Adani slams ‘attack by US short sellers on India’ as stock rout hits $70bn

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By Diksha Madhok, CNN

The Adani Group has accused a US investment firm of launching “a calculated attack” on India by publishing a report alleging widespread fraud at the ports-electricity conglomerate.

Hindenburg Research published its report on the affairs of billionaire Gautam Adani last week, accusing the group of “brazen stock manipulation and an accounting fraud scheme over decades”. He said he took a short position in Adani Group companies, meaning he would benefit from a decline in their value.

Since Hindenburg’s report was published, Adani’s business empire has lost more than $70 billion in market value. The infrastructure magnate’s net worth also fell by some $30 billion, according to the Bloomberg Billionaires Index.

He is still Asia’s richest man with a personal fortune of over $92 billion, which is $10 billion more than fellow Indian entrepreneur Mukesh Ambani.

The Adani Group had already denounced the Hindenburg report as “baseless” and “malicious” in its initial response hours after the report was released, and said on Thursday it was considering legal action. He followed that up on Sunday with a long and furious over 400-page rebuttal, in which he called Hindenburg’s claims “baseless and discredited” and said the research firm had an “ulterior motive.”

“This is rife with conflicts of interest and is intended solely to create a false securities market to enable Hindenburg, a recognized short seller, to achieve massive financial gain through illicit means at the expense of countless investors,” did he declare.

Rapid expansion

The 60-year-old tycoon founded the Adani Group over 30 years ago and is considered a close ally of India’s current Prime Minister Narendra Modi.

Before the rout, which continued on the Mumbai Stock Exchange on Monday, markets had applauded the businessman and his blistering pace of expansion. Investors were betting on the self-made industrialist’s ability to grow his businesses in sectors Modi had prioritized for development.

In its detailed response on Sunday, the Adani Group described the US short seller’s report as an “attack” on India, its economy and its investors.

“This is not just an unwarranted attack on any particular company, but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the history of India’s growth and ambition,” he said.

Hidenburg concluded his report last week with 88 questions for the Adani Group. These ranged from asking for details of the group’s offshore entities to why it has “such a convoluted and interconnected corporate structure”.

The Indian conglomerate called the questions “rhetorical undertones coloring the rumors as facts”. She then sought to answer them, and published some tables and graphs to support her position.

The lengthy rebuttal was intended to reassure investors about the group’s debt, banking relationships and corporate governance practices. Shares of Adani Enterprises, the group’s flagship company, rose more than 4% on Monday, but most Adani shares extended losses from last week.

Hide behind “nationalism”?

The conglomerate’s chief financial officer, Jugeshinder Singh, compared the Indian market’s reaction to one of the most horrific events in the country’s colonial past under British rule.

“At Jallianwala Bagh, a single Englishman gave an order and Indians fired at other Indians. So am I surprised by the behavior of some of my fellow Indians? No,” Singh told the Mint business daily in an interview published Monday.

On April 13, 1919, British Brigadier General Reginald Dyer ordered his soldiers to fire without warning on a peaceful protest of thousands of unarmed people at Jallianwala Bagh, a public garden in the city of Amritsar. They stopped firing 10 minutes later when their ammunition ran out. The horrific event is now known as the Jallianwala Bagh or Amritsar massacre.

Hindenburg’s claims come at a sensitive time for Adani. It aims to raise 200 billion rupees ($2.5 billion) by issuing new shares in Adani Enterprises this month. The offer will end on Tuesday.

Hindenburg responded to Adani’s rebuttal by saying “fraud cannot be masked by nationalism”.

“The Adani Group has attempted to confuse its meteoric rise and the wealth of its chairman, Gautam Adani, with the success of India itself,” he said in a Twitter post on Sunday.

Hindenburg went on to add that the group ignored “all the key allegations we raised.”

“In terms of substance, Adani’s 413-page response only comprised about 30 pages focused on issues related to our report,” he said.

“The rest of the response consisted of 330 pages of court filings, as well as 53 pages of high-level financial data, background information and details of irrelevant corporate initiatives, such as how they encourage the female entrepreneurship and the production of safe vegetables.”

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