The world’s third-richest man has been accused of perpetrating the “biggest scam in corporate history” through the Indian-based Adani Group.
US investor Hindenburg Research, which has begun short selling the conglomerate through bonds, conducted a two-year investigation into head Gautam Adani, who is worth $125 billion.
The company alleges that Adani and his family controlled a web of offshore empty accounts that it used to carry out corruption, money laundering and taxpayer theft, all while siphoning money from the companies they owned.
“Adani has accomplished this gigantic feat with the help of government enablers and a cottage industry of global companies that make these activities possible,” the company wrote in its report published Tuesday.
The Adani Group immediately denied the allegations and expressed shock at the allegations that cost the company $12 billion in market value and saw its flagship company Adani Enterprises fall nearly 4 percent on Wednesday.
Gautam Adani, the third richest man in the world, was accused by the famous American investor Hindenburg Research of perpetrating the “biggest scam in corporate history.” Adani (left, pictured with wife Priti) is worth $125 billion through conglomerate Adani Group
Hindenburg’s two-year investigation alleges that Adani, his family and close associates cheated with money to manipulate stocks and hide debts. Adani is one of the most powerful men in India and remains a close ally of Prime Minister Narendra Modi. The two are pictured in 2019
Gautam Adani: World’s third richest man worth $125 billion
Gautam Adani, 60, is the chairman of the Adani Group, one of the three largest industrial conglomerates in India.
He started as a diamond sorter in Mumbai in the late 1970s before joining his brother’s plastics business in 1981.
After making a deal with Korea, he launched Adani Enterprises, the group’s main import-export company.
His business secret, as the Financial Times put it, was simple. “Earn a small amount of money in one company and then go into heavy debt to finance the expansion into another company,” the newspaper said.
The group now has interests in ports, power generation and transmission, real estate, cement and a plethora of other industries.
Adani operates India’s largest port, Mundra Port, and became the country’s largest airport operator after purchasing a 74 percent stake in Mumbai International Airport in 2020.
Adani has been accused by his critics of exploiting personal ties with Indian Prime Minister Narendra Modi to secure benefits.
With a net worth of $125 billion, Adani is behind only French luxury goods magnate Bernard Arnault and Tesla CEO Elon Musk.
In his damning report, Hindenburg asked questions how the Adani Group used its offshore entities in tax havens such as Mauritius, the Caribbean Islands and the United Arab Emirates, adding that certain offshore funds and shell companies tied to the group “covertly” own shares in Adani-listed companies.
The short seller claimed that at least 28 of the shell entities were controlled by Adani’s older brother, Vinod, or his “close associates,” as Hindenburg highlighted Indian officials’ investigation into allegations of fraud against the group.
According to the officials in those investigations, Vinod would move money from offshore entities to private offshore trusts and family-owned companies. That money would then go to the Mauritius entities before being used to invest in Adani Group shares.
“If the Adani Group secretly controls significant amounts of listed shares without disclosure, the resulting share price of Adani listed companies can be easily manipulated to meet the immediate needs of the Adani Group,” Hindenburg concluded.
The alleged money laundering would not only allow the conglomerate to manipulate stocks, but it would enable its companies to “maintain the appearance of financial health and solvency despite their debts,” the short seller added.
Hindenburg said key listed Adani companies had “substantial debt,” which has put the entire group in a “precarious financial position.”
The short seller claimed that shares of seven Adani-listed companies are down 85 percent on a fundamental basis due to what it called “skyrocketing valuations.”
The report also highlighted that the Adani Group was the subject of four government investigations alleging that the conglomerate illegally benefited from government tax credit programs.
The investigative report, Hindenburg said, was based on a two-year investigation that involved speaking with dozens of individuals, including former Adani Group executives, and a review of documents.
Pictured: Investigators outlined how Adani and his associates shuffled money from their offshore entities to their companies
The Adani Group has denied the allegations against them, claiming that the report is intended to hurt them ahead of their largest secondary share offering scheduled for Friday
The Adani Group dismissed the US short-seller’s claims as unfounded and said it was time to damage its reputation in the run-up to a big stock offering.
Adani Enterprises will launch India’s largest public offering of secondary shares on Friday, aiming to raise $2.5 billion to fund capital expenditures and service some debt.
Adani Group’s Chief Financial Officer, Jugeshinder Singh, said in a statement that the company was shocked by the report, calling it a “malicious combination of selective disinformation and outdated, baseless and discredited allegations.”
“The Group has always complied with all laws,” the company said, without commenting on specific allegations from Hindenburg.
“The timing of the publication of the report clearly betrays a brazen, malicious intent to undermine the reputation of the Adani Group for the primary purpose of harming Adani Enterprises’ upcoming public offering,” it added.
After the report was filed, flagship Adani Enterprises fell 4 percent before stabilizing
Adani Transmissions also saw its valuation drop 9 percent on Wednesday
Adani’s newer ACC cement firm also saw its shares plummet 8 percent
Along with the dip in Adani Enterprises, shares in Adani Transmission fell 9 percent, Adani Ports and Special Economic Zone fell 6.3 percent. Adani’s fledgling ACC cement business fell more than 8 percent.
In bond markets, US dollar-denominated bonds issued by Adani Green Energy fell nearly 15 cents to just under 80 cents per dollar, Tradeweb data showed.
International bonds issued by Adani Ports And Special Economic Zone, Adani Transmission and Adani Electricity Mumbai saw similar declines.
The declines mirrored Hindenburg’s findings. The short-seller is a leading research firm best known for its report on the decommissioning of electric car maker Nikola.
Hindenburg described the company as built on “dozens of lies,” which led to Nikola founder Trevor Milton stepping down as chairman and being found guilty of securities fraud.
Nitin Chanduka, a Singapore-based analyst, told Bloomberg, “These are known short sellers. Their track record is strong, with recent allegations against Nikola Corp. which led to a 40 percent drop in share prices.’
Chanduka said that if the allegations materialize, it could lead to “increased regulatory scrutiny and deeper scrutiny given the systemic importance of Adani Group” in Asia.