What is wrong with the Adani Group? The Indian conglomerate’s billionaire richest man’s financial fortunes after the Mumbai stock market crash
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.
Hindenburg accused the company of “brazen stock manipulation” and accounting fraud that’s taken place over decades. Hindenburg said Adani Group shares are massively overvalued, and it has taken a short position (more on that in a minute) on them, meaning Hindenburg wins when Adani shares fall.
His personal fortune is $92 billion, making him Asia’s wealthiest man, $10 billion greater than his Indian counterpart, Mukesh Ambani.
This is intended to create a false market in securities in order to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors.
Before the rout, which continued on the Mumbai stock exchange on Monday, markets had been cheering for the businessman and his breathless pace of expansion. Investors were betting on the self-made industrialist’s ability to grow his businesses in sectors that Modi had prioritized for development.
“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.
Those questions are libelous and coloring rumors as fact, according to the Indian conglomerate. It then sought to answer them, and published some tables and charts to support its position.
The Jallianwala Bagh Regime in India after the Amritsar Bombing and the 9/11 Attacks: A Memoir of the Indian Revolution
The long rebuttal sought to reassure investors about the group’s debt, banking relationships and corporate governance practices. Shares in Adani Enterprises, the group’s flagship company, were up over 4% on Monday, but most Adani stocks extended last week’s losses.
The Indian market reaction to the 9/11 attacks was the most terrible event from the country’s colonial past according to the CFO of the conglomerate.
“In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians. So am I surprised by the behavior of some fellow Indians? No,” Singh told Mint business daily in an interview published Monday.
On April 13, 1919, the British army was ordered to fire on a peaceful protest by thousands of people in Jallianwala Bagh, a public garden in Amritsar. They stopped firing 10 minutes later when their ammunition ran out. The Jallianwala Bagh is now known as the Amritsar massacre.
A post on the social media site said that a company tried to equate its rise and fortune with India’s success.
The response consisted of 330 pages of court records and 53 pages of information about company initiatives such as how to encourage female entrepreneurship and the production of safe vegetables.
Gautam Adani – a Doomsday tribute to his richest man and his legacy in India – A rebuttal
The name of the research was given after the 1937 disaster and it is known for taking bold bets against corporations that it thinks are overvalued or fraudulent.
India’s richest man Gautam Adani ended his trip to Davos earlier this month on an optimistic note. The billionaire is confident in India’s growth and ambition. He talked about his addiction.
In a rebuttal, he said fraud could not be obfuscated by nationalism and the Adani Group hadn’t paid attention to their allegations.
What can short-sellers tell us about Wall Street and finance? A story about Nathan Anderson and the Hindenburg football game on Friday
A football game on Friday is non-financial, and your friend has a ticket. But you suspect the price of tickets may fall due to lack of demand on game day. You borrow the ticket from your friend, and will return it to them in time for 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. And sure enough, bad weather keeps people at home and the stadium starts slashing prices. You buy a ticket for $30, give it to your friend, and pocket the difference if he uses it, minus the fee he paid for borrowing.
In practice, firms that specialize in short-selling are often among the most reviled. If the world of Wall Street is a craps table, where one player’s winnings boost everyone else’s, short-sellers are the guys betting against the table.
Wall Street is built to sell securities regardless of quality, so critical research is needed. “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.
There are bad actors in the short-selling business who will exaggerate or fabricate claims about companies to try to turn a quick profit.
The website states that they believe the Hindenburg is a complete man-made disaster. We look for man-made disasters in the market to shed light on them, before they lure in more gullible victims.
It is like a bunch of investigative journalists, but 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 the company was convicted of fraud.
Nightcap: The Adventures of a Coincident Prime Minister and the Adani-Mumford Managing Director of the Mundra Port Coal Mine
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 close on Tuesday.
Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. Most nights we think in a four-day work week around here.
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. Less than a week later, everything changed.
The director of research at his company said that the markets are driven by sentiment and the Adani group is a negative for markets.
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 this battle of wills?
Even in India, where the super rich have exploded in number, experts think the speed with which he has accumulated wealth is extraordinary.
A first-generation entrepreneur, Adani began his career with diamond trading, before setting up a commodity trading business in 1988, which later evolved into Adani Enterprises Limited (AEL).
A year later, Adani started operating the Mundra Port in Gujarat, a state in western where the businessman and Narendra Modi, the prime minister of India, both hail from. The biggest commercial port in the country is called Mundra Port, often labeled the group’s “crown jewel”.
He operates one of the largest coal producers in India and also a controversial coal mine in Australia, which faced opposition from climate change activists.
Adani is seen as a close ally of the prime minister, and investors believe that he can grow his business in sectors that Modi prioritized for development.
Adani is not going anywhere: his rise and his failure to sell his shares in Adani Enterprises, a conglomerate founded by a billionaire
Critics say his rise has been driven by crony capitalism. They question whether his empire could survive unscathed if there is a change of government.
Life Insurance Corporation (LIC, the country’s largest insurer with $4 billion invested in the Adani Group), which is one of India’s largest insurers, told reporters that it will hold talks with the group.
“Presently there is a situation that’s emerging and we are not sure what is the factual position … Since we are a large investor, we have the right to ask relevant questions and we will definitely engage with them,” LIC Managing Director Raj Kumar was quoted as saying.
After a tepid start, the offer was fully subscribed shortly before the deadline set for the close of trading in Mumbai on Tuesday. Its success offers Adani some respite after the relentless stock market battering of recent days.
Analysts have said in the past that the rapid growth of Adani businesses poses a huge risk. The business of Adani has a $30 billion borrowing binge that has made it one of the most indebted in the country.
Adani Group “is not going anywhere,” said Rajat Sharma, founder of financial advisory firm Sana Securities. “They are a well-established group in systemically important businesses.”
The stock market meltdown has wiped $100 billion off the value of the Adani conglomerate, but it was only after a attempt by the Indian billionaire to assure panicking investors that he was doing everything in his power to stop it.
“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.
The Adani crisis has opened a little bit of a can of worms for foreign investors: Gautam Adani speaks highly of the Hnk intl
Reuters reported Wednesday that the Securities and Exchange Board of India (SEBI) was examining the stock price falls and also looking into any possible irregularities in the abortive share sale, citing a source with direct knowledge of the matter. The SEBI has so far not responded to requests for comment.
The central bank in India has requested information about the Adani Group’s debt exposure, according to sources. The Reserve Bank of India did not respond to a request for comment.
The crisis swirling around one of India’s most prominent businessmen could have bigger consequences for the fast-growing economy, which only two weeks ago was pitching aggressively for foreign investment at the World Economic Forum in Davos.
The founder of Marcellus Investment Managers said that foreign investors have had a rude awakening.
“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.
While it was said that investors would now be skeptical about accounting practices of Indian firms, his clients were already asking more questions.
They are requesting that we do a little bit of hand holding with regards to accounting and corporate governance in India.
Stephen Innes, managing partner of SPI Asset Management said it will be a turn off for foreign investors when it comes to political issues.
Source: https://www.cnn.com/2023/02/02/business/gautam-adani-speaks-hindenburg-hnk-intl/index.html
Comment on Adani” by R. E. Sasso et al. ”When the Adani Group arose”
While the Adani Group had immediately denounced the report as “baseless” and “malicious,” the video address marked the first time the company’s founder has spoken about the crisis.
“This decision will not have any impact on our existing operations and future plans. He added that they would focus on timely execution and delivery.