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Adani vs Hindenburg: What we know so far
- Hindenburg Research said evidence that the Group has engaged in a 'brazen stock manipulation and accounting fraud scheme over the course of decades.'
US short seller Hindenburg Research in a report on January 24 had publsihed a report on Adani Group accusing it of improper use of offshore tax havens and flagging concerns about high debt that sent the Group stocks to crash.
The group holds short positions in Adani group companies. Hindenburg Research said evidence that the Group has engaged in a 'brazen stock manipulation and accounting fraud scheme over the course of decades.'
What did Hindenburg Research say?
The Hindenburg Research said that the seven listed companies of the Adani group, have an 85% downside on a fundamental basis due to sky-high valuations, Hindenburg said in the report.
The report pointed out the debt on the company. "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," the report said.
The report said that 8 of 22 key roles are held by the family members of Gautam Adani, Founder and Chairman of the Adani Group.
At the end of the report Hindenburg asked some questions:
a)Gautam Adani’s younger brother, Rajesh Adani, was accused by the Directorate of Revenue Intelligence (DRI) of playing a central role in a diamond trading import/export scheme around 2004-2005. He was subsequently arrested twice over allegations of customs tax evasion, forging import documentation and illegal coal imports. Given his history, why was he subsequently promoted to serve as Managing Director at the Adani Group?
b)Gautam Adani’s brother-in-law, Samir Vora, was accused by the DRI of being a ringleader of a diamond trading scam and of repeatedly making false statements to regulators. Given his history, why was he subsequently promoted to Executive Director of the critical Adani Australia division?
What has been the full extent of Vinod Adani’s role in the Adani Group to date, including all roles on deals and entities that have transacted with the Adani Group?
4) The Adani Group has previously been the focus of 4 major government fraud investigations which have alleged money laundering, theft of taxpayer funds and corruption, totaling an estimated U.S. $17 billion, said the report. 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, the report added.
Response of Adani Group:
In a 413-page rebuttal filed late Sunday night, the Adani group labelled the US short seller as the “Madoffs of Manhattan."
The Adani group has called the report baseless and termed the allegations "unsubstantiated speculations".
"All transactions entered into by us with entities who qualify as 'related parties' under Indian laws and accounting standards have been duly disclosed by us," Adani said in the 413-page response issued late on Sunday.
Hindenburg response to this:
The short-seller has said that listed Adani companies have seen a number of changes in chief financial officers (CFOs) and that auditors used by the group are relatively unknown.
It said Adani Enterprises has had five chief financial officers over the course of eight years, citing this a "a key red flag indicating potential accounting issues".
Adani response:
The Adani group said that several of the CFOs that the Hindenburg report points to have remained within the group and moved on to new roles.
On the quality of audits, it said that the audit committee of each of the listed companies is composed entirely of independent directors, and auditors are appointed on their recommendation.
"This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors," it added.
Billionaire Gautam Adani, who is the richest Indian and Asian in the world, saw his fortune decline which led to his ranking on the Bloomberg Billionaires Index slipping out of the top ten in the world's richest list.
Adani Group stocks fell 5-20%, wiping out ₹3.19 trillion in investor wealth after Hindenburg Research said it stood by its findings of alleged share price manipulation and accounting fraud by the conglomerate.
(input from agencies)
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First Published:4 Feb 2023, 05:43 AM IST
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