Adani Faces Deadline as Fraud Allegations Spook Investors


The clock is ticking for Gautam Adani as India’s leading tycoon, and Asia’s wealthiest person, confronts a U.S. short seller claiming he “uncovered evidence of brazen accounting fraud, stock manipulation and money laundering” amounting to “the largest con in corporate history” at Adani’s business empire.

Adani companies lost $20 billion in market value on Friday and another $17 billion Monday, taking their losses to $68 billion since the Jan. 24 report by Hindenburg Research, as shares of the seven Adani Group affiliates listed on India’s stock market plunged.

The capital losses could grow uglier still if a crucial stock offering by Adani Enterprises, the conglomerate’s flagship company, falls short of its $2.5 billion fundraising goal at its scheduled conclusion on Tuesday. The offering, launched the day after Hindenburg’s report, was only 2% subscribed before Abu Dhabi’s International Holding announced a $400 million investment Monday. The same investment group controlled by the emirate’s royal family invested nearly $2 billion in Adani companies last year.

Key Takeaways

  • U.S. short seller Hindenburg Research has accused the Indian conglomerate Adani Group of fraud.
  • Adani companies, controlled by the richest man in Asia, have lost $68 billion in market value over the past week.
  • The losses threaten to derail a $2.5 billion secondary offering as the conglomerate seeks to pare its debt burden.
  • Adani is a close ally of India’s nationalist Prime Minister Narendra Modi, and his companies have won large public contracts.
  • Hindenburg has previously targeted EV maker Nikola, whose founder was later convicted of defrauding investors.

Central to Hindenburg’s allegations is its claim that Adani and his family secretly control a network of offshore funds whose holdings of Adani companies’ public shares nominally satisfy a listing requirement preventing corporate insiders and their affiliates from owning more than 75% of the share float. The same shell entities engage in share manipulation and money laundering, according to Hindenburg. The firm also questioned the competence and independence of the auditors certifying the financial results of Adani Enterprises and a sister company.

In the two days following Hindenburg’s publication, Adani Group responded only with two short statements. The first dismissed the critical report as “a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.” The second called it an “intentional and reckless attempt by a foreign entity to mislead the investor community.” 

On Sunday, Adani issued a 413-page response that dismissed some of Hindenburg’s allegations as old news, disproven by official investigations or else disclosed in public securities filings.Adani also said it discloses all transactions with related parties and conducts them on an arms-length basis.

“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” the company said.

Gautam Adani, 60, is a native of Gujarat, also the home state of Indian Prime Minister Narendra Modi. The two have been close, with Adani rallying political support for Modi. In turn, his companies, focused mainly on infrastructure and energy, have won big public contracts in furtherance of Modi’s economic development goals. Adani has been called “Modi’s Rockefeller.”

After dropping out of college, Adani worked in the Mumbai diamond trade and then in plastics importing before launching his company. He’s the survivor of an alleged kidnapping for ransom in 1997 as well as the 2008 terror attack on Mumbai’s Taj hotel.

Hindenburg Research is headed by Nathan Anderson, a 38-year-old analyst and short seller. Anderson is known for a report describing electric vehicle maker Nikola as “an ocean of lies.” Nikola founder Trevor Milton was later convicted of defrauding investors. Hindenburg, which says its name evokes the man-made disasters its forensic accounting probes seek to uncover, said Adnani’s response to its report “ignores every key allegation we raised” while appealing to nationalism.

Hindeberg has acknowledged concerns over the beneficial ownership of offshore funds investing in Adani companies were previously raised in 2021 by an Indian opposition lawmaker. Similarly, Hindenburg’s report cited criticism of Adani companies’ leverage published last year by the unrelated research firm CreditSights, which is owned by Fitch Ratings. CreditSights issued several reports last year calling Adani companies overly leveraged.

Adani Group has said it’s considering legal action, while Hindenburg has said it would welcome a U.S. suit since it has a long list of documents it would request as part of a discovery process. At the same time, Hindenburg has been careful to note that its bet against Adani is via U.S.-traded bonds and derivatives not traded in India, adding that its report “relates solely to the valuation of securities traded outside of India.”

Barring a court confrontation, the Adani stock offering due to conclude Tuesday may serve as a market verdict on Hindenburg’s claims. The price range of the offering now exceeds the share price of Adani Enterprises amid investor concerns, while some dollar-denominated bonds issued by Adnani companies now trade below 70 cents per dollar of face value. “How does a group that big explain no analyst coverage and no mutual fund holdings?” one investment analyst told Bloomberg.

Four of the seven listed Adani companies had more than doubled in value in the year before Hindenburg’s report, while Adani Enterprises was also sitting on a three-year gain of nearly 1,400%, according to Hindenburg, which said the Adani Group “appears to be highly overvalued” based on the company’s own accounting.

If Monday’s losses in Adani shares cost Gautam Adani the distinction as Asia’s richest human, as they might, taking his place would be archrival tycoon Mukesh Ambani, who trailed Adani’s $92.7 billion fortune by $11.4 billion as of Sunday, according to Bloomberg. Their respective conglomerates have recently extended their competition to branded food staples, even as Adani called Mukesh Ambani “a very good friend.”


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