Billionaire Gautam Adani is under siege.
Since January 24, Asia’s richest man has been facing serious allegations of fraud, money laundering and price manipulation that threaten to strip him of a large part of his fortune.
The New York investment company Hindenburg Research has indeed launched an offensive against one of the largest Indian conglomerates.
“We have found evidence of brutal accounting fraud, stock manipulation and money laundering at Adani that have occurred over decades,” Hindenburg wrote in a report published Jan. 24.
“Adani has accomplished this gigantic feat with the help of government facilitators and a cottage industry of international companies that make these activities possible.”
The report describes a galaxy of empty entities based in tax havens – the Caribbean, Mauritius and the United Arab Emirates – controlled by the Adani family.
The short-seller alleges that the conglomerate has used shell companies in tax havens to boost its revenues and manipulate the stock price of its various entities. As a result, the company shorted shares of the Adani conglomerate through US-traded bonds and non-Indian-traded derivatives.
This means that Hindenburg Research, a well-known short-seller, is betting on a short-term fall in the prices of these stocks.
These accusations come as the Adani empire tries to attract the general public and foreign institutional investors for a $2.5 billion bid.
‘A calculated attack on India’: Adani
Hindenburg’s report caused a stock market crash for the entities that make up the Adani conglomerate on the Mumbai stock exchange. In total, the Adani empire lost $68 billion in market value during the three trading sessions following the release of the Hindenburg report.
Aware that the first two statements failed to allay Hindenburg’s concerns and questions, 60-year-old Adani has just pulled out the patriotism weapon.
“This is not just a baseless attack on a specific company, but a calculated attack on India, the independence, integrity and quality of Indian institutions, and India’s growth story and ambition,” Adani said in a 413-page report. According to the company, the report answers most of the questions Hindenburg asked on Jan. 29.
In this report, the conglomerate repeatedly says that Hindenburg does not understand how Indian institutions work. It suggests that Hindenburg just doesn’t understand India.
The company strives for nationalism in the hope of undoubtedly generating a wave of sympathy from the local population and the authorities. The word “Indian” appears frequently in Adani’s 413 comment pages.
“The questions are making reckless statements without any evidence and purely on unsubstantiated speculation without any understanding of Indian laws surrounding related parties and related party transactions,” Adani said of questions from Hindenburg about his governance and alleged malpractice.
“The assumption that the entities mentioned in the report are related to Adani-listed entities is imaginary, vague and unsubstantiated and arises only from a lack of understanding by Hindenburg of Indian laws, regulations and accounting standards,” he said. Company. said.
Adani ‘stirred up a nationalist narrative’: Hindenburg
“Hindenburg Research appears to have no understanding of Indian law or accounting standards and yet claims entities are secret ‘related parties’ who have no understanding of what a related party is.”
In addition to accusations of ignorance of Indian institutions, Adani also has no hesitation in accusing the New York firm of rejecting India.
“Hindenburg is deliberately ignoring Indian legal processes and regulations in their innuendo against us,” Adani said.
The short seller sensed the strategy.
“Fraud cannot be covered up by nationalism or an inflated response that ignores every major allegation we have made,” Hindenburg said in a statement.
Adani Group “predictably tried to shift the focus away from substantive issues and instead instigate a nationalist narrative, claiming that our report amounted to a ‘calculated attack on India. the wealth of its chairman, Gautam Adani, with the success of India itself.”
Adani Group is one of the most valuable companies in India. The company owns mines, ports and power plants. It owns a dozen commercial ports and has a presence in coal, electricity and renewable energy. It has also diversified into airports, data centers and defense.
The company also recently entered the cement sector by purchasing assets from cement manufacturer Holcim (HCMLY) in India and also wants to set up an aluminum factory.
Adani has grown the group by acquiring indebted companies.
Last August, Fitch Ratings’ subsidiary CreditSights warned that the Adani conglomerate was “deeply overstretched” and could “slide into a debt trap at worst”.
But two weeks later, the credit rating agency said it found it had made “miscalculations” in two of the Adani Group’s companies. It corrected its report, removing the words “deeply overextended”.
“CreditSights’ views have not changed from the original report and we continue to maintain that the group’s influence is greater,” CreditSights concluded.