Market ignores Adani's 413-paged rebuttal against Hindenburg’s allegation and continues the sell-off

Shares in companies of Adani Group owned by Indian billionaire Gautam Adani fell immediately last Wednesday (25 Jan) following the allegations by Hindenburg Research, a prominent research outfit in New York 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, United Arab Emirates and Singapore – that it claims were used to facilitate corruption, money laundering and taxpayer theft while siphoning money from the group’s listed companies.In response, the Adani Group released a 413-paged response to the allegations on Sunday (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 Research."This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India," the Adani Group said in its 413-page response.Adani's finance chief, Jugeshinder Singh, likened the behaviour of Indian investors participating in the sell-off to the colonial-era Jallianwala Bagh massacre in Amritsar city.

Market rejects Adani Group's response

Despite the release of the 413-page response from Adani Group, share prices of Adani Group's companies continue to slide. Adani’s 413-page attempt to restore confidence in his business empire is falling flat with investors, as stock-market losses deepen.One day (30 Jan) after the release of Adani's response, investors continued to dump the shares of all Adani Group firms. The sell-off since last Wednesday has erased nearly US$72 billion in market value. Many investors are concerned about the conglomerate’s corporate governance. It also threatens to weaken broader confidence in India.“Not sure if Adani’s rebuttal is enough to assuage investor concerns. Just because things are disclosed and known does not make them right,” said an analyst from Smartkarma. “How does a group that big explain no analyst coverage and no mutual fund holdings?”In the latest twist, Hindenburg Research said Adani’s 413-page rebuttal has ignored all its key allegations and was “obfuscated by nationalism”. The conglomerate’s statement failed to specifically answer 62 of Hindenburg’s 88 questions and conflated the company’s “meteoric rise” and the wealth of Asia’s richest man “with the success of India itself”, Hindenburg Research said.The broad sell-off continued on Monday, with Adani Total Gas and Adani Transmission plunging as much as 20 per cent again. The flagship Adani Enterprises also erased its earlier gain of 10 per cent to trade 2 per cent lower.Adani Enterprises, the flagship company of Gautam Adani, was, however, able to secure a full subscription of its US$2.5 billion share sale on Tuesday despite the rout on the group's shares.