Allegation of conflict-of-interest in the Adani Group: a massive fraud at the ports-to-power conglomerate
A report published by a US investment firm alleges a widespread fraud at the ports-to-power conglomerate, which the Adani Group accuses of launching a calculated attack on India.
A report by CreditSights was published last year about Adani Group that expressed strong concerns about its debt funded growth plans.
Much of his fortune is tied up in the sprawling Adani Group, which he founded over 30 years ago. The last week has seen his personal net worth plummet, but he is still Asia’s richest man with $82 billion, more than any other Indian.
“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 growth, before the stock exchange’s plunge. Investors were betting on the self-made industrialist’s ability to grow his businesses in sectors that Modi had prioritized for development.
This is 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 then sought to answer them, and published some tables and charts to support its position.
The 1919 Amritsar Shooting: The Anatomy of a Colony-Like Bombassment in India
Analysts have worried that the rapid expansion of Adani businesses brought with it a huge risk. The group has been fueled by a $30 billion borrowing binge, making it one of the most indebted companies in India.
The conglomerate’s chief financial officer Jugeshinder Singh compared the Indian market reaction to one of the most horrific events from the country’s colonial past under British rule.
“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? Singh told Mint business that he was not aware of it.
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 Jallianwal Bagh was formerly known as the 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.”
Wall Street is a Craps Table: A Case Study in the Betrothale Crimes of Nathan Hindenburg (aka “Captain Joe”)
Hindenburg was founded in 2017 by Nathan Anderson, a former hedge fund manager who is now among a small group of activist short sellers on Wall Street — traders who make money by shorting, or betting against, big companies. According to a New York Times story, Anderson is turning his passion for finding scam artists into a profession.
Adani, a 60-year-old college dropout, has been compared to business magnates such as John D. Rockefeller and Cornelius Vanderbilt, who built vast monopoly businesses in the 1800s.
“We believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation,” Hindenburg responded.
To put it in non-financial terms: Let’s say there’s a football game on Friday night, and your friend has a ticket. You think the price of tickets may fall because there isn’t as much demand on game day. So you borrow the ticket from your friend, for a small fee, and promise to have it back to them in time for kickoff. 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 at home and the stadium begins to cut prices. You buy a ticket for $30, give it to your friend, and pocket the $20 difference since you paid your friend for the privilege of borrowing.
Firms that specialize in short-selling are often 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.
In his report, he wrote about the need for critical research because Wall Street is built to sell securities regardless of quality. “The corporate world is rife with fraud, and investors have little protection.”
The global economy nearly cratered in 2008 because of the massive mortgage fraud that was exposed by short sellers.
Bad actors in short-selling are free to make false claims about companies to try to turn a quick profit.
Hindenburg as an epitome of a catastrophe: An investigative journalist’s perspective on financial misfeasance and ill-preparedness
The website says it views the Hindenburg as the epitome of a completely avoidable disaster. We look for man-made disasters in the market that have similarities, so we can shed light on them before they lure in more victims.
It’s sort of like a bunch of investigative journalists, except without all the ethical baggage. Journalists can’t retain a financial interest in their subjects; short-sellers do.
After accusing an electric vehicle maker of lying to investors about its capabilities in 2020, it became famous as a bloodhound for financial malfeasance. Nikola’s founder was eventually convicted of fraud.
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.
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The India-Adani Hindenburg Report Explainer in the Indian Stock Market: David vs. Goliath in Adani’s Coal Mine and Mundra Port
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 after that.
The director of research at the broker said the markets were driven by sentiment after the report and the sentiment was against Adani group.
How did a small New York financial research firm stop the Adani empire from collapsing? What happens next in this David versus Goliath battle?
In India, where the super-rich have exploded in number, the pace with which he has amassed wealth is both extraordinary and unusual.
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).
The Gujarat state in India where the businessman and the prime minister are from was chosen as the location for Adani to begin operations. Mundra Port is the country’s biggest commercial port by volume, and often called the group’s “crown jewel”.
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.
investors have bet on Adani’s ability to grow hisbusinesses in sectors that the prime minister has prioritized for development as he is a close ally of Modi.
Source: https://www.cnn.com/2023/01/31/investing/india-adani-hindenburg-report-explainer-intl-hnk/index.html
Raj Kumar’s death insisted that he would not give up on a change of government and his tycoon’s wealth
His rise was mostly due to crony capitalism, according to critics. They wonder if his empire could survive if there is a change of government.
India’s stock market regulator hasn’t yet made any statements on the allegations, but Life Insurance Corporation (LIC), the country’s largest insurer with over $4 billion invested in the Adani Group, told Reuters that it will hold talks with the group
Raj Kumar said that LIC has the right to ask relevant questions since it is a large investor.
After a slow beginning, the offer was fully subscribed by the close of trading on Tuesday. Its success offers Adani some respite after the relentless stock market battering of recent days.
In its response, Adani Group said that the “leverage ratios” of its companies “continue to be healthy and are in line with the industry benchmarks in the respective sectors. “
Adani Group is not going to go anywhere, according to Rajat. They are well-established in systemically important businesses.
It was the first time the tycoon has spoken about the market mayhem that has slashed his personal fortune by nearly $50 billion in just over a week, removing his crown as Asia’s richest man. It wasn’t enough to calm the markets. His other companies’ share prices fell 5% to 10%.
The business mogul’s interest in his investors is the main thing, and he abandoned the $2.5 billion deal to sell new shares in his flagship company just 24 hours after it was sealed.
Gautam Adani speaks Heads Up: Why Foreign Investors Are Frustrated with the India Stock Market? Comment on the Reuters Report
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.
India’s central bank has asked lenders for details on their debt exposure to the Adani Group, Bloomberg reported on Thursday, citing unnamed 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.
“It is evident from looking at broader market activity that foreign investors …have had a rude awakening,” said Saurabh Mukherjea, 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.
They want us to do a little hand holding with regards to how accounting and corporate governance is implemented in India, according toMukerjea.
“This will certainly be a turn-off for large foreign investors now because it has become a political issue now,” said Stephen Innes, managing partner of SPI Asset Management.
Source: https://www.cnn.com/2023/02/02/business/gautam-adani-speaks-hindenburg-hnk-intl/index.html
Surprisingly little attention has been done to the crisis: Mahua Moitra’s 2021 letter to the board of India
In a video address, the founder of the company spoke about the crisis for the first time.
There is no impact on our current operations and future plans. We will continue to focus on delivering projects on time.
In 2021, Mahua Moitra wrote to the board of India urging an investigation into the use of offshore companies, which he used to be an investment banker. “The regulators never took a stand, and the allegations died down,” says Srivastava, the investment advisory firm founder.
The Adani Group shares plummeted on Wednesday after it was reported that Credit Suisse stopped accepting bonds as a security. The conglomerate called off a major share sale on the same day, raising eyebrows from investors.
“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.”
Amol is an economics professor at the University in Gujarat, India, and he says that the Adani episode is a major dent on the group’s image.
Both men are from the western Indian state of Gujarat, had humble beginnings and have been friends for many years. Modi traveled to New Delhi for his inauguration in the plane of Adani, which was owned by him.
Issues in India’s Adani Group: a crisis in the Indian stock market, and how the public feels about the conglomerate
Many investigations of India’s Adani Group have been held up or stonewalled.
The research firm based in the US raised some serious questions about Adani Group. He wants to know why there are so many stock market analysts in India, and why they weren’t watching what these guys were seeing.
Most market analyses today are “buy, buy, buy”, and it points to a larger problem, he says. The stock market and financialization of the world economy is moving in a direction where you need to make sure that stock markets keep going up. Because if anything happens there’s a whole fallout.”
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. If governance problems are not restricted to one group then there will be some backlash from investors.
The claims, published in late January, set off a crash in the company’s market value and robbed its owner Gautam Adani of his title as Asia’s richest man, as a 400-page rebuttal by the conglomerate failed to reassure investors.
Adani Group did not respond to a CNN request for comment on the inquiry on Tuesday. A spokesman for the company provided a statement on Monday denying that the company had halved its revenue growth target and was planning to hold off on capital expenditure for the next fiscal year.
The balance sheet of each of its independent portfolio companies is “very healthy” and “our business plan is fully funded,” the spokesperson told CNN. We are confident the portfolio will deliver superior returns to shareholders.
The listed firms controlled by the conglomerate saw their share prices sliding on Tuesday. There were 5% falls in Adani Transmission, Adani Total Gas, and Adani Power, despite the 4.9% rise in Adani Enterprises.