After Hindenburg Research took short positions against the companies controlled by billionaire Gautam Adani and released a scathing report, the Adani group has refuted the claims terming them “malicious, mala fide and brazen”, whose intention is to damage the group’s upcoming follow-on public offer.
"The timing of the report’s publication clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming follow-on public offering from Adani Enterprises, the biggest FPO ever in India," says Jugeshinder Singh, group CFO, Adani group.
He said the investor community has always reposed faith in the Adani Group on the basis of detailed analysis and reports prepared by financial experts and leading national and international credit rating agencies. "Our informed and knowledgeable investors are not influenced by one-sided, motivated and unsubstantiated reports with vested interests."
Singh said the Adani Group holds a diverse portfolio of market-leading businesses managed by CEOs of the highest professional calibre and overseen by experts in various fields for several decades. "The group has always been in compliance with all laws, regardless of jurisdiction, and maintains the highest standards of corporate governance."
Earlier today, short-seller Hindenburg Research released a report, saying even if one ignores the findings of its investigation and takes the financials of Adani Group at face value, its seven key listed companies have 85% downside, purely on a fundamental basis owing to “sky-high valuations”.
The report comes amid the Adani group's plans to launch the country’s largest-ever FPO worth ₹20,000 crore, which will open on January 27 and close on January 31. The company has fixed the floor price for the issue at ₹3,112-3,276 per share, a discount of 13.5% at the lower end of the January 18 closing price. The board also approved a discount of ₹64 per FPO equity share for retail individual investors.
The report, titled 'Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History', says key listed Adani companies have also taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. "5 of 7 key listed companies have reported ‘current ratios’ below 1, indicating near-term liquidity pressure," said the report by a New York-based organisation.
The report alleges the group’s very top ranks and 8 of 22 key leaders are Adani family members, a dynamic that places control of the group’s financials and key decisions in the hands of a few. "A former executive described the Adani Group as “a family business.”
It also talks about the Adani Group's alleged involvement in four major government fraud investigations, in which it faced allegations of "money laundering, theft of taxpayer funds and corruption, totalling an estimated U.S. $17 billion". "Adani family members allegedly cooperated to create offshore shell entities in tax-haven jurisdictions like Mauritius, the UAE, and Caribbean Islands, generating forged import/export documentation in an apparent effort to generate fake or illegitimate turnover and to siphon money from the listed companies."
It says it identified 38 Mauritius shell entities controlled by Vinod Adani, Gautam Adani's elder brother, or close associates. "We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands." The allegations state that many of the Vinod Adani-associated entities have no obvious signs of operations, including no reported employees, no independent addresses or phone numbers and no meaningful online presence.
"Despite this, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals."
Meanwhile, Adani Group stocks were rattled after the short seller stated it had taken a short position in the firms through its U.S.-traded bonds and Indian-listed derivatives. With a collective market capitalisation of ₹17.8 lakh crore ($218 billion), Adani Group is the second largest conglomerate in India, after Tata Group, run by its chairman and founder Gautam Adani, who is currently the world’s third richest man.
Notably, a report by CreditSights, published in August 2022, had also called the Adani Group “deeply over-leveraged” and suggested it could “unravel Adani’s vast business empire”. The report was “toned down” in September 2022, after CreditSights met with the company.