US firm flags ‘brazen’ Adani fraud

BENGALURU: Well-known US activist investor 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 on Wednesday its two-year investigation reveals that “the Rs 17.8 trillion ($218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”

The report comes ahead of a Rs 20,000 crore follow-on share sale of Adani Group’s flagship Adani Enterprises on January 27, aiming to raise to $2.5 billion to fund capital expenditure and pay off some debt.

Hindenburg, known for having shorted electric truck maker Nikola Corp (NKLA.O) and Twitter, said it holds short positions in Adani companies through US-traded bonds and non-Indian-traded derivative instruments.

Its research report questioned how the Adani Group has used offshore entities in offshore tax havens like Mauritius and the Caribbean Islands.

It also said key listed Adani companies had “substantial debt” which has put the entire group on a “precarious financial footing”, and asserted that shares in seven Adani listed companies have an 85 per cent downside on a fundamental basis due to what it called “sky-high valuations”.

Adani Group’s Chief Financial Officer, Jugeshinder Singh, said in a statement the company was shocked by the report, calling it a “malicious combination of selective misinformation and stale, baseless and discredited allegations.”

“The Group has always been in compliance with all laws,” the company said, without addressing specific allegations made by Hindenburg.

“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,” it added.

The research report, Hindenburg said, was based on an investigation over two years that involved speaking with dozens of individuals, including former Adani Group executives as well as a review of documents.

India’s capital markets regulator, the Securities and Exchange Board of India, did not immediately respond to a request for comment.

Adani has repeatedly dismissed debt concerns. Singh told media on January 21: “Nobody has raised debt concerns to us. No single investor has.”