by 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 rob 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 blatant accounting fraud, stock manipulation and money laundering at Adani, which occurred over decades,” Hindenburg wrote in a report released on Jan. 24.
“Adani has accomplished this mammoth undertaking with the help of facilitators in the government and a cottage industry of international companies facilitating 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 says the conglomerate has been using shell companies in tax havens to boost its revenue and manipulate the stock price of its various entities. As a result, the firm shorted the shares of the Adani conglomerate through bonds traded in the United States and non-traded derivative instruments in India.
This means that Hindenburg Research, a well-known short seller, is betting on a short-term decline in the prices of these stocks.
These allegations come as the Adani empire tries to entice the general public and foreign institutional investors into a $2.5 billion offer.
“A Calculated Attack Against India”: Adani
The Hindenburg report caused a stock rout for the entities making 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 her first two statements failed to allay the concerns and questions raised by Hindenburg, Adani, 60, has just drawn her patriotism weapon.
“This is not simply an unwarranted attack on a specific society, but a calculated attack on India, on the independence, integrity and quality of Indian institutions, on India’s growth and ambitions,” 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 claims that Hindenburg does not understand how Indian institutions work. It suggests that Hindenburg simply doesn’t understand India.
The company leans towards nationalism in the hope of undoubtedly arousing a wave of sympathy among the local population and the authorities. The word “Indian” appears regularly in Adani’s 413-page response.
“The questions make reckless statements without any evidence and purely on baseless speculation with no understanding of Indian laws on related parties and related party transactions,” Adani said of questions asked by Hindenburg about its governance and alleged wrongful practices.
“The assumption that the entities, as stated in the report, are related to Adani listed entities, is imaginary, vague and baseless and stems only from a lack of understanding on the part of Hindenburg of Indian laws, regulations and accounting standards the company added. She said.
Adani “fueled a nationalist narrative”: Hindenburg
“Hindenburg Research does not appear to have any understanding of Indian law or accounting standards and yet claims the entities are undisclosed ‘related parties’ with no understanding of what constitutes a related party.”
In addition to the accusations of ignorance of Indian institutions, Adani does not hesitate to accuse the New York studio of snubbing India.
“Hindenburg willfully ignores Indian legal processes and regulations in their insinuations against us,” Adani said.
The short seller has an intuition about the strategy.
“Fraud cannot be overshadowed by nationalism or a bloated response that ignores every key allegation we have raised,” Hindenburg said in a statement.
Adani Group “predictably sought to deflect attention from substantive issues and instead fueled a nationalist narrative, claiming that our report amounted to a ‘calculated attack on India’. In short, Adani Group attempted to merge its meteoric rise and the wealth of its president, 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 is present in coal, electricity and renewable energy. It has also diversified into airports, data centers and defense.
The company has also recently entered the cement business by purchasing the assets of cement producer Holcim (HCMLY) in India and is also trying to set up an aluminum factory.
Adani has grown the group by acquiring leveraged companies.
Last August, Fitch Ratings subsidiary CreditSights warned that the Adani conglomerate was “deeply overleveraged” and could “in the worst-case scenario” plunge into a debt trap.
But two weeks later the credit rating company said it had discovered it had made “miscalculations” at two of the Adani group companies. He corrected his report and removed the words “deeply over-indebted”.
“CreditSights’ views have not changed since its original report and we continue to maintain that the group is highly leveraged,” concluded CreditSights.
