Billionaire Gautam Adani can catch his breath.
For the past week, his conglomerate has been rocked by fraud allegations that threaten its expansion.
These accusations are made by New York investment firm Hindenburg Research, which shorted shares of the Adani conglomerate through US-traded bonds and non-Indian-traded derivatives. This means that Hindenburg Research, a well-known short seller, is betting on a near-term drop in the prices of these shares.
The short seller claims the conglomerate has used shell companies in tax havens to boost its revenue and manipulate the share prices of its various entities. The report describes a galaxy of shell entities based in the Caribbean, Mauritius and the United Arab Emirates controlled by the Adani family.
“We have uncovered evidence of outright accounting fraud, stock manipulation and money laundering at Adani, which took place over decades,” Hindenburg wrote in a report published Jan. 24.
“Adani has accomplished this mammoth feat with the help of enablers in the government and a cottage industry of international companies that facilitate these activities.”
Adani Group has rejected the allegations as unfounded and has threatened to seek all possible legal remedies in Indian courts. The conglomerate also went so far as to say that India was Hindenburg’s target.
“This is not simply an unwarranted attack on a specific company, but a calculated attack on India, the independence, integrity and quality of Indian institutions, and India’s history of growth and ambition,” Adani Group said. in a 413-page report. on January 29.
Adani Group raises $2.5 billion in bid…
Another problem for the group was that this confrontation with Hindenburg was taking place when he was trying to attract the general public and foreign investors to a follow-up $2.5 billion public offering of Adani Enterprises, which is the flagship of the Adani empire.
This sale of shares was fully subscribed on January 31, the last day of the sale. Last week only about 30% of the shares had been subscribed, raising doubts about the success of the transaction. But the final data shows that the sale of shares was fully subscribed.
The rush of last-minute share purchases came from foreign corporate and institutional investors. One of the prominent investors is Abu Dhabi Conglomerate International Holding, which has indicated it will invest $400 million, or 16% of the offering. Last year, IHC invested $2 billion in the Adani conglomerate.
Participation in the offering from retail investors and company employees was relatively low, representing only about 10% of the shares purchased.
However, fully underwriting the stock sale at a crucial time is a win for Adani. It marks a vote of confidence from foreign investors and will allow him to reduce the debt that his empire has.
…But Doubts and Questions Persist
But it will not remove the doubts and questions that Hindenburg raised regarding the governance of one of Asia’s largest conglomerates.
The short seller attack also risks delaying Adani Group’s international expansion plans because it will trigger increased due diligence from foreign partners.
The attack also damaged the reputation and image of Gautam Adani, who saw this year as an opportunity to raise his profile on the international scene.
Some damage is already evident. Shares in the entities that make up the Adani group were sold hard during the three trading sessions following the publication of the Hindenburg report. The conglomerate lost $69 billion in market capitalization, according to Bloomberg News.
Adani’s personal fortune also suffered. The tycoon who started the fourth year in the Bloomberg Billionaires Indexhe has now been kicked out of the top 10. He is currently ranked 11th, with an estimated fortune of $84.4 billion as of January 30, down from $119 billion as of January 24.
Therefore, his net worth has decreased by $34.6 billion in six days.
Adani Group is one of the most valuable companies in India. The firm owns mines, ports and power plants. It has a dozen commercial ports and is present in coal, electricity and renewable energy. It has also diversified into airports, data centers and defense.
The company has also recently entered the cement sector by buying assets of cement maker Holcim in India and is also looking to set up an aluminum factory.
Adani has grown the group by acquiring companies with debt.
Last August, Fitch Ratings subsidiary CreditSights warned that the Adani conglomerate was “deeply overleveraged” and that “at worst” it could fall into a debt trap.
But two weeks later, the credit ratings firm said it found it had made “miscalculations” at two of the Adani Group companies. He corrected his report and removed the words “deeply overleveraged.”
“CreditSights’ views have not changed from their original report and we still maintain the group’s leverage is high,” CreditSights concluded.
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