Why Is Adani Group Accused Of Stock Manipulation And Fraud By Hindenburg?
Following the release of a report by investment research company Hindenburg Research that purported to show that the company had been “engaged in flagrant stock manipulation and fraudulent conduct plan throughout the several decades,” shares of Adani Group firms fell dramatically on Wednesday. Adani Enterprises’ $2.5 billion share offering was just around the corner, and this news came just days beforehand.
According to Reuters, the primary listed firms in the conglomerate have “significant debt,” which now has placed the whole company on a “difficult financial foundation,” according to Hindenburg, which holds short positions in Adani companies via US treasuries and non-Indian-traded derivative contracts.
According to Reuters, Jugeshinder Singh, the Adani Group‘s Chief Financial Officer, expressed dismay at the study and regarded it as a “malicious combination of selected falsehoods and stale, unsubstantiated, and debunked charges.”
So, what exactly does Hindenburg Research do?
According to their website, forensic financial investigation is Hindenburg Research’s area of expertise. In its own words, it has “a historical concentration on equities, credit, and derivatives analysis” and boasts decades of experience in the investment management sector.
According to the organisation, “the most significant research results from unearthing difficult-to-find information from unconventional sources,” and it looks for “fraudulent practices; unethical actors in administration or key service provider positions; unreported related-party activities; illegal/unethical business or financial reporting methods; and unreported regulatory, product, or financial difficulties” in businesses.
The Adani Group, led by Gautam Adani, was the subject of a report from financial research firm Hindenburg Research on Wednesday. The Group was allegedly involved in “decades-long stock market fraud involving manipulation and accounting irregularities,” according to the investigation.
Ten things to be aware of are as follows:
1) According to new research by Hindenburg Research, the seven publicly traded firms that make up the Adani group are overvalued by a factor of 85.
2) The debt that the corporation has was mentioned in the report. Among the most significant Adani businesses that are listed publically have racked up a lot of debt, particularly by using shares of their overpriced shares as collateral to secure loans. ‘Current ratios’ below 1 were recorded by 5 of 7 significant listed corporations, indicating short-term liquidity concern “says the report.
3) The research said that eight of the company’s twenty-two most important positions were filled by relatives of Gautam Adani, the company’s founder, and chairman.
Hindenburg posed the following queries at the report’s conclusion:
- Around 2004–2005, Rajesh Adani, Gautam Adani’s younger brother, was charged by the Directorate of Revenue Intelligence (DRI) of being a key player in a diamond trade import/export scam. He was then detained twice on suspicion of importing illegal coal and evading customs taxes as well as falsifying import paperwork. Why then was he elevated to the position of Managing Director at the Adani Group given his past?
- Samir Vora, Gautam Adani’s brother-in-law, was charged by the DRI with leading a diamond trade scheme and making numerous false claims to authorities. Given his background, why was he appointed to Executive Director of Adani Australia, a vital division?
- To what extent, taking into account all of his positions in agreements and organizations that have done business with the Adani Group, has Vinod Adani contributed to the Adani Group up to this point?
- According to the research, The Adani Group has already been the subject of 4 significant government fraud investigations that have raised allegations of corruption, tax fraud, and money laundering totaling an estimated $17 billion in the United States.
- According to the report, members of the Adani family allegedly worked together to establish offshore shell companies in tax haven nations like Mauritius, the UAE, and the Caribbean Islands while producing forged import/export documentation in an apparent effort to generate fictitious or fraudulent turnover and steal money from the listed companies.
- According to the research report, many of the largest “public” offshore shells and funds are connected to the Adani Group “(i.e., non-promoter) holders of Adani stock, a situation that, if Indian securities regulator SEBI’s rules were followed, would result in the delisting of the Adani companies.
- It’s been widely reported that a large portion of the so-called “public “funds are (1) Mauritius or offshore-based corporations, typically shells; (2) have beneficial ownership concealed via nominee directors; (3) own portfolios consisting nearly exclusively of shares in Adani listed businesses; and (4) have little to no diversification.
- In response, the Adani Group referred to the article as “a vicious blend of selected misinformation and trash.”
- “We were shocked to learn that Hindenburg Research conducted a study on January 24, 2023, before getting in touch with us or attempting to confirm the statistics. The research is a vile compilation of unfounded claims which have been examined and rejected by India’s highest courts but are also outdated, baseless, and unverified.” CFO of the Adani Group Jugeshinder Singh
- “Since the report has been out there for so long, it was likely released deliberately to tarnish the Adani Group’s prestige. The main goal was to hurt Adani Enterprises’ upcoming follow-on public offering, which will be the biggest FPO in India’s history.
- Detailed analyses and assessments produced by top national and international credit rating organizations and financial specialists have always served as the foundation for the investor community’s faith in the Adani Group. One-sided, driven, and unsupported reports with vested interests do not impact our intelligent and informed investors, “The CFO of Adani Group remarked.
- He assured them that the company “has always acted in line with all legislation, irrespective of jurisdiction,” and that it “preserves the greatest norms of corporate governance.”
- The research was released before Adani Enterprises, the group’s flagship company, made its follow-on public offer (FPO). The FPO issuance will commence trading on January 27, 2023, at a floor price of 3,112 rupees per share.
- Between 3% and 7% of the seven listed Adani group firms’ stocks decreased.
Based on its findings, the company has contacted Adani Group with 88 inquiries.
Adani Group denies the report and labels it “malicious.”
The research report by Hindenburg has been disputed by Adani Group, who has labeled it dishonest. Adani released a statement in which he claimed that “The study is a purposeful mash-up of inaccurate material and old, baseless, and proven accusations that have been invalidated by India’s highest courts.”
The group “maintains the greatest standards of corporate governance” and has always complied with all regulations, no matter the jurisdiction. The report was also criticized by Jugeshinder Singh, CFO of the Adani Group, who stated, “We were shocked to discover that Hindenburg Research published a report on January 24, 2023, without making an effort to contact us or validate the factual information.
The study is a purposeful amalgamation of claims that have already been tested and rejected by India’s highest courts. These claims are old, baseless, and unproven.” He went on to say that the timeframe of the report’s publication “certainly reveals a brazen, mala fide intent to undermine the Adani Group’s repute with the major aim of undermining the planned Follow-on Public Offering from Adani Enterprises, the largest FPO ever seen in India.”
edited and proofread by nikita sharma
