India’s top businessman faces the biggest test
The Adani Group: A “calculated attack” on India by the Hindenburg report on the port-to-power conglomerate
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-to-power conglomerate.
The Adani Group had already denounced the Hindenburg report as “baseless” and “malicious” in its initial response a few hours after the report’s release, and said Thursday that it was considering legal action. It ran a rebuttal for more than 400 pages and called Hindenburg’s allegations “baseless and discredited.” The research firm had an ulterior motive, it said.
NEW DELHI — On Wednesday, Indian businessman Gautam Adani lost the title of Asia’s richest man. In early January, not only was he the richest in Asia, he was the third-richest in the world and just a few billion shy of Elon Musk. Over the last week or so, Adani has dropped several places on the list of world’s wealthiest people. His personal fortunes dropped by over 50 billion dollars in a 10 day period, while his firms lost $100 billion in market value.
“This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors,” it said.
Markets had been cheering for the businessman and his rapid expansion before the Mumbai stock exchange fell on Monday. Modi prioritized sectors that the industrialist was able to grow his businesses in.
“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,” it said.
The Indian conglomerate called those questions “rhetorical innuendos coloring rumors as fact.” It wanted to answer them, so it published a number of tables and charts.
Adani and the Jallianwala Bagh Manifesto: How the Indians Learned from the Amritsar Massacre
The group has an excellent track record of fulfilling its debt obligations, according to Adani in his video address. He said the Adani Enterprise share issue was pulled to protect investors from losses — the stock had been trading well below the offer price since last week.
One of the worst events in India under British rule was the reaction of the market to it, said the CFO of the conglomerate.
There was only one Englishman who gave an order, and other Indians fired at each other. So am I surprised by the behavior of some fellow Indians? In an interview published Monday, Singh denied that.
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 in 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.
“Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself,” it said in a post on Twitter on Sunday.
“The remainder of the response consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables.”
Adani’s fate is being held back by the group of looters: A tribute to the late S.C. Adani and the first Asian person to do so
The research was named after the 1937 airship disaster and is known for its risky bets against high-flying corporations that it believes are overvalued or both.
He was ranked the second-richest person in the world, making him the first Asia-based person to ever do so on the list. Adani fell from fourth to 11th over the past week.
India is a vibrant democracy with an exciting future, we believe. We believe that India’s future is being held back by the Adani group, which has draped itself in the Indian flag while systematically looting the nation.
Defying Wall Street Crime: Why Short-Sellers Get Their Money When They Make Sense of Their Own Profit, or How to Make a Bad Investment
A football game on Friday night has your friend having a ticket. You think that the price of tickets may fall due to lack of demand. To get the ticket back to your friend, you have to pay a small fee and promise to do it before the game. Right away, you sell the ticket you borrowed for 50 bucks, betting that by game day the cost of a ticket will be less than $50. Bad weather keeps people away from the stadium and it starts to cut prices. You purchase a ticket for $30 and give it to your friend, who will keep the $20 difference.
Firms that sell short-selling are among the most reviled. If the world of Wall Street is a table where one player can boost everyone else’s fortunes, long-sellers are betting against the table.
Wall Street is a finely tailored machine built to sell securities to the public, regardless of quality, and critical research is needed to understand that. The corporate world is rife with fraud, and investors have little protection.
And to their credit, short sellers were key to exposing major market frauds like Enron in 2001 and the systemic mortgage fraud that nearly cratered the global economy in 2008.
Of course, there’s nothing to stop bad actors in the short-selling world from making exaggerated or bogus claims about a company to try to turn a quick profit.
The website states that it sees the Hindenburg as a totally man-made disaster. It’s our goal to shed light on man-made disasters floating around in the market, so they don’t lure in more victims.
It’s sort of like a bunch of investigative journalists, except without all the ethical baggage. (Journalists cannot retain a financial interest in their subjects; short-sellers like Hindenburg almost always do.)
It was founded in 2017 by Nathan Anderson and won its reputation as a bloodhound for financial malfeasance in 2020, when it accused electric vehicle maker Nikola of lying to investors about its truck’s capabilities. The founder of Nikola was found guilty of fraud.
The Adani fight: The road to big dreams, big debts and big fat ends in India’s booming coal mining conglomerate AEL
Meanwhile, the negative press comes at a tricky time for Adani, who is aiming to raise $2.5 billion by issuing new shares in Adani Enterprises this month. The offer will end on Tuesday.
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Back home, his huge logistics and energy conglomerate announced plans to take more businesses to the stock market and issue new shares to raise billions to pay down debt. Everything changed less than a week later.
According to the director of research at Stoxbox, sentiment is playing against the Adani group in the short term.
So, how did a relatively young and small New York financial research firm manage to bring the Adani juggernaut to a juddering halt? What happens next in the fight between David and Goliath?
Experts say the speed with which he has accumulated wealth is both extraordinary and unusual, even in India, where the super-rich have exploded in number.
India launched reforms that made its economy grow more quickly. Adani’s fortune grew along with it. In 1994, AEL became the first company to list on the Mumbai stock exchange.
The businessman and the indian prime minister both hail from a state in western India where Adani started operating a port. The largest commercial port in the country by volume is Mundra Port.
He is one of the largest coal producers in India, and also operates the controversial Carmichael Coal Mine in Australia, which has faced fierce opposition from climate change campaigners.
While the business is built on fossil fuel, Adani invests billions of dollars into clean energy, which is in line with India’s long term climate goals.
Raj Kumar tells Reuters: “I am not afraid of a change of government”: Adani after the crash of the Adani Group
But critics say his rise has rested heavily on crony capitalism. They doubt if his empire would survive a change of government.
Life Insurance Corporation, the largest insurer in India with $4 billion invested in the Adani Group, told Reuters that it will hold talks with the group.
Raj Kumar said that since they are an investor, they have right to ask relevant questions.
The offer became fully subscribed before the deadline for the close of trading in Mumbai on Tuesday. Its success offers Adani some respite after the relentless stock market battering of recent days.
The Adani Group said at the time that the leverage ratios of its companies continue to be healthy and are in line with industry benchmarks. “
Adani Group “is not going anywhere,” said Rajat Sharma, founder of financial advisory firm Sana Securities. They are a well-established group in important businesses.
On Thursday, the value of the businesses belonging to the Indian billionaire was wiped out by the stock market crash that has hurt his empire.
“For me, the interest of my investors is paramount and everything is secondary,” the 60-year-old businessman said in a recorded video address posted after he abruptly abandoned a $2.5 billion deal to sell new shares in his flagship company, Adani Enterprises, just 24 hours after it was sealed.
How the Adani saga has opened a rude awakening for foreign investors: Gautam Adani speaks out against the indiscrepancies in the stock market
TheSEBI was examining stock price falls and also looking into any possible irregularities in the share sale, according to a source with direct knowledge of the matter. The stock exchange has yet to respond to requests for comment.
The central bank of India has asked banks about their debt exposure to the Adani Group, according to a report. The Reserve Bank of India was unresponsive to the request for comment.
The economy was trying to get more foreign investment at the World Economic Forum in Switzerland when the crisis erupted around a prominent businessman.
“Foreign investors have had a rude awakening as I can see it from the broader market activity.” said Saurabh, founder of Marcellus Investment Managers.
“The Adani saga has opened a big can of worms,” said Manish Chowdhury, head of research at brokerage Stoxbox. “The India story is looking weak” to foreign investors now, he added.
Chowdhury said that investors would now be “skeptical” about accounting practices at all Indian firms, while Mukherjea said his clients are already asking more questions.
“Naturally … they are requesting us to do a bit of hand holding with regards to how accounting and corporate governance works in India,” Mukherjea told CNN.
Stephen Innes said that it will be a turn-off for large foreign investors since it has become a political issue.
The Adani crisis and the friendship between India’s premier and prime minister Amir Khan: a video interview with Safiyev Modi
The founder of the company had not spoken about the crisis before, but in a video address he did say that the report was baseless.
“This decision will not have any impact on our existing operations and future plans. We will continue to focus on timely execution and delivery of projects,” he added.
What is the reason? He is accused of pulling the largest con in corporate history by a U.S. based short seller, who bets against Adani’s stock prices.
According to an unconfirmed report, Credit Suisse has stopped accepting bonds of the Adani Group as deposits, further damaging the group’s shares. In a move that raised eyebrows, the conglomerate called off a massive share sale on the same day.
“It is quite clear that Adani has had very little auditory supervision, almost no coverage by analysts and the regulator has not taken any steps to investigate their business processes or price actions.”
The reputations of the group are important, says Amol Agrawal, who teaches economics at Ahmedabad University in Gujarat.
Both men hail from the western Indian state of Gujarat and have been friends for a long time. In 2014, the then-Prime Minister-elect Modi traveled to New Delhi for his inauguration in Adani’s plane.
The Adani Group of Companies and India’s Stock Markets: Why is it taking a Research Firm to the Next-to-Leading Order?
The Adani Group has been the subject of several investigations but most of them have been stopped or stonewalled.
Agrawal, of Ahmedabad University, also wonders why it took a research firm based in the U.S. to raise such serious questions about the Adani Group. “There are so many stock market analysts [in India], why is it that they were not seeing what these guys are seeing?” he asks.
Most market analyses today, he says, are “buy, buy, buy” and it points to a wider problem. “The stock market and the whole financialization of the world economy has moved in a direction where the only thing you want to do is to make sure that stock markets and whatever companies are trading there are constantly going up. There’s a lot of repercussions for anything that happens.
On Tuesday, Indian newspaper Mint reported that the Adani Group was planning an independent audit of its eight listed firms. India’s securities regulator is also increasing scrutiny of Adani’s deals, according to Reuters.
“If this is a one-off case, and it’s quickly figured out, then fine, it will not dent India’s image,” he says. “But if these governance problems and so on are not just limited to one group, and if it’s a larger phenomenon, then there will be some backlash in the sense that [investors] might withdraw funds.”
As a rebuttal by the conglomerate failed to calm investors, the company saw its market value crash as claims took away the title of Asia’s richest man.
Adani Group did not respond to a CNN request for comment on the inquiry on Tuesday. But on Monday, a spokesperson provided a statement in response to a report by Bloomberg that said the company had halved its revenue growth target for the next financial year and planned to hold off on fresh capital expenditure.
The balance sheet of the companies in the portfolio is very healthy and that the business plan is fully funded, the spokesman told CNN. “We are confident in the continued ability of our portfolio to deliver superior returns to shareholders.”
Many of the listed firms that are controlled by the conglomerate’s group of companies have their shares slide in Mumbai on Tuesday. Although Adani Enterprises rose 1.9%, there were 5% falls in the stocks of Adani Transmission, Adani Total Gas, Adani Power and Adani Total.