What is Hindenburg's report? New York-based company's research call Adani 'The Largest Con'

Hindenburg's report on Adani came just 2 days before the launch of its FPO, and as a result, the selling pressure in stocks of Adani Group companies intensified on the second trading session on Friday

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Two days before the much-awaited Adani Enterprises FPO release, New York-based investment research firm Hindenburg made serious and sensational allegations against India's Adani Group and alleged that India's third richest man is conducting the largest corporate scam in the history of the universe. Hindenburg reports raised 88 questions in its paper from the Adani Group which the Indian-conglomerate company later rubbished the accusations. However, Hindenburg's report on Adani came just 2 days before the launch of its FPO, and as a result, the selling pressure in stocks of Adani Group companies intensified on the second trading session on Friday. Reportedly, Adani group lost up to 20% on claims made in short-seller Hindenburg's report. Although the Adani Group came forward and denied the allegations labeled by the US-based research team Hindenburg Research counter alleged citing not addressing any 'substantive issue' raised in their report. In fact, in the last two sessions, Adani Enterprises share price has fallen from around ₹3,390 apiece levels to ₹2,721 levels, correcting to the tune of 20 percent in this time. Now, the question arises, what actually is Hindenburg report or what is Hindenburg's report on Adani? Below is everything you need to know about Hindenburg's report and how the Adani group retaliated.

What is Hindenburg's report?

For the unversed, Hindenburg research posted a detailed report and analysis on January 25, 2023 with a title saying, 'Adani Group – How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History'. Hindenburg raised a total of 88 questions from the Adani Group in its research. As per the New York-based firm, Hindenburg was preparing a whistleblower report on Adani for the past 2 years. Hindenburg's whistleblower report consists of 106 pages, a 32,000-word report, and over 720 citations.

Seeing in a nutshell, Hindenburg Research has alleged that Adani Group was "engaged in a brazen stock manipulation and accounting fraud", a charge the conglomerate described as malicious, unsubstantiated, one-sided, and having done with malafide intention to ruin its share sale. Hindenburg, a US-based investment research firm that specialises in activist short-selling, said its two-year investigation reveals that "the Rs 17.8 trillion (USD 218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over decades." Adani Group said it was shocked to see the report that came out without any attempt to contact it to get 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," the ports-to-energy conglomerate said in a statement as reported by the media.

Some of the sensational accusations of the Hindenburg Research says, "Gautam Adani, Founder and Chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group’s 7 key listed companies, which have spiked an average of 819% in that period."

"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. 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."

"We have identified 38 Mauritius shell entities controlled by Vinod Adani or close associates. We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands.....Gautam Adani’s elder brother, Vinod Adani, has been described by media as “an elusive figure”. He has regularly been found at the center of the government’s investigations into Adani for his alleged role in managing a network of offshore entities used to facilitate fraud."

Read Full Hindenburg's report here

Adani group's strong response

Adani evaluating remedial and punitive action against Hindenburg Research

After the sensational accusations, the Adani Group is mulling legal action against Hindenburg Research, whose report calling out the conglomerate’s debt position and governance issues led to shares of the group’s companies losing ₹85,000 crores in value. In a media statement as reported, Jatin Jalundhwala, Group Head - Legal, Adani Group, said, “The maliciously mischievous, unresearched report published by Hindenburg Research on 24 Jan 2023 has adversely affected the Adani Group, our shareholders and investors.”

“The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens,” he added. “We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO (Follow-on Public Offering) from Adani Enterprises,” Jalundhwala further said.

After the alleged whistleblower report, Adani Group companies – Adani Enterprises, Adani Power, Adani Transmission, Adani Wilmar, Adani Total Gas, Adani Ports & SEZ, and Adani Green Energy – suffered huge losses. Companies owned by the group, including ACC, Ambuja Cement, and NDTV also saw shares decline sharply during intraday trade.

Hindenburg Research hits back

On legal action threat, Hindenburg Research also issued a strong media statement stating that they welcome legal suits against them. Furthermore, the New York-based Shirt-Seller firm stated that they stand by their whistleblower report and that any legal action against them would be meritless. Not only this, Hindenburg went onto challenge Adani Group saying, "If Adani is serious, it should also file a suit in the U.S. where we operate. We have a long list of documents we would demand in a legal discovery process'

Adani releases detailed report on Hindenburg Research accusations

The Ahmedabad-headquarter group said 21 of the questions raised were responded in the public disclosures made in its 2015 Adani Portfolio presentation. The accounting or fraud assertions investigation made by Hindenburg It added that as far as accounting or fraud assertions investigation made by Hindenburg, "it is devoid of facts". The group further reiterated that on governance four of its large companies are amongst the top 7% of the peer group in Emerging markets or the sector or the world. It added that overall promoter leverage is less than 4 percent of promoter holding.

Read Adani Rebuttle In Detail In Document