The article 'Hindenburg Research Stands by its Report on Adani' is an insight into one of India's most significant and powerful industrial giants, the Adani Group

The article 'Hindenburg Research Stands by its Report on Adani' is an insight into one of India's most significant and powerful industrial giants, the Adani Group, which is still reeling from claims made by a short seller that it engaged in "the greatest swindle in corporate history," which allegedly involved stock manipulation and fraud. The backlash has reduced the market value of Adani's many listed companies by around $70 billion, as well as Gautam Adani's personal wealth. Additionally, it has fueled scepticism regarding the conglomerate's fundraising initiatives, including a major stock offering.

The Adani Group and Hindenburg have been in a bitter back-and-forth since the report's publication, and the Indian conglomerate announced that it is considering legal action. Following that, it issued a lengthy, irate reaction that spanned more than 400 pages. In it, it referred to Hindenburg's claims as "baseless and discredited" and asserted that the research firm had an "ulterior motive."

What is Hindenburg Research?

Hindenburg is a research company as well as a short seller. The practice of betting against a company's stock is known as short selling. But Hindenburg makes other types of wagers as well.

The company, which took its name from the 1937 airship tragedy, places daring wagers on successful businesses that it considers to be either overvalued, deceptive, or both. Founded in 2017 by Nathan Anderson, it gained notoriety as a hunter of financial fraud in 2020 when it accused electric vehicle manufacturer Nikola of misleading investors about the capabilities of its truck. Ultimately, the founder of Nikola was found guilty of fraud.

Following the shorting of the stock, they also publish a very thorough report explaining their reasoning. They do this in the hopes that other people would follow suit and further down stock prices. It goes without saying that Hindenburg has had a lot of success with its now-famous playbook. They recently focused on Adani, and this week they published a substantial study documenting claims of business malfeasance and stock market manipulation. Hindenburg said in its Adani probe that it had shorted the group's companies "via US-traded bonds and non-Indian-traded derivative instruments." By betting that the stock price of the firms they are targeting will decline, short sellers hope to make money.

Allegations Made Against the Adani Group

On January 24, Hindenburg published a scathing report where it alleged that Indian energy-to-infrastructure behemoth Adani Group is allegedly "performing the largest scam in corporate history" and "has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades. In its report, Hindenburg made a number of claims about offshore firms and posed a slew of questions to the Adani Group. According to the report, members of the Adani family allegedly ran offshore shell companies in tax havens like Mauritius, the United Arab Emirates, and the Caribbean Islands, and they allegedly created false import and export documentation to produce fictitious, fraudulent sales and steal money from publicly traded companies.

Additionally, Hindenburg claimed that the younger brother and brother-in-law of Adani Group Chairman Gautam Adani, Rajesh Adani, and Samir Vora, played significant roles in the diamond trading import and export scheme in 2004–2005 that involved the use of offshore entities to create a fictitious turnover. The more serious accusations, however, were reserved for Vinod Adani, the elder brother of Gautam Adani, who the study claimed played a crucial role in overseeing a network of offshore firms used to commit fraud. According to the report, Vinod Adani "manages a large labyrinth of offshore shell entities" through his close friends.

According to the Report, Vinod Adani and his close allies are purportedly in control of 38 shell firms situated in Mauritius, and he is also "covertly controlling" additional businesses in Cyprus, the United Arab Emirates, Singapore, and a number of Caribbean Islands. According to Hindenburg, many of these businesses lack any "obvious" indications that they are in business, such as stated workers, separate addresses, phone numbers, or an online presence. Despite this, it claimed, they had transferred billions of dollars into both publicly traded and privately held Indian Adani companies, frequently without disclosing the deals' related party nature as was required by law.

According to Hindenburg, Vinod Adani shells have a lot of functions, including stock manipulation, money laundering, and maintaining the illusion of financial stability and solvency "via Adani's private entities onto the balance sheets of the listed corporations." Additionally, it was claimed that many of the biggest "public" shareholders in the Adani Group are offshore shell firms and money, which could result in the delisting of Adani companies if SEBI regulations were to be followed.

The percentage of Adani Green Energy that was sold to foreign companies, like those from Mauritius and Cyprus mentioned in its report, has drawn criticism from Hindenburg. It demanded information on every offshore entity that took part in the OFS deals. The assertion made by Group CFO Robbie Singh on June 16, 2021, that funds like the Mauritius shareholders had not made new investments and had acquired shares of other Adani stocks through vertical demergers was also called into doubt. It claimed that contrary evidence was present.

Response of Adani Group to the Allegations

The Adani Group responded to the Hindenburg report with a 413-page document, claiming that the short-seller had misrepresented offshore corporations and related party activities and lacked knowledge of Indian law. The company claimed that Hindenburg's assertions and inquiries lacked any supporting data and were merely "unsubstantiated assumptions."

It stated that none of the subsidiaries or Adani-listed companies have a managerial position held by Vinod Adani. It was stated that Vinod Adani has no involvement in the day-to-day operations of the business and that these inquiries are thus irrelevant. The Adani Group further stated that it was unable to respond to Hindenburg's accusations of Vinod Adani's business dealings or transactions. Additionally, it stated that in accordance with Indian law, all transactions made by Adani portfolio businesses had been properly identified and disclosed as related party transactions.

Way Forward

Adani Group was under pressure when they attempted to raise 200 billion rupees ($2.5 billion) by issuing new shares in Adani Enterprises when Hindenburg's allegations surfaced. The offer was hailed as the largest public share offering by a listed firm in India's history. The offer had a slow start, but it was fully subscribed to just before the deadline. After the recent unrelenting stock market beating, its performance gives Gautam Adani some relief.

Analysts have already voiced concerns in the past that the rapid expansion of Adani firms carries a significant risk. The $30 billion borrowing binge that Adani used to fund his empire has made his company one of the most indebted in the nation. In a report titled "Deeply Overleveraged" that was issued by Adani Group last year, CreditSights, a research company owned by the Fitch Group, voiced grave worries about the company's plans for debt-financed growth.

Adani Group responded by stating that its companies' "leverage ratios" "remain to be healthy and are in line with the industry benchmarks in the respective sectors." However, analysts predict that over time, even though the value of Adani shares will undergo a much-needed correction, the company will endure this crisis.


[1] George Glover, Everything you need to know about Gautam Adani and Hindenburg after the short seller's fraud allegations burnt a $72 billion hole in the richest Asian's empire, Available Here

[2] Diksha Madhok, Adani vs Hindenburg: India’s top businessman faces the biggest test, Available Here

[3] Jayshree Pyasi, Aditya Kalra and Aditi Shah, Adani hits back at Hindenburg, says it made all disclosures, Available Here

[4] Anwesha Madhukalya, Hindenburg's allegations v. Adani's Response: Shell companies, money laundering, Vinod Adani's role, Available Here

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Snehil Sharma

Snehil Sharma

Snehil Sharma is an advocate with an LL.M specializing in Business Law. He is a legal research aficionado and is actively indulged in legal content creation. His forte is researching on contemporary legal issues.

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