Hidenburg Research Report Charges Adani Group Is a ‘Corporate Con’

Last week, Hindenburg Research released a report describing the Adani Group as the “largest corporate con” in history. The report accuses the Adani Group of stock manipulation and accounting fraud.

The Adani Group is headed by Guatam Adani. In January of 2020, his net worth was listed at $10B. In September of 2022, that number was estimated to be $120B. The ballooning growth seems impossible to believe, especially given the economic turmoil of 2020. Much of his net worth is tied to stock in the Adani Group, which is listed under 7 different companies. Adani Enterprises, the flagship stock in the group has gained almost 1400% over the last 3 years. According to Hindenburg Research, the stock has skyrocketed as a result of fraud and manipulation.

The Hindenburg Group was founded in 2018 by Nate Anderson. It rose to prominence in 2020 when it released a report accusing electric vehicle maker Nikola of mispresenting technology. The Hindenburg Group makes its money by taking short positions on companies. This means that they are betting on the prices of stocks to go down and have a financial incentive to publish the reports such as the attack on the Adani Group.

The Adani Group makes note of this in a 413-page rebuttal released on Monday. The group also claims that Hindenburg’s report is a calculated attack on India. Hindenburg promptly responded that “fraud cannot be obfuscated by nationalism.”

This is an important week for the Adani Group as they are currently attempting to raise $2.5B through a stock offering which closes on Tuesday (1/31). As of Monday afternoon, Adani Enterprises is down 16.4%.

Hindenburg’s report claims that the Adani Group controls dozens of shell companies which are used to manipulate the price of stock and launder money. The report notes that 8 of 22 key leaders of the group are Adani family members, one of which being founder Guatam Adani’s older brother Vinod. During the investigation into the Adani Group, Hindenburg discovered 38 shell companies belonging to Vinod in Mauritius, a small island nation off the coast of India often used as a tax haven.

This isn’t the first time the Adani Group has been accused of money laundering. The group has been the focus of 4 major government investigations which have included accusations of money laundering and corruption. These investigations included the discovery of shell corporations as well.

According to Hindenburg, these shell organizations have no employees and do nothing except move billions of dollars into Adani companies. Hindenburg claims that these shell companies are the largest holders of Adani stock. One trader at Elara, an offshore fund, claimed that 99% of the fund’s holdings were in Adani stock. An email from Elara CEO showed that the company worked with fugitive accountant Dharmesh Doshi. Mr. Doshi has known ties to stock manipulation schemes and the emails with Elara CEO occurred after Mr. Doshi became a fugitive.

The Securities and Exchanges Board of India (SEBI), has investigated and prosecuted more than 70 entities for manipulating Adani stock over the years. A 2007 investigation discovered a relationship between 14 Adani enterprises and Ketan Parekh, a known stock manipulator.

Other members of the Adani family that have been investigated, accused, and convicted of wrong doing. Examples include younger brother Rajesh Adani, the managing director of Adani Enterprises. He’s been arrested over tax evasion in addition to undervaluing imported goods. Guatum’s brother-in-law, Samir Vora, was involved in a diamond trading scam to defraud the government and then provided false testimony over the affair.

Despite these allegations of wrong-doing in conjunction with evidence including documents, witnesses, and bank records, the investigations were delayed by various arms of the Indian government. Further, the Hindenburg report alleges that a key source of the Adani Group’s early cashflows came from a misappropriation of tax-payer funds. One example was the group receiving $151M USD in illegitimate export credits. The group was convicted though an Appeals Court overturned the prosecution. The group was also involved with a $12B scam involving the export of iron ore and was then accused of bribing multiple levels of government.

There are many more allegations against the company, and the list is too long to include in a singular article. The Hindenburg report aggregates these allegations in a 100+ page report which can be found here.

One result of the report has been the $65B in market value lost over the last several trading days. This comes even after the rebuttal to the allegations by the Adani Group. This story is just beginning to play out. If the Hindenburg report is true, the Adani Group committed the largest Ponzi scheme in history. Over the subsequent weeks, we’ll learn more about the Adani Group, its various shell companies, and how it managed to evade the law for such a long time.