Billionaire Gautam Adani is under siege.
Since January 24, Asia’s richest man has faced serious allegations of fraud, money laundering and price manipulation that threaten to strip him of much of his fortune.
Indeed, the New York investment firm Hindenburg Research has launched an offensive against one of the largest Indian conglomerates.
“We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, which has been going on for decades,” Hindenburg wrote in a report released Jan. 24.
“Adani has achieved this gargantuan feat with the help of facilitators in government and a cottage industry of international companies that facilitate these activities.”
The report describes a galaxy of fictitious entities based in tax havens – the Caribbean, Mauritius and the United Arab Emirates – controlled by the Adani family.
The short seller claims that the conglomerate used front companies in tax havens to increase its income 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-India-traded derivatives.
This means that Hindenburg Research, a well-known short seller, is betting on a short-term decline in the prices of these stocks.
The accusations come as the Adani empire seeks to entice the general public and foreign institutional investors towards a $2.5 billion bid.
‘A calculated attack on India’: Adani
Hindenburg’s report caused a stock market rout for the entities comprising the Adani conglomerate on the Mumbai Stock Exchange. In total, the Adani empire lost $68 billion in market value in the three trading sessions following the publication of the Hindenburg report.
Aware that his first two statements failed to allay the concerns and questions raised by Hindenburg, Adani, 60, has just pulled out the weapon of patriotism.
“This is not just an unwarranted attack on any particular company, but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the history of India’s growth and ambition,” Adani said in a 413-page report. According to the company, the report answers most of the questions posed by Hindenburg on January 29.
In this report, the conglomerate repeats several times that Hindenburg does not understand the functioning of Indian institutions. This suggests that Hindenburg simply does not understand India.
The company tends towards nationalism in the hope of undoubtedly arousing a surge of sympathy with the local population and the authorities. The word “Indian” comes up regularly in Adani’s 413 response pages.
“The queries make reckless statements without any evidence and only on unsubstantiated speculation without any understanding of Indian laws on related parties and related party transactions,” Adani said of Hindenburg’s questions about its governance and its allegations of wrongdoing.
“The assumption that the entities, as stated in the report, are related to entities listed in Adani, is imaginary, vague and unsubstantiated and stems only from Hindenburg’s lack of understanding of accounting laws, regulations and standards Indians,” the company also said. said.
Adani ‘fueled a nationalist narrative’: Hindenburg
“Hindenburg Research does not appear to have an understanding of Indian law or accounting standards issues and yet claims entities are undisclosed ‘related parties’ without understanding what constitutes a related party.”
In addition to accusations of ignorance of Indian institutions, Adani does not hesitate to accuse the New York firm of snubbing India.
“Hindenburg deliberately ignores Indian legal processes and regulations in their insinuations against us,” Adani said.
The short seller smelled the strategy.
“Fraud cannot be masked by nationalism or a bloated response that ignores all the key allegations we have raised,” Hindenburg said in a statement.
Predictably, the Adani Group “attempted to divert attention from substantive issues and instead fueled a nationalist narrative, claiming that our report amounted to a ‘calculated attack on India’. In short, the Adani Group tried to confuse its meteoric rise and 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 stations. It has about ten commercial ports and is present in coal, electricity and renewable energies. It has also diversified into airports, data centers and defense.
The company has also recently entered the cement sector by acquiring the assets of cement manufacturer Holcim (HCMLY) in India and also plans to set up an aluminum plant.
Adani grew the group by acquiring indebted companies.
Last August, Fitch Ratings subsidiary CreditSights warned conglomerate Adani was “deeply overleveraged” and could “in the worst case scenario” fall into a debt trap.
But two weeks later, the ratings firm said it discovered it had made “calculation errors” at two of the Adani Group companies. He corrected his report and deleted the words “deeply over-indebted”.
“CreditSights’ views have not changed since its initial report and we still maintain that the group’s leverage is high,” CreditSights concluded.