Fraud Can't Hide Behind Nationalism: Hindenburg Counters Adani's 413 Page Reply

The Hindenburg report has caused a 48 billion dollar rout in Adani's stock.

Gautam Adani.

(Photo: The Quint)

Almost a week after a report published by Hindenburg Research accused the Adani Group of carrying out an elaborate 'con', the group offered a 413-page rebuttal to the short seller, saying that the allegations were a not only an attack against the company, but a "calculated attack on India."

"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."

Adani Group

Hours after the lengthy document was made public, Hindenburg research countered it by saying that:

"We 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 Research

Driving the news: A report published by American short seller Hindenburg Research on 24 January, levelled new allegations of stock market manipulation and money laundering against the billion-dollar conglomerate founded by Gautam Adani.

The fallout: The 'revelations' caused a 48 billion dollar rout in Adani's stock, even as its flagship firm, Adani Enterprises, continues with its $2.5 billion follow-up public offer (FPO).

So what does Adani's reply say?

• In the detailed response, the company underlined that it complies with all local laws and had made the necessary regulatory disclosures.

  "All transactions entered into by us with entities who qualify as 'related parties' under Indian laws and accounting standards have been duly disclosed by us," the reply read.

• After the Hindenburg Research alleged that it had identified several offshore shell entities with ties to the Adani Group, most of which were allegedly located in tax havens, the company dismissed the allegations on account of them having no evidence or understanding of Indian laws.

• Further, the Indian firm defended its practice on pledging shares to key shareholders, saying that raising financing against shares as collateral was common practice globally, and loans are given by large institutions and banks on the back of thorough credit analysis.

• It added that the report "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.”

• In an overarching response to Hindenburg allegations, the firm accused the report of being a "selective and manipulative presentation of matters already in the public domain to create a false narrative".

• It read, “The report seeks answers to “88 questions” – 65 of these relate to matters that have been duly disclosed by Adani Portfolio companies in their annual reports available on their websites, offering memorandums, financial statements and stock exchange disclosures from time to time. Of the balance 23 questions, 18 relate to public shareholders and third parties (and not the Adani portfolio companies), while the balance 5 are baseless allegations based on imaginary fact patterns."

Hindenburg's counter: Taking note of this, the US-based short seller wrote that Adani's response has "predictably tried to lead the focus away from substantive issues and instead stoked a nationalist narrative.."

It added, "In terms of substance, Adani’s ‘413 page’ response only included about 30 pages focused on issues related to our report. 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."