The Hindenburg report has been out for over ten days now and has rattled the Adani group. After an activist investment firm published a report on Tuesday accusing his company, Adani Group, of “brazen” stock manipulation and accounting fraud worth $218 billion, billionaire Gautam Adani fell from being the third richest man in the world to the seventh position, wiping $27.9 billion from his net worth since the beginning of the year.
Using U.S.-traded bonds and non-Indian-traded derivative instruments, Hindenburg Research, which has previously shorted—or gambled against—businesses like Twitter and electric truck manufacturer Nikola Corp, said it holds short holdings in Adani companies.
The study released on Tuesday caused the stock of the flagship firm and affiliates of the Adani Group to plunge, suffering a loss of more than $50 billion since then and compelled the corporation to strongly deny its contents.
Gautam Adani, who is he?
India’s richest individual and self-made billionaire, Gautam Adani, with a net worth of about $118 billion as of April 2022. The share prices of his major publicly traded firms increased throughout the past three years, propelling the billionaire to the third-richest man in the world behind Elon Musk and Jeff Bezos. A large portion of this fortune was gained during this time through his company Adani Group.
Before founding his business, the businessman worked as a commodity trader in the 1980s. In 1988, he launched the Adani Group, which he later expanded into a private infrastructure empire that runs ports, airports, and coal mines throughout India and the rest of the world. Through its data and cable centers, the production of defense products, and other businesses, the group also has numerous subsidiaries. It intends to increase its size by investing $70 billion in green energy companies in the upcoming year.
Due to Adani’s close ties to India’s governing Bharatiya Janata Party, the company’s success has frequently been associated with lucrative government concessions. Adani has already spoken out in favor of Prime Minister Narendra Modi’s goal of creating a “self-reliant India.”
Hindenburg’s findings: what do they reveal?
The report makes several accusations, including that Adani Group manipulated stock prices and committed accounting fraud over a long period. It also claims to have discovered evidence that the group’s “7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations.” Additionally, it stated that the group is on “precarious financial footing” due to its significant debt.
The Adani Group’s associates and many family members are mentioned in the report for their involvement in high-profile bribery and tax evasion cases. These individuals include Rajesh and Vinod Adani, brothers of Gautam Adani. The Directorate of Review Intelligence and the Securities and Exchange Board of India (SEBI) have both conducted corruption investigations into members of the Adani family in the past. In addition, the Hindenburg investigation alleges that Adani family members helped create shell companies overseas worth $4.5 billion using fraudulent paperwork, especially in tax haven nations including Mauritius, the United Arab Emirates, and the Caribbean islands. In September 2022, Hindenburg stated that SEBI was still looking into a case in Mauritius, but that no action had yet been taken against the group.
Hindenburg stated that the findings of the research were based on interviews with a large number of people, including former senior officials at Adani Group, thousands of documents, and site visits for the sake of conducting due diligence in nearly a dozen different nations.
Adani Group vs. Hindenburg
The market value of Adani Group firms fell by more than $100 billion in the last ten days, and Gautam Adani, the group’s chairman, lost the title of the richest man in India and Asia to Mukesh Ambani of Reliance.
Let’s take a look back at everything that has occurred since the release of the Hindenburg report last week on January 24 as the Hindenburg vs. Adani controversy continues.
January 24, 2023
The Adani Group is accused of accounting fraud, stock manipulation, and money laundering in a new investigation by Hindenburg Research. How The World’s Third Richest Man is Committing The Biggest Corporate Scam is the report’s subtitle.
According to its analysis, Hindenburg stated that it has acquired a short position in the Adani Group Companies through derivatives traded outside of India and U.S.-listed bonds.
As soon as the report is revealed, Adani’s stock starts to decline, with Adani Green Energy dropping 0.7%, Adani Ports dropping 1%, and Adani Transmission dropping 0.8% from their previous day’s closing prices.
25 January 2023
We are startled that Hindenburg Research issued a study on January 24, 2023, without trying to get in touch with us or verify the factual matrix, according to a media statement released by Adani Group’s CFO Jugeshinder Singh the day after Hindenburg’s report was released.
Adani Group stocks continue to decline as a result of the report, with Adani Enterprises down 1.5% on that day, Adani Green Energy down 3%, Adani Ports down 6%, Adani Power down over 4%, and Adani Transmission down 8% compared to their closing prices the day before. Hindenburg is still waiting for answers to its 88 questions as a result of the report. Adani Group enterprises lost a total of Rs 97,000 crore in a single day.
26 January 2023
The Adani Group released yet another press release while Adani’s stock price continued to plummet. This time, Jatin Jalundhwala, its legal director, stated in the statement “The Adani Group, our shareholders, and investors have all suffered as a result of the purposefully deceptive, unresearched report released by Hindenburg Research. The report’s impact on the volatility of the Indian stock markets is extremely worrying and has caused Indian residents unwarranted suffering.”
Hindenburg Research responded to the Adani Group’s claims later on in the day. As per Hindenburg “If Adani is sincere, it needs to pursue a lawsuit in the US, where we do business. In a legal discovery procedure, we have a lengthy list of materials we would request.”
27 January 2023
Despite a prolonged stock sell-off seen in the equities of group firms, the main company of the Adani group, Adani Enterprises, continues with opening subscriptions for its follow-on public offering (FPO) of $2.5 billion despite the Hindenburg report shaking the Adani group.
The FPO is introduced as the stock prices of the Adani portfolio firms drop sharply. On Day 1, there was little interest in the offer and only 0.01 subscriptions were made.
The Hindenburg study, according to millionaire investor William Ackman, is “very reputable and exceptionally thoroughly researched.”
Adani Enterprises was down 18% on that day, Adani Green Energy was down 19%, Adani Ports was down 16%, and Adani Transmission was down 19% from their closing prices the day before. Adani equities are still losing money, but now by double digits.
28 January 2023
Adani Group and related securities are being surveyed, according to index provider MSCI. An American financial firm called MSCI offers tools for analyzing multi-asset portfolios as well as global equities, fixed income, and real estate indexes. Except for Adani Wilmar, all seven of the Adani Group’s listed equities are included in the MSCI world indices.
29 January 2023
In a 413-page response released on January 29, 2023, Adani Group threatened legal action against Hindenburg and asserted that the allegations made against the Indian company were a “planned attack on India” and its institutions.
30 January 2023
“Fraud Cannot Be Obfuscated By Nationalism Or A Bloated Response That Ignores Every Key Allegation We Raised,” said Hindenburg in rebuttal to the Adani Group’s 413-page response during the market carnage.
Following the announcements made by Adani Group and Hindenburg over the weekend, some Adani Group stocks continued to decline while other ones managed to slightly increase.
Adani Enterprises received a $400 million investment from Abu Dhabi’s International Holding Company (IHC) on the second day of the FPO, boosting the Adani Group’s FPO. Additionally, Life Insurance Corporation (LIC), one of Adani Group’s largest shareholders, stated that it is examining the company’s reaction to the issues brought up by Hindenburg.
31 January 2023
Despite a sluggish beginning brought on by the loss of group shares, non-institutional investors (NIIS), who subscribed to the offer 3.26 times their quota, helped the FPO reach full subscription on its third day. Investors were drawn to the 30% anchor part, which also included India’s HDFC Life Insurance and Life Insurance Corp., as well as Maybank Securities and the Abu Dhabi Investment Authority.
However, a few Adani Group equities, such as Adani Enterprise, did manage to increase slightly.
1st February 2023
The corporate regulator in Australia has stated that it will examine the Adani Group Hindenburg report. Since the release of the Hindenburg report, the stock prices of seven Adani Group firms that are publicly traded have lost a combined $86 billion.
In a shocking change of events, Adani Enterprises cancels its FPO despite it being completely subscribed, citing an “unprecedented situation and the current market instability.” It claims to be coordinating the repayment of the funds with its FPO banks. In his video statement launching the FPO, Gautam Adani doesn’t answer Hindenburg’s claims.
During this time, shares of the Adani Group plummeted sharply once more, with Adani Enterprises down 28%, Adani Green Energy down 5% further, Adani Ports down 19%, and Adani Transmission down 2% from the day’s closing prices.
In addition, Mukesh Ambani of Reliance Industries surpasses Gautam Adani to claim the title of wealthiest Asian and Indian.
2nd February 2023
As shares of the conglomerate continue to decline, the market value losses of Adani Group companies surpass the enormous $100 billion threshold. Another setback for Adani Group came when Credit Suisse, Switzerland’s second-largest bank, and Citigroup’s wealth division withdrew lending to the company.
There is evidence that the Adani Group likely purchased shares in its own $2.5 billion share sale, according to a report from Forbes.
February 3rd, 2023
Adani Group experienced yet another shock from the US markets today as things continue to go worse for the company.
With effect from February 7, the group’s leading company, Adani Enterprises, is no longer included in the Dow Jones Sustainability Indices. The S&P Dow Jones Indices and RobecoSAM (sustainable asset management) of the S&P Dow Jones Indices manages the Dow Jones Sustainability Indices, a series of indices that assesses the sustainability performance of thousands of publicly traded firms.
And that’s not all; on February 3 the F&O prohibition list of the National Stock Exchange of India included Adani Ports and the Special Economic Zone. To prevent short sales, the National Stock Exchange (NSE) has also included Adani Enterprises, Adani Ports, and Ambuja Cements in the Additional Surveillance Measure (ASM) framework as of February 3, 2023.
According to a Bloomberg article, billionaire Gautam Adani is attempting to restore trust in the financial stability of his group by negotiating with creditors to pay back some debts secured by pledged shares.
Adani Group’s response to the allegations?
The report stunned the corporation, according to Jugeshinder Singh, the chief financial officer of Adani Group, who called it a “malicious combination of selected falsehoods and outdated, unsubstantiated, and rejected charges.”
Adani Group said in its official statement that it has always complied with the law but did not address any particular charges. In addition, the conglomerate claimed that the timing of the report indicated malicious intent to “undermine the Adani Group’s reputation with the primary objective of damaging the upcoming follow-on Public Offering from Adani Enterprises,” referring to the group’s plans to increase the proportion of freely traded shares.
Adani Group said in a new statement on Thursday that it is thinking about suing Hindenburg. Adani Group Legal Head Jatin Jalundhwala stated, “We are analyzing the pertinent remedies under US and Indian legislation for corrective and punitive action against Hindenburg Research. The “volatility in Indian stock markets” brought about by the article, he continued, was “of grave concern and has caused unwanted sorrow for Indian citizens.”
Hindenburg has challenged Adani Group to file a lawsuit, claiming that doing so will subject the business to more scrutiny.
The research was released days ahead of the start of Friday’s bidding for a $2.5 billion stock sale for Adani’s secondary shares, which will include major investors including Morgan Stanley and the Abu Dhabi Investment Authority.
Investors were “informed” of Hindenburg’s analysis and “taking it into consideration,” the investor told the Financial Times.
Stocks of the Adani Group continue to plunge
Shares of the Adani Group have been steadily bleeding and are down significantly as of this morning.
Adani Enterprises has decreased by over 60% since the release of the Hindenburg report on January 24; in contrast, Adani Green Energy has decreased by 50%, Adani Ports has decreased by 42%, Adani Power has decreased by 30%, Adani Total Gas has decreased by 58%, Adani Wilmar has decreased by 30%, and Adani Transmission has decreased by 48%.
