Adani’s response ignored key questions: Hindenburg
Fraud cannot be obfuscated by nationalism, the US short seller retorted
Hindenburg Research, the US short seller that has accused the Adani group of fraud, said Adani’s Sunday night response to its allegations largely confirmed its findings and ignored key questions.
In a 413-page rebuttal filed late Sunday night, the Adani group labelled the US short seller as the “Madoffs of Manhattan.” In its response, Hindenburg said, “Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised.”
“In short, the Adani group has attempted to conflate its meteoric rise and the wealth of its chairman, Gautam Adani, with the success of India itself. We disagree. To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation,” Hindenburg said.
The short seller also denied Adani’s claims that it had violated securities and foreign exchange laws. “In terms of substance, Adani’s ‘413 page’ response only included about 30 pages focused on issues related to our report. The remainder of the response consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables,” Hindenburg noted.
Hindenburg said that its report alleged that Adani Group has engaged in billions of dollars in suspicious dealings with its chairman’s brother, Vinod Adani, and his labyrinth of offshore shell entities, it added.
“Adani’s Defense: Vinod Adani, brother to the chairman, is not a related party to the group, and there are no disclosable conflicts relating to this web of opaque transactions,” Hindenburg said in its response.
The short seller added that it asked Adani about the source of the billions of dollars that flowed from Vinod Adani-associated offshore shell entities through the Adani Group, to which Adani responded: “We are neither aware nor required to be aware of their source of funds.”
Hindenburg cited examples of a $253 million loan from a Mauritius entity where Vinod Adani serves as a director and another example of an investment of $692.5 million from a Mauritius entity controlled by the head of the Adani Group’s private family investment office.
Hindenburg also said its report outlined numerous irregularities and connections between suspected offshore stock parking entities and Adani promoters, raising questions about whether promoter holdings were fully disclosed.
“In one example, we showed how an entity that had been an Adani related-party made a major investment into one of the suspect offshore holders, drawing a clear line between the Adani Group and the suspected stock parking entities. We also showed how several of the suspected stock parking entities had been formed with the help of Amicorp, which was involved in one of the most notorious international fraud and money laundering scandals in history, the 1MDB scandal,” the short seller said in its response.
It added that the report showed that the suspected stock parking entities engaged in wildly irregular trading, accounting for up to 30%-47% of delivery volume, essentially cornering the market in Adani shares.
“Of the questions Adani answered, they largely confirmed our findings, argued points we didn’t raise or sidestepped the key issues altogether,” it said.
Hindenburg pointed out that the Adani Group did not even attempt to clarify its relationship with a Chinese national (Chang Chung-Ling), despite a plethora of linkages. “We had asked: What is the nature of Chang Chung-Ling’s relationship with the Adani Group, including his relationship with Vinod Adani?”
It added that this is an important matter, not only for shareholders but also for India’s national interest, as an entity (Gudami International) run by Chang Chung-Ling was said to have been part of a massive corruption scheme in the AgustaWestland scandal, one of India’s largest bribery scandals. The son of Chang Chung-Ling is the beneficial owner of the major contractor to the Adani Group called PMC Projects.
The short seller noted that listed Adani companies paid ₹6,300 crore to private contractor PMC Projects over the past 12 years.
“We noted that the entity is controlled by the son of a close associate of Vinod Adani. We included Taiwanese media reports showing that the same individual controlling the entity is “Adani Group’s Taiwan representative”. We found pictures of him literally holding an Adani sign at an official government event, where he represented Adani,” it said.
Despite the controller of PMC Projects clearly being an Adani representative, we found no related party disclosures about the massive payments to PMC Projects, which siphoned cash out of listed companies, Hindenburg said, adding that Adani simply didn’t respond to these questions, instead referring to documents from an earlier DRI (directorate of revenue intelligence) investigation.
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First Published:30 Jan 2023, 11:03 PM IST
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