Adani and Hindenburg: A Public Feud Over Allegations

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Setting the Record Straight: Adani Group Rebuts Hindenburg Report

Adani Group issued a statement on Sunday refuting claims made in the Hindenburg report, calling it “neither independent nor objective”. Adani Group has responded with a report alleging fraud with a 413-page document claiming the Hindenburg reports authors are the “Madoffs of Manhattan,” and accusing them of a breach of securities and foreign exchange laws without providing evidence, while trying to deflect attention by claiming the report was an attack on India. 

The Group accused the report of spreading false narratives, making misleading claims, and creating a false market in securities with the intention of gaining profits.The statement also claimed that the report was an attack on India’s growth story. The Adani Group stated that it is in compliance with all applicable laws and regulations and that the report’s claims are baseless allegations. The Group also pointed out that 65 out of the 88 questions raised in the report have already been disclosed and the rest are related to public shareholders or baseless allegations.

Hindenburg Research Clarifies Stand in Latest Report, Addresses Adani Group Response

They believe Adani is holding back India and that fraud is fraud, regardless of the perpetrator’s wealth. Adani’s response only partially addressed the report’s allegations. Hindenburg states that 88 questions were asked to the Adani Group in a report and 62 of these questions went unanswered, with Adani mainly grouping questions together and providing generalised deflections.

They believe that Adani Group’s report answered a few questions but mainly confirmed the findings of the report. The core allegations of the report, focused on suspicious transactions with offshore entities, were left unaddressed. The report detailed the labyrinth of offshore shell entities associated with Vinod Adani, the elder brother of Chairman Gautam Adani, used for stock parking/manipulation and accounting manipulation. Adani did not dispute the existence of these transactions, but bizarrely claimed Vinod Adani is not a related party and there are no disclosable conflicts. 

Many questions were focused on the source of funds for suspect transactions, but Adani claimed ignorance and was not required to be aware of the source of funds. Adani’s lack of direct and transparent answers raises questions about the integrity of their business. There seems to be irregularities and connections between suspected offshore stock parking entities and Adani Promoters. The report outlines a web of offshore entities with connections to Adani, holding billions of dollars worth of stock in Adani listed companies. The report also shows connections between these entities and Amicorp, which was involved in a notorious international fraud and money laundering scandal. 

The suspected stock parking entities were also found to be engaging in irregular trading, accounting for up to 30%-47% of delivery volume. Adani claimed ignorance as to its largest public holders and their trading patterns and focused its argument on contesting the legal definition of ‘related party’ in India. 

Hindenburg believes that Adani Group has various issues related to party transactions, market manipulation, conflicts of interest, and lack of transparency. The Financial Accounting Standards Board defines related parties as management of the entity and their immediate families, but the author believes Vinod Adani, who has familial relationship with senior management of Adani Group and suspected significant ownership of Adani Group shares, should also be considered a related party. The Hindenburg report in response to the Adani Group’s report raises questions about Adani Group’s association with market manipulator Ketan Parekh, frequent market manipulation investigations and prosecutions, false statements to regulators about Vinod Adani’s involvement in Adani Group, lack of disclosure about payments to private contractor PMC Projects, and entities involved in transactions to bail out Adani Green Energy. 

In conclusion, the Hindenburg report claims Adani’s responses largely confirmed the findings but sidestepped the key issues. The impending battle between the two parties promises to be a prolonged affair, and only time will determine its ultimate outcome. Regardless of the result, this event will leave a significant mark in the history of Indian stock markets.

 

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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