Indian billionaire Gautam Adani and logo of the Adani Group seen on the facade of one of its buildings on the outskirts of Ahmedabad,

INDIA — The Adani Group has released a page 413-paged response to the allegations made by US short-seller Hindenburg Research, which accused it of “brazen” market manipulation and accounting fraud.

The conglomerate, which is owned by Indian billionaire Gautam Adani, said to be the richest person in Asia, had earlier said it would not be releasing this response before it completes its new share sale that is set to conclude on 31 January.

According to bondholders who participated in a conference call with Adani executives, had said it would give a detailed rebuttal on Friday. While it had answered some questions, the longer reply did not materialise as expected.

The response was said to be more than 100 pages, and the group is also seeking legal advice on when to release it, one of the people said to Bloomberg, asking not to be identified because the information is private.

While it was said not to be released before 31 January, the group eventually published it on Sunday evening (29 Jan).

While the group’s response is 413 pages in total, only 24 pages are dedicated to the brief rebuttal of the allegations by Hindenburg.

Allegations by Hindenburg

Shares in companies of Adani Group fell immediately last Wednesday following the allegations by Hindenburg. a prominent research outfit which specialises in activist short selling, made wide-ranging allegations of corporate malpractice following a two-year investigation into the tycoon’s companies.

Hindenburg’s report details a web of Adani family-controlled offshore shell entities in tax havens – including the Caribbean, Mauritius and the United Arab Emirates – that it claims were used to facilitate corruption, money laundering and taxpayer theft while siphoning money from the group’s listed companies.

In 2020, Hindenburg brought down the founder of e-truck company Nikola Corp, which was accused of concocting “dozens of lies”. Nikola founder Trevor Milton eventually stepped down as chairman and was found guilty of securities fraud. More recent targets of Hindenburg’s include Clover Health and Lordstown Motors.

The short seller stressed that its report “represents our opinion and investigative commentary” and urged readers to draw their own conclusions about Adani Group.

Hindenburg said in its report with regard to Adani’s companies, “Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its seven key listed companies have 85 per cent downside purely on a fundamental basis owing to sky-high valuations.”

Indeed, Adani’s companies trade at price-to-earnings ratios many times those of peer companies in India and around the globe.

Investors and analysts have also flagged concerns over the high levels of debt seen in the empire’s listed units. Gross debt at six Adani companies – Adani Enterprises, Adani Green Energy, Adani Ports and SEZ, Adani Power, Adani Total Gas and Adani Transmission – stood at 1.88 trillion rupees (S$30.3 billion) as at end-March 2022.

In response, Adani Group’s CFO Jugeshinder Singh condemned the report published by Hindenburg, saying that it is “a malicious combination of selective misinformation and stale, baseless and discredited allegations”.

Responses by Adani Group

  1. (Allegation #1) Gautam Adani’s younger brother, Rajesh Adani, was accused by the Directorate of Revenue Intelligence (DRI) of playing a central role in a diamond trading import/export scheme around 2004-2005. He was subsequently arrested twice over allegations of customs tax evasion, forging import documentation and illegal coal imports. Given his history, why was he subsequently promoted to serve as Managing Director at the Adani Group?
  2. (Allegation #72) Adani has been subject to numerous allegations of fraud by the DRI and other government agencies. In the 2004-2006 diamond scandal investigation, the government alleged that Adani Exports Ltd (renamed Adani Enterprises) and related entities’ exports were x the total exports of all the other 34 firms in the industry group put together. How does Adani explain that sudden surge in trading volume?
  3. (Allegation #73) The diamond export investigation also demonstrated the role played by Vinod Adani and entities in the UAE, Singapore and Hong Kong that were used to facilitate the back-andforth movement of money and product. How does Adani explain all the trading that took place with entities associated with Vinod Adani?
  4. (Allegation #2) Gautam Adani’s brother-in-law, Samir Vora, was accused by the DRI of being a ringleader of a diamond trading scam and of repeatedly making false statements to regulators. Given his history, why was he subsequently promoted to Executive Director of the critical Adani Australia division? 

Common Response to the four allegations: Each of the above matters are closed and dismissed in our favour. Further, these have been disclosed by us in the public domain and all our stakeholders are aware of the same. These have been cited solely in an attempt to further the narrative of lies.

Adani further referenced to circulars contained in Annexure 2 of the report.

(Allegation #86) In the same interview, Gautam Adani said “I always introspect and try to understand the others’ point of view.” Given this, why has Adani Group filed legal suits against journalists and activists, which have been condemned by media watchdogs? Why did it have an activist in Australia followed by private investigators?

Response: Being open to introspection or understanding others’ point of view does not mean we have given up our legal right to defend ourselves, our businesses and other employees through proper legal channels. We have exercised our rights in this matter in due compliance with law and through proper judicial processes in this respect.

Welcomes legal actions by Adani Group

Hindenburg, in an earlier response to Adani Group’s denial, said that the group has not addressed a single substantive issue that it raised.

“At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions.”

“Instead, as expected, Adani has resorted to bluster and threats. In a statement to media today, Adani referred to our 106-page, 32,000-word report, with over 720 citiations and prepared over the course of 2 years, as “unresearched” and said it is “evaluating the relevant provisions under U.S and Indian laws for remedial and punitive action” against us.

Hindenburg said it welcomes the legal actions of the group and stands by its report, and believes any legal action taken against it would be meritless.

It also asks that the group file a suit in U.S. where it operates.

“We have a long list of documents we would demand in a legal discovery process”

Temasek and GIC in talks with Adani Group on Green industry

Three months ago (Oct 2022), Indian billionaire Gautam Adani, said to be the richest person in Asia, was reportedly in talks with Singapore’s two sovereign wealth funds, Temasek Holdings and GIC, to raise at least US$10 billion to fund its business expansion.

The Adani Group wanted to invest more than US$100 billion over the next decade, most of it in the energy transition business, Adani announced.

Adani is seeking to raise his international profile and is aggressively branching into new businesses in India, where he is seen to enjoy a close relationship with PM Narendra Modi.

Adani’s executives personally flew to Singapore to talk with Temasek and GIC, after meeting with other investors. The plan was to raise the capital in multiple tranches, likely through the sale of stakes in the group’s firms or associated entities.

At the time, when asked by Reuters about the meeting, Temasek said it does not comment on market speculation and rumours.

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