Gautham Adani, billionaire and chairman of the Adani Group, speaks at an event held at the port of Haifa, Israel on Tuesday. The Indian billionaire, whose business empire has been shaken by fraud allegations by Hindenburg Research in his short sale, said his firm would invest more in Israel.
Kobi Wolf/Bloomberg via Getty Images
NEW DELHI — Indian businessman Gautam Adani lost his title as Asia’s richest person on Wednesday. In early January, he was not only the richest person in Asia, but the third-richest in the world, trailing Elon Musk by just a few billion. I’ve dropped a few places on the list of. forbes and Bloomberg. In less than 10 days, his personal fortune plummeted to nearly $50 billion and his company lost about $100 billion in market value.
reason? He has been accused of “permitting the largest fraud in corporate history” by a US-based short seller, a research firm betting on Adani stock.
On January 24, Hindenburg Research released a more than 100-page report, alleging that the Adani conglomerate was “engaged in decades of brazen stock manipulation and accounting fraud schemes.”
The Adani Group calls the claims “nothing but lies”.
Adani Group shares fell further on Wednesday after Bloomberg reported that Swiss investment bank Credit Suisse had stopped accepting Indian conglomerate bonds as collateral. The conglomerate also canceled a massive $2.5 billion equity sale on the same day, raising eyebrows among investors.
Hindenburg claims there is evidence of “brazen accounting fraud, stock manipulation, and money laundering at Adani.” He has expressed concern about the group’s debt levels, alleging that the conglomerate illegally channeled funds through shell companies in tax havens like Mauritius. Several of the group’s top executives are members of the Adani family, creating a favorable environment for opaque funding decisions, the report notes.
The allegation that Adani shares are overvalued came as no surprise to Sonam Srivastava, founder of Indian investment advisory firm Right Research. But “the detailed allegations of fraud and market manipulation are pretty frightening,” she says.
“It is clear that Adani has undergone very few audits, has had little coverage by analysts, and has taken no action by regulators to investigate its business processes or pricing behavior.”
Amol Agrawal, who teaches economics at Ahmedabad University in Gujarat, India, said the Adani episode “has taken a toll on the group’s image and reputation is very important here.”
Connections with Indian leaders
Indian businessman Gautam Adani (left) shakes hands with future Indian Prime Minister Narendra Modi at the summit in Gandhinagar, India, January 13, 2011.
Mint for Vijay Soneji/Getty Images
Adani’s business spans everything from airports and seaports to coal and renewable energy and most recently media. The 60-year-old tycoon’s rapid rise over the past few years — about $100 billion of his previously estimated $120 billion net worth (before the scandal erupted) occurred in the past three or so years — has been elected was consistent with the rise of India. Prime Minister Narendra Modi.
Observers note that both men are from the western Indian state of Gujarat, have humble beginnings and are longtime friends. I visited New Delhi for the inauguration ceremony.
Hindenburg’s report has put the relationship between the two under renewed scrutiny. “Adani has accomplished this colossal feat with the help of government enablers and the cottage industry of the international companies that facilitate these activities. These corruption problems permeate multiple layers of government. ,” asserts the report.
“No fire, no smoke”
A sign at the Adani Group headquarters in Ahmedabad, India, on Wednesday. The confidence crisis plaguing Gautam Adani is deepening, with Hindenburg Research fraud allegations wiping out his third of the market value of his group of companies, despite the completion of a major stake sale. Stock prices plummeted after he left.
Dhiraj Singh/Bloomberg via Getty Images
However, Hindenburg does not publish the alleged scam purely as a public service. A short position in the Adani Group allows Hindenburg to financially benefit if Adani’s shares fall. Short sellers have a track record of prosecuting and profiting from exposure to corporate fraud all over the world, from the United States to China. For example, in 2022, Trevor Milton, the founder and CEO of electric car company Nikola, was accused of making false claims that would boost its stock price. I was.
“Short-sellers have their own game, just like long-buyers,” says Agrawal. “But there is no smoke without fire.”
Hindenburg was founded in 2017 by former hedge fund manager Nathan Anderson. He is now one of a small group of Wall Street activist shortsellers. According to 2021 new york times Anderson’s Profile He turned his passion for ‘finding fraud’ into a career.
This is not the first time fraud accusations against Adani have surfaced.
In 2021, Indian parliamentarian Mahua Moitra, a former investment banker and an opposition ally, wrote to the Securities and Exchange Commission of India urging an investigation into Adani’s alleged use of offshore companies. He Srivastava, the founder of the investment advisory firm, said:
Adani Group has been the subject of multiple investigations by government agencies, but Hindenburg said most of them have been stalled or sabotaged.
“A calculated attack on India”
Agrawal of Ahmedabad University also questions why it took a US-based research firm to raise such serious questions about the Adani group. “There are so many stock market analysts [in India]why didn’t you see what they were looking at?” he asks.
Most market analysis today is “buy, buy, buy,” pointing to broader issues, he says. “The stock market and the entire financialization of the global economy is moving in a direction where all we need to do is make sure the stock market and the companies traded there are always going up. The whole thing is fallout.”
On January 29, the Adani Group released a more than 400-page rebuttal to the Hindenburg findings, calling it a “malicious combination of selective misinformation and hidden facts.” Citing conflicts of interest as a short-seller, he argued that the company had ulterior motives.
“This is not simply an unjustified 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,” the statement said. Adani Group said it is also considering suing Hindenburg.
Hindenburg welcomes any legal action, stating that “nationalism cannot obscure fraud”.
“We believe that India is a vibrant democracy and an emerging superpower with an exciting future.In addition, India’s future is determined by the systematic looting of the nation. I believe they are being blocked by the Adani group, who are dressed in the flag of the United States,” Hindenberg replied.
indian newspapers tuesday mint reported that the Adani Group plans to conduct independent audits of eight listed companies. Indian securities regulators have also stepped up scrutiny of Adani’s transactions, Reuters reports.
The aftermath from the Hindenburg report was Adani’s significant $2.5 billion follow-on offering, or secondary offering, backed by investors such as Abu Dhabi International Holding Company, although the response from private investors was muted. It happened during a stock sale. The conglomerate made a full offer but withdrew the next day, citing market volatility. ‘It’s not morally right to move on,’ says Adani Said Investors on Thursday.
Agrawal said it remains to be seen whether Adani’s allegations will have widespread ramifications for India’s reputation.
“If this is a one-off case and it is resolved soon, no problem. India’s image will not be tarnished,” he said. “But if these governance issues, etc., he is not confined to just one group, but a larger phenomenon, [investors] You may withdraw your funds. ”
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