Shares of some Adani group companies plummeted 10-15% in early trade on Friday, extending Wednesday’s losses, after Hindenburg Research said it stood by the findings of its report which, among other things, accuses that the group’s stocks were “manipulated” and accounting fraud over the years by offshore funds whose antecedents remain relatively unknown.
Hindenburg Research, a US-based investment research firm that specialises in activist short-selling said, just days before the billionaire’s flagship firm Adani Enterprises Ltd. launched India’s biggest ever primary follow-on public offering that’s seeking to raise 200 billion rupees ($2.5 billion). It was meant to fund capital expenditures and to pay down the debt of its various units.
The Hindenburg report on Adani Enterprises caused negative sentiment in the market, which led to today’s market crash, 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.
A report from Global index provider MSCI has sought feedback from market participants on Adani group securities after a damaging report by US-based investment research firm Hindenburg led to a massive selloff across all the listed stocks of the conglomerate.
At present, eight Adani group stocks (barring Adani Wilmar and NDTV) are part of the MSCI Standard Index. They have a cumulative weight of 5.75 per cent. Their cumulative value is estimated at $3.5 billion as of Friday.
Gautam Adani who has his businesses in several countries including investments in Sri Lanka’s wind and renewable energy sector, has been accused of pulling off the ‘largest con in corporate history’ through the Indian-based Adani Group Corporation.
There was certain controversial news, in Sri Lanka, a senior bureaucrat caused a storm when he alleged that the Sri Lankan government had been subjected to Indian pressure to favour the Adani Group with the awarding of an energy contract. He alleged that the Sri Lankan president had confided that India’s PM had insisted that a renewable-energy project be allocated to the Adani Group.
In its scathing report, Hindenburg questioned how the Adani Group used its offshore entities in tax havens like Mauritius, the Caribbean Islands, and the United Arab Emirates, adding that certain offshore funds and shell companies tied to the group ‘surreptitiously’ own stock in Adani-listed firms, according to UK’s Daily Mail.
Adani said, 8 of 9 listed companies have a big 6 auditor such as Deloitte Haskins & Sells, SRBC & Co. (EY), SRBC & Co. (EY) & Dharmesh Parikh & Co. (Joint Auditors), Shah Dhandharia & Co., Ernst & Young, PKF, Walker Chandiok & Co. and K S Rao & Co., etc.
Whereas, Adani Group said Thursday that it was exploring legal action against the research firm, calling Hindenburg’s report “maliciously mischievous,” “bogus” and “unresearched.”
Expert says, it is the need of the urgency for the Adani Group to release a detailed response to allegations made by US short seller Hindenburg Research only after the completion of a new share sale that’s set to conclude on Jan. 31.
Hindenburg alleged that its two-year investigation found the Adani Group “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades” and called out the conglomerate’s “substantial debt.” The firm said it’s shorting Adani Group through US traded bonds and non-Indian-traded derivatives, and that its report “relates solely to the valuation of securities traded outside of India.”
At the same time, SEBI has reportedly increased the scrutiny of deals done by the Adanis over the past year, even as it is also studying the observations made by Hindenburg Research. According to a Reuters report, Sebi is conducting an investigation on the group’s foreign portfolio investors and it may look at the Hindenburg report to complement its probe in this regard.
