Adani Group, led by the world’s third-richest person Gautam Adani, is involved in “blatant stock manipulation” and an “accounting fraud scheme”. .
In a report released yesterday (January 24), the New York-based short seller said the $218 billion conglomerate was “pulling the biggest scam in corporate history.”
“We have identified 38 fictitious Mauritian entities controlled by Vinod Adani or close associates. We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the United Arab Emirates, Singapore and several Caribbean islands,” the report says, referring to Gautam Adani’s older brother, Vinod Adani.
“Many of Vinod Adani’s associated entities have no obvious signs of operations, including informed employees, separate addresses or phone numbers, and no significant online presence. Despite this, they have collectively transferred billions of dollars to private and publicly traded entities in Indian Adani, often without the required disclosure of the related party nature of the deals,” the report says.
Earlier, the financial research firm’s allegations of “intricate fraud” at US electric truck maker Nikola Corporation in 2020 led to the ouster of its former CEO Trevor Milton.
Hindenburg’s two-year investigation has now shown that more than $100 billion was added to Gautam Adani’s net worth in the past three years, largely due to an 800% rise in share prices over this period. .
“The report is a malicious combination of targeted misinformation and outdated, baseless and discredited allegations that have been proven and rejected by India’s highest courts,” Jugeshinder Singh, Adani Group CFO said in a statement, responding to the report. Hindenburg.
Shares of Adani Group’s seven listed entities plunged as much as 7% on Indian stock markets at press time today. This equates to a loss of $7.7 billion in market capitalization, according to BSE data.
Adani is one of the largest business groups in India and is often seen as cannot be allowed to fail. The huge pile of debt in his portfolio has been a matter of concern. In the year ending in March 2022, its gross debt increased 40% to $26.9 billionfrom $19.2 billion a year ago.
The group’s collapse would wreak havoc not only on Indian equity markets, but also on retail investors, as several public sector banks and India’s largest insurer, Life Insurance Corporation, have indirect exposure to it. A significant portion of Indian taxpayers’ money is held by these government-run entities.
Hindenburg takes a short position on Adani
Hindenburg Research also said it had taken a short position in the group through its US-traded bonds and India-traded derivatives, meaning the company expects a correction in overleveraged Adani shares.
“Even if you ignore our research findings and take Adani Group’s financials at face value, its seven key publicly traded companies are down 85% purely fundamentally due to sky-high valuations,” the report said.
It comes at a time when Adani Enterprises, the group’s also separately listed holding company, plans to raise $2.5bn through a follow-up public offering (FPO) this week. It is touted as the largest FPO in Indian history.