Adani: Asia’s richest man threatens legal action against Hindenburg Research over stock con allegations

Adani group calls allegations ‘unresearched’ while Hindenburg says legal action will reveal fraud

Shweta Sharma
Friday 27 January 2023 12:08 GMT
File: Chairperson of Indian conglomerate Adani Group, Gautam Adani, speaks at the World Congress of Accountants in Mumbai
File: Chairperson of Indian conglomerate Adani Group, Gautam Adani, speaks at the World Congress of Accountants in Mumbai (AFP via Getty Images)

India’s Adani group has said it is considering “remedial and punitive” legal action against Hindenburg Research after it accused Gautam Adani of “pulling the largest con in corporate history”.

Shares in the Adani business empire continued to tank on Friday, losing almost $24bn of its market value and prompting investors to dump their shares in the fallout of the damning report.

The Adani Group, founded by Asia’s richest man, Mr Adani, called the allegations by the US investment firm “maliciously mischievous” and “selective misinformation” stating “baseless and discredited allegations”.

In its report, “Adani Group: How the World’s 3rd Richest Man is Pulling the Largest Con in Corporate History”, Hindenburg accused the Adani group of engaging in “brazen” stock manipulation and accounting fraud.

Hindenburg Research, which has begun short-selling the conglomerate through bonds or betting against the company’s share price, said the findings in the report follow a two-year investigation.

It alleged that the company allegedly created a web of offshore shell accounts in countries like Mauritius, the UAE, and Caribbean Islands to carry out corruption, money laundering and taxpayer theft.

It “listed 88 questions it invited the company (Adani) to answer” and said it was betting against shares in companies within the Adani empire.

Most of the allegations involved concerns about the group’s debt levels, activities of its top executives, use of offshore shell companies and past investigations into fraud.

“We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades. Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities,” the report said.

On Thursday, the Adani group said it “was evaluating the relevant provisions under US and Indian laws for remedial action against Hindenburg Research”.

“Clearly, the report and its unsubstantiated contents were designed to have a deleterious effect on the share values of Adani Group companies as Hindenburg Research by their own admission, is positioned to benefit from a slide in Adani shares,” said Jatin Jalundhwala, head of the Adani group’s legal department.

The company said they are “in compliance with all laws” and acknowledged that volatility in Indian stock markets created by the report “is of great concern and has led to unwanted anguish for Indian citizens”.

Responding to Adani’s comments, Hindenburg said it would would “welcome” legal action but it would be “meritless”.

“In the 36 hours since we released our report, Adani hasn’t addressed a single substantive issue we raised,” the company said. “At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions.”

Responding to the allegations that the report is “unresearched”, it said the company released a “106-page, 32,000-word report, with over 720 citations and prepared over the course of two years”.

“If Adani is serious, it should also file suit in the US where we operate,” it added. “We have a long list of documents we would demand in a legal discovery process.”

The seven listed companies under Adani conglomerate have lost a combined $48bn in market capitalisation since Wednesday when the report was released.

Shares of Adani Enterprises plunged 20 per cent on Friday, with Adani Total Gas falling by 19.65 per cent, Adani Transmission by 19 per cent, Adani Green Energy 15.50 per cent and Adani Enterprises tanked 6.19 per cent on the Bombay Stock Exchange.

The allegations come as the Adani group launched a $2.4bn public share - India’s biggest ever - sale on Friday to bolster the business empire’s balance sheet.

The 60-year-old Indian chairman of the Adani Group, who briefly dethroned Amazon founder Jeff Bezos from the spot of the second richest man on the planet earlier this year, has faced questions over the spectacular rise of his business empire that has been linked to his closeness with Indian prime minister Narendra Modi.

Their relationship, dating back to over two decades from their home state Gujarat, is well documented and Mr Modi’s rise through political ranks has mirrored the expansion of Adani’s business empire.

Since Mr Modi became prime minister in 2014, at times reportedly using a private jet owned by Mr Adani to go for election campaigns, the tycoon’s net worth shot up nearly 2,000 per cent to $125bn, according to Bloomberg’s Billionaire Index.

Founded by Mr Adani, who is a college drop out, the Adani group has operations in a wide range of industries including commodities trading, airports, utilities, agriculture, renewable energy, and most latest – news channel.

Mr Adani, who began this week as the world’s third-richest person, has fallen down on the ranking ladder to become seventh on the Forbes billionaires following the scathing report.

The report has also kicked off a political storm in the country with opposition party members and critics of the Modi government saying Mr Modi should be held accountable. They demanded a “serious probe” into the allegations.

“Modi should be held responsible for giving control of Indian economy to 1 person, who’s entire family hands are sinked in pits of wrong doing. Adani is a bubble and it is about to burst. Indian Middle-class should save money if he turns to be fugitive,” said Prashant Kanojia, a politician of a local opposition party in Uttar Pradesh state.

Priyanka Chaturvedi, a member of parliament and a Shiv Sena party leader, said: “Considering that detailed research is out in the public domain, it is important that the government of India takes note of the charges made.”

Congress communications head Jairam Ramesh demanded “serious investigation” as “Adani Group is no ordinary conglomerate: it is closely identified with Prime Minister Narendra Modi since the time he was chief minister”.

He added that it has ramifications for financial stability as well as for millions of Indians.

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