Adani Hindenburg Report Controversy

In less than a week since New York-based investor research firm Hindenburg Report Research accused industrialist Gautam Adani-led conglomerate of “brazen stock manipulation and accounting fraud scheme over the course of decades,” shares of Adani Group companies have plummeted.

Adani, who was the richest Indian in the world until recently, has now fallen to 22nd place on the Forbes Real-time billionaire list for 2023.

Hindenburg Report

Although Adani shares recovered after falling sharply earlier in the day, the seven listed firms have lost roughly half of their market value – or more than USD 100 billion – since the US-based short-seller questioned the group last week about its debt levels.

The combined market value of the listed Adani firms is now USD 108 billion, down from USD 218 billion prior to Hindenburg’s report.

Adani Group, on the other hand, has rejected the criticism and denied any wrongdoing.

Hindenburg Report on Adani Group

According to the Hindenburg Report, the Adani Group employed aggressive and unconventional accounting practices to overstate its profits while minimizing its liabilities.

According to the report, the company has received significant income from subsidiaries and joint ventures that are not consolidated in its financial statements, giving a misleading picture of the company’s financial health and profitability.

In addition to these financial concerns, the Hindenburg report accuses the Adani group of insider trading and tax evasion.

Hindenburg Report on Adani Group

The report cites documents from the Indian government and regulators that support the claims. The report also criticizes the Adani Group for its environmental practices, accusing the company of large-scale deforestation, damage to sensitive ecosystems, and pollution of groundwater and air.

According to the report, the Adani Group ignored local people’s concerns and failed to comply with environmental regulations.

The Adani Group categorically rejected the allegations in the Hindenburg report, calling them “baseless and defamatory”.

The company said it fully complies with all Indian laws and regulations and operates to the highest ethical and environmental standards.

It should be noted that Hindenburg Research is a short-selling research firm and its reports are often critical of the companies it covers.

Having sold short Adani Group shares, the company has a vested interest in the stock falling. That means if the stock price falls, the company benefits.

Consequently, the allegations contained in the report should be treated with caution and independent verification of the allegations made is essential.

The Hindenburg report has already had an impact on Adani Group’s share price, which has fallen since the report was published.

Adani Group

The report has also sparked a wider debate about Indian companies’ business practices and the need for more transparency and accountability.

The Outcome of the Hindenburg Report

Adani’s market losses have risen to more than USD 100 billion as a result of the report. Earlier this week, the Adani Group announced that it had decided to cancel Adani Enterprises Ltd’s (AEL) Rs 20,000 crore FPO and would refund the money to investors.

S&P Dow Jones Indices announced on Thursday that Adani Enterprises Ltd would be removed from widely used sustainability indices on February 7, making the shares less appealing to environmentally conscious investors.

As the market continued to punish its stocks, the Reserve Bank of India (RBI) requested information from banks regarding their exposure to the group.

However, market regulator SEBI has not announced any investigation into the collapse of Adani shares and the withdrawal of a Rs 20,000-crore FPO.

While the State Bank of India (SBI) has yet to publicly disclose its exposure, sources say it could be more than Rs 21,000 crore.

The Punjab National Bank (PNB) stated that its total exposure to the Adani Group of Rs 7,000 crore is supported by adequate cash flows and that there is no concern about repayments at this time.

Bank of Baroda has a Rs 4,000 crore exposure. Other banks’ exposure has not yet been disclosed.

The Outcome of the Hindenburg Report

The Adani storm reached Parliament this week, with the Opposition banding together to demand an investigation into the allegations of fraud and stock manipulation by a Joint Parliamentary Committee (JPC) headed by the Supreme Court or monitored by the Chief Justice of India.

Union Finance Minister Nirmala Sitharaman stated on Friday that LIC and SBI were not “over-exposed” (to Adani Group shares) and that “investors’ confidence” in the market would continue.

In a press conference outside Parliament House, her colleague Parliamentary Affairs Minister Pralhad Joshi slammed the Opposition for disrupting Parliamentary proceedings over the Hindenburg report.

“It has nothing to do with the government. There is absolutely no link. The priority is to discuss the President’s Address. “They have no problem,” he stated. 

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