India’s Adani Group on Wednesday denounced fraud allegations made by US-based short seller Hindenburg Research as “baseless” and a “malicious combination of targeted misinformation.”
Hindenburg Research published an investigation into billionaire Gautam Adani’s sprawling conglomerate on Tuesday, accusing him of “blatant stock manipulation and accounting fraud scheme over the course of decades.”
Hindenburg said he has taken a short position in Adani Group companies “through US-traded bonds and non-Indian-traded derivatives.” Short sellers aim to make money by betting that the share price of the companies they target will fall.
Adani’s business empire contains seven publicly traded companies, in sectors ranging from ports to power plants, with shares in most of them falling between 3% and more than 8% on Wednesday.
In its research, which Hindenburg said took two years to compile, the research firm questioned the “sky-high valuations” of Adani’s companies, saying his “substantial debt” puts the entire group “in a precarious financial situation.”
The research firm concluded its report with 88 questions for the Adani Group. These range from asking for details about Adani’s offshore entities to why it has “such a complicated and interrelated corporate structure.”
CNN has not verified the report’s claims and India’s stock market regulator did not immediately respond to a request for comment.
Shares of Adani’s companies have risen in recent years, making him the richest man in Asia.
In a statement issued a few hours after Hindenburg published his report, Adani Group CFO Jugeshinder Singh said Hindenburg made “no attempt to contact us or verify the factual matrix,” adding that the allegations made by the seller in short they are “stale, unfounded and discredited”.
The conglomerate has faced scrutiny from Indian authorities in the past. In 2021, shares of Adani’s companies plummeted after The Economic Times newspaper said the country’s National Securities Depository froze foreign funds holding billions of dollars worth of holdings. The Adani Group called that report “blatantly wrong.”
Nate Anderson, who founded Hindenburg Research, has made a name for himself in recent years by targeting companies he believes are overvalued and have shady financials. Anderson is best known for going after electric truck company Nikola in 2020, calling it a “complex fraud” and causing the company’s stock to plummet. In 2022, the Nikola founder was convicted by a US jury of fraud in a case alleging he lied to investors about the company’s technology.
But some have accused Hindenburg of trying to push shares down with his research reports for profit.
Your report on the Adani Group comes at a sensitive moment. Later this week, Adani Enterprises, the conglomerate’s flagship company, aims to raise 200 billion rupees ($2.5 billion) by issuing new shares.
Singh said that “the timing of the report’s publication clearly reveals a blatant and bad faith intent to undermine the reputation of the Adani Group with the primary aim of damaging the upcoming follow-up public offering.”
The conglomerate is also considering bringing five new businesses to the stock market in the next two to five years.
A college dropout and self-made industrialist, Adani is worth nearly $120 billion, making him the fourth-richest man in the world, ahead of Bill Gates and Warren Buffet, according to the Index of Bloomberg Billionaires. He is also seen as a close ally of India’s current Prime Minister Narendra Modi.
But this is not the first time that analysts have expressed fear that the rapid expansion of its business carries great risk. Adani’s giant has been propelled by a $30 billion lending binge, making his business one of the most indebted in the country.
Last year, CreditSights, a research firm owned by Fitch Group, published a report on Adani Group titled “Deeply Overleveraged” in which it expressed strong concerns about its debt-financed growth plans.
Adani Group responded to CreditSights with a 15-page report, saying its companies’ “leverage ratios” “remain healthy and in line with industry benchmarks in the respective sectors” and that “they have deleveraged constantly”. in the last nine years.