
Hindenburg Report on stocks of Adani Group of Companies
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by admin
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What is Hindenburg Report and the man behind it?
Hindenburg Research LLC was founded by Nathan (Nate) Anderson, 38, is an American short seller, has published critical research and analyses of alleged corporate fraud that have triggered investigations and regulatory action. The Hindenburg name comes from the Hindenburg disaster of 1937, an accident in which a German passenger airship caught fire and was destroyed, killing 35 people.
As per reseacher’s details the Hindenburg as the epitome of a totally man-made, totally avoidable disaster. Almost 100 people were loaded onto a balloon filled with the most flammable element in the universe (hydrogen). This was despite dozens of earlier hydrogen-based aircraft meeting with similar fates. Nonetheless, the operators of the Hindenburg forged ahead, adopting the oft-cited Wall Street maxim of “this time is different”.
What the Hindenburg report says about the Adani Group of Companies?
The firm published a research paper titled ‘Adani Group: How the World’s Third Richest Man Is Pulling the Biggest Scam in Corporate History‘ and revealed the findings of its two-year investigation presenting evidence that the Adani group, valued at Rs 17.8 trillion, it has engaged in a brazen scheme of stock manipulation and accounting fraud for decades.
According to the report, Gautam Adani, the founder and chairman of the Adani Group, has a net worth of about $120 billion, which has increased by more than $100 billion in the past three years, mainly as a result of the growth in the price of actions in the group top seven publicly traded companies, which have risen by an average of 819 per cent during that time.
Hindenburg says it identified 38 alleged Mauritius-based shell companies “controlled by” Vinod Adani, Gautam Adani’s older brother, along with several other similar companies based in Cyprus, the United Arab Emirates, Singapore and various Caribbean islands.
The report alleges that the shell companies are used for “stock manipulation” and “money laundering”, using the private companies of the Adani Group on the books of publicly traded companies “to maintain the appearance of solvency and health financial”.
Hindenburg Research said the Adani Group companies are intricately and clearly linked and dependent on one another. None of the listed entities is isolated from the performance, or failure, of the other companies in the group. “We believe that it could take a single severe liquidity event in a single entity to trigger a negative cascade of events in other entities in the group that could affect the entire Adani Group.”
Hindenburg report has informed that Four of Adani’s publicly traded companies are near the delisting threshold due to high developer ownership, according to a report published by Hindenburg Research, an investment research firm that focuses on sales in short activists.
The report also said that five companies in the group (all but Adani Ports and Adani Wilmar) have current ratios below 1.0, suggesting increased near-term liquidity risk. Furthermore, Adani Wilmar, a new company with current insider ownership of 87.94%, must reduce its insider holdings to 75% by early 2025 to meet these requirements – a significant feat requiring the offloading of 12.94% of its current insider equity.
Listed companies in India are subject to regulations requiring all promoter holdings to be disclosed. The rules also require publicly traded companies to have at least 25 per cent of the free float held by non-promoters to mitigate manipulation and insider trading.
Hindenburg said he had taken a short position in Adani’s companies through US-traded bonds and non-Indian-traded derivatives. Here is a quick summary of some of the main accusations made by him:
- 38 Mauritian shell entities controlled by Adani’s brother Vinod Adani or his close associates were identified, as well as entities controlled by him in other tax havens.
- The fictitious offshore network appears to be used for profit manipulation.
- Adani Enterprises and Adani Total Gas appear to be audited by a small company, with no current website, only four partners and 11 employees and have only audited one other publicly traded company.
- Hindenburg said in the report that “Even if you ignore our research findings and take Adani Group’s financials at face value, it’s seven key publicly traded companies are down 85% purely fundamentally due to sky-high valuations,” .
Adani’s companies trade at a price-earnings ratio many times that of similar companies both in India and around the world, including companies in the Reliance empire of rival tycoon Mukesh Ambani, Adani’s predecessor as the world’s richest man from Asia. There are some signs that the bull run is slowing, with most shares in the Adani group starting the year lower even before the Hindenburg report.
Adani Group rejects Hindenburg report
Adani Group CFO Jugeshinder Singh has rejected the Hindenburg report, stating that it is “a malicious combination of targeted misinformation and rancid, baseless and discredited accusations that have been proven and rejected by Indian courts.”
The statement adds that Hindenburg never contacted the company and criticizes the timing of the report’s release, saying it “clearly betrays a brazen and bad faith intent to undermine the reputation of the Adani Group with the primary aim of damaging the next public offering of the company.
Shares of the Adani group of companies fell sharply during the morning trading session on Wednesday. Shares of seven Adani group stocks lost ₹55,000 crore in market capitalization (m-cap) shortly after the report came to light.
Hindenburg Research LLC was founded by Nathan (Nate) Anderson, 38, is an American short seller, has published critical research and analyses of alleged corporate fraud that have triggered investigations and regulatory action.
Hindenburg Research LLC was founded by Nathan (Nate) Anderson, 38, is an American short seller, has published critical research and analyses of alleged corporate fraud that have triggered investigations and regulatory action.