India’s Adani Group on Wednesday denounced fraud allegations made by US-based short seller Hindenburg Research as “baseless” and a “malicious combination of selective misinformation”.
Hindenburg Research released an investigation into billionaire Gautam Adani’s sprawling conglomerate on Tuesday, accusing it of “brazen stock manipulation and an accounting fraud scheme over decades.”
Hindenburg said he took a short position in Adani Group companies “through US-traded bonds and non-India-traded derivatives.” Short sellers aim to make money by betting that the stock price of the companies they target will fall.
Adani’s business empire contains seven listed companies – in sectors ranging from ports to power plants – and shares of most of them fell 3% to more than 8% on Wednesday.
In its survey, which Hindenburg said took two years to compile, the research firm questioned the “skyrocketing valuations” of the Adani companies and said their “substantial debt” puts the whole group “in a precarious financial situation.
The research firm concluded its report with 88 questions for the Adani Group. These range from asking for details of Adani’s offshore entities to why it has “such a convoluted and interconnected corporate structure”.
CNN did not verify the report’s claims, and India’s stock market regulator did not immediately respond to a request for comment.
Shares of Adani’s companies have surged in recent years, making him Asia’s richest man.
In a statement issued hours after Hindenburg released his report, Adani Group Chief Financial Officer Jugeshinder Singh said Hindenburg made “no attempt to contact us or verify the factual matrix”, adding that the allegations made by the short seller are “stale, baseless and discredited”.
The conglomerate has come under scrutiny from Indian authorities in the past. In 2021, shares of Adani’s companies fell after The Economic Times newspaper reported that foreign funds holding stakes worth billions of dollars had been frozen by the country’s National Securities Depository. The Adani Group called the report “demonstrably wrong”.
Nate Anderson, who founded Hindenburg Research, has made a name for himself in recent years by targeting companies he deems overvalued and whose finances are questionable. Anderson is best known for taking on electric truck company Nikola in 2020, calling it a “complex fraud” and causing the company’s shares to plummet. In 2022, the Nikola founder was convicted by a US jury of fraud in a case alleging he lied to investors about the company’s technology.
But some have accused Hindenburg of trying to drive stocks down with his research reports in order to make a profit.
His report on the Adani group comes at a sensitive time. Later this week, Adani Enterprises, the conglomerate’s flagship company, is aiming to raise 200 billion rupees ($2.5 billion) by issuing new shares.
Singh said that “the timing of the report’s release clearly betrays a brazen and bad faith intent to undermine the Adani Group’s reputation for the primary purpose of harming the upcoming follow-up public offering.”
The conglomerate is also plans to IPO five new companies over the next two to five years.
A self-made college dropout and industrialist, Adani is worth nearly $120 billion, making him the fourth richest man in the world, ahead of Bill Gates and Warren Buffet, according to Bloomberg’s Billionaires Index. He is also considered a close ally of the current Indian Prime Minister, Narendra Modi.
The 60-year-old tycoon founded the Adani Group over 30 years ago. It has now established businesses in sectors ranging from logistics to mining, and is growing aggressively in various sectors such as media, data centers, airports and cement.
But this is not the first time that analysts have feared that the rapid expansion of his business poses a huge risk. Adani’s juggernaut has been fueled by a $30 billion borrowing spree, making his company one of the most indebted in the country.
Last year, CreditSights, a research firm owned by the Fitch Group, released a report on the Adani Group titled “Deeply Overleveraged” in which it expressed serious concerns about its debt-funded growth plans.
The Adani Group responded to CreditSights with a 15-page report, saying the “leverage ratios” of its businesses “continue to be healthy and in line with industry benchmarks in the respective sectors” and that they ” constantly got out of debt”. over the past nine years.