Asia’s richest man, Gautam Adani, has lost over $50 billion or Rs 3.7 lakh crores in less than a week!! But what has forced the world’s third-richest man’s wealth to plummet so terribly? The answer: A Research Report by Hindenburg Research.

Hindenburg Research is a forensic financial research firm that was founded in 2017. The firm publishes forensic analysis reports on equity, credit, and derivatives. According to the firm’s website, it looks for ‘man-made’ disasters on the stock markets to expose them before they created more victims.

What was in the report?

The report was extremely detailed as it made sure to assess a variety of factors and inspect all materially important aspects of the Adani Group. Some of the highlights of the report were: -

  • Gautam Adani added around $100 billion to his net worth in the past 3 years with all 7 of his listed entities registering an average growth of 819% during the same time frame.
  • All 7 listed entities have an 85% downside based purely on their fundamentals.
  • 5 of the 7 listed entities have current ratios below 1, indicative of short-term liquidity crises.
  • The Adani Group is a “family business” where 8 of 22 key personnel are Adani family members, several of which are accused of major frauds or of reportedly running a vast network of shell companies to facilitate fraud.
  •  Gautam Adani’s older brother, Vinod Adani, was found to be behind several shell companies based in Cyprus, Mauritius, the UAE, Singapore, and several Caribbean islands!
  • These entities, which have no reported operations, have moved billions of dollars into Indian Adani Group entities without making any disclosures.
  • Elementary efforts were made to hide the nature of some of the entities.
  • These shell companies serve 2 main purposes: a] Stock parking/manipulation, b] laundering money into Adani’s listed companies to show an image of financial healthiness.
  • 4 listed Adani entities have promoters acting as public owners through shell companies. These companies hold massive stakes in the Adani entities which could result in delisting pursuant to SEBI norms.
  • Adani’s offshore funds, which have massive irregularities such as possessing portfolios comprising Adani-only stocks, are actually undergoing investigations carried out by Indian regulators.
  • Offshore funds, which have been flagged for irregularities, accounted for 30-47% of annual ‘Delivery volumes’, a clear indicator of stock manipulation.
  • SEBI has persecuted over 70 entities under the allegation of pumping Adani stock.
  • There have been signs of Governmental leniency towards the Group.

The report goes on to detail the shell companies, the employees who may or may not have been part of entities that did or did not exist, the relations of the Adani Group with notorious market manipulator Ketan Parekh, the financial extent of money laundered to and from the group and much more. 

Read the entire report here: https://hindenburgresearch.com/adani/

How badly was the Adani Group affected by this report?

Gautam Adani, who had once briefly dethroned Jeff Bezos as the world’s second richest person, lost his position as the world’s third richest person and fell down to the 7th place with a net worth of roughly $96.5 billion! 

All 7 Adani Group companies have registered double-digit declines in less than a week! All the stocks witnessed massive gap-down openings as the report spooked investors all over the world, triggering massive panic selling pressures which tanked all Adani Group stocks. On the day the report was released, the market cap of the group fell over Rs 80,000 crores!!

The Indian stock market as a whole was also affected. The SENSEX index fell 1.45% and the Nifty 50 index tanked 1.6% on Friday alone!! 

Moreover, the report has also affected the FPO of Adani Enterprises. The FPO, whose anchor book brought in funds worth around Rs 6,000 crores for Adani Enterprises, witnessed a subscription of only 1% on the first day of bidding!!!

What are all the related parties doing about it?

There have been speculations that the Hindenburg firm was undermining the Adani group to damage the latter’s FPO. Moreover, the position of the Hindenburg firm as a short seller only adds to the speculations.

The Adani Group has issued a statement wherein it clearly accused the research firm of publishing baseless facts & having dishonest intentions to undermine the Adani Group and its ongoing FPO, which is India’s biggest FPO. The statement also emphasized the investor community’s trust in the Group which was based upon the detailed reports prepared by experts and large credit rating agencies.

Earlier, there was a group called CreditSights that claimed that the Adani Group was overleveraged, but this report by Hindenburg has blatantly accused the Adani Group of the world’s largest ‘stock market con in corporate history’. Moreover, the report has also raised 88 critically important questions on the Adani Group while demanding answers for the same! It will be interesting to see how the short seller’s report will affect the Indian stock market.