Hindenburg's point blank charges against Gautam Adani, explained in 10 points
The investment research firm in its report said that Adani Group has engaged in a 'brazen stock manipulation and accounting fraud scheme over the course of decades.'
PremiumHindenburg Research, investment research firm published a report on Adani Group, headed by Gautam Adani, on Wednesday said that it is presenting evidence that the Group has engaged in a 'brazen stock manipulation and accounting fraud scheme over the course of decades.'
Here are 10 things to know:
1)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.
2)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.
3) 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?
c)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.
5)The research report said that offshore shells and funds tied to the 'Adani Group comprise many of the largest “public" (i.e., non-promoter) holders of Adani stock, an issue that would subject the Adani companies to delisting, were Indian securities regulator SEBI’s rules enforced.'
Many of the supposed “public" funds exhibit flagrant irregularities such as being (1) Mauritius or offshore-based entities, often shells (2) with beneficial ownership concealed via nominee directors (3) and with little to no diversification, holding portfolios almost exclusively consisting of shares in Adani listed companies.
6) Adani group issued a statement and termed the report 'malicious combination of selective misinformation and stale.'
7) “We are shocked that Hindenburg Research has published a report on 24 January 2023 without making any attempt to contact us or verify the factual matrix. The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts," Adani Group CFO Jugeshinder Singh
8) “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. 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," Adani group CFO added.
"The group has always been in compliance with all laws, regardless of jurisdiction, and maintains the highest standards of corporate governance," he said.
9) The report has comes ahead of the follow-on public offer (FPO) of Adani Enterprises, the group's flagship company. The FPO issue is set to open on Friday, January 27, 2023, and the floor price has been fixed at ₹3,112 per share.
10) Stocks of the seven listed Adani group companies fell between 3% and 7%.
The firm has asked 88 questions to Adani Group based on its findings.
Hindenburg Research on its website says that the company specialises in forensic financial research. it says it has 'experience in the investment management industry spans decades, with a historical focus on equity, credit, and derivatives analysis.'
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