Short-seller Hindenburg Research recently accused Gautam Adani, Adani Group chairman, of accounting fraud and stock manipulation in its January 24th report, triggering a stock rout at the billionaire empire and wiping $127 billion off the group's market value.
While Adani has repeatedly denied the allegations, shares in its seven listed companies have tanked since the report was published.
The well-known US short seller has reignited old doubts about Adani's corporate governance. Whether its claims are ultimately proven to be true or not, the fallout from its nearly 100-page report threatens to undermine investor confidence in India and the country's regulatory framework. The Research Group claims that Adani manipulated the stock market and committed financial fraud.
In its report, Hindenburg claimed that Adani used offshore shell companies for money laundering and siphoned from publicly traded companies. The short seller invested in Adani securities offshore and called the company's meteoric rise "the largest con in corporate history."
While many of the claims had been circulating among the Indian investing class and media for years, their appearance in the global conversation appeared to spark a confidence crisis. Hindenburg has consistently refused to comment.
Adani firms now account for eight of the ten worst-performing stocks in the MSCI Asia Pacific Index this year, and bonds issued by the Indian billionaire's flagship company have fallen to distressed levels in US trading. The turmoil has not only impacted Adani Group shares but also the banks that lent to these companies.
For many years, Adani companies have delivered the type of infrastructure projects that India required. Gautam Adani’s integrated businesses touch hundreds of millions of Indians, from the chain of ports that transport coal from Adani mines to company power plants that deliver electricity to homes via Adani’s transmission units.
According to company presentations, Adani Group is the largest private operator of India's sea and airports, controlling 33% of Indian air cargo traffic and 24% of its shipping capacity, in addition to developing more than 3,100 miles of the country's road network. The conglomerate intends to invest $70 billion in renewable energy projects that will be critical to Modi's achievement of India's Net Zero goals.
The Adani Group has issued a 413-page rebuttal, which refutes all of Hindenburg's allegations. According to the Financial Times, which cited unnamed sources, Adani Group has also hired the American law firm Wachtell, Lipton, Rosen & Katz to fight back against the short seller's claims. Wachtell is one of the most expensive law firms in the United States, with experience defending clients previously targeted by shareholder activists.
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