“Is Adani’s Empire Built On Deception? Unpacking Hindenburg Research’s Alarming Fraud Allegations!”

In January 2023, Hindenburg Research released a bombshell report on the Adani group, alleging corporate wrongdoing, such as fraud accounting and stock price manipulation.

Hindenburg Research released a shocking report accusing Adani of accounting fraud, stock manipulation and improper use of offshore entities. This US-based short seller Hindenburg Research states the Securities and Exchange Board of India’s chairman, Madhabi Buch alleges Adani Group. Hindenburg Research is a US-based financial research firm known for its short-selling strategy. They conduct investigations and publish detailed reports about fraud, misleading financial statements, regulatory violations or operational problems. By splitting facts, Hindenburg profits from the company’s stock value decline.

Hindenburg’s Allegation on Adani Group

In January 2023, Hindenburg alleged that the Adani group added $100 billion to the company’s valuation between 2020 and 2023 through stock price manipulation. They also claimed that the Adani Group used offshore funding to siphon money, and all these processes were controlled by Vinod Adani, Gautam Adani’s brother. They also alleged that Adani used offshore companies to buy shares in its publicly listed firms, which caused inflation in stock prices.

The Hindenburg research firm also takes the name Rajesh Adani, Gautam Adani’s younger brother, because he was arrested twice for forgery and tax fraud. Rajesh Adani was promoted to managing director of the Group. Hindenburg’s research blamed the Adani family for setting up shell companies in Mauritius, the British Virgin Islands and Bermuda, which are tax-free countries. They said these companies buy large amounts of Adani shares and artificially inflate stock prices. They alleged that Vinod Adani operated 37 shell companies where money laundering happens. They also said that the Adani group also violated Indian law. According to Indian law, one-fourth of the share must be held by public investors.

 Adani Group maintains this by using offshore companies, which creates the illusion of public proprietorship. They added that Adani Group controls information flow and trading shares by using offshore companies. The Hindenburg Research reported that Adani Group violates various laws and unfairly exploits other market participants. They alleged that four Adani-listed companies are violating the one-fourth law.

Adani Transmission-Adani Enterprise, Adani Power, Adani Total Gas. Vinod Adani is also associated with a 6.8 billion diamond trading scandal. Monterosa Investment Holdings total 360 billion shares in Adani Group using five independent investment funds. They also said that Samir Vora, Gautam Adani’s brother-in-law, was accused of a diamond trading scam.

Samir Vora was promoted to Executive Director of the Adani Australia division. In 2021 Adani Enterprises stock fell 25%, but on the other hand other companies fell 4%-5% on the day. Opposition lawmaker Mahua Moitra says, “We want to know whose money it is. If it is not Adani’s money, then minority shareholders are being screwed”. In this report, Hindenburg Research wants answers to a total of 88 questions.

Adani’s Response to Allegation

In response to the Hindenburg Report’s explosive allegation in January 2023, the Adani Group claims all the allegations are baseless and lies. The Adani Group denied all the allegations and called them “preposterous” and “a calculated attack” on the company’s reputation and value. Adani Group’s response mentions three key themes from the Hindenburg Research report. Adani Group noted that the report is a selective and manipulative presentation of matters already in the public domain to create a false narrative. The Group also said that this report is complete ignorance or deliberate disregard of the applicable legal and accounting standards and industry practice.

In this report, Hindenburg ignores the Indian constitution, including regulators and judiciary. Adani Group alleges Hindenburg’s report by exposing Hindenburg’s motive. The Adani Group said that from the research of Hindenburg  intends to profiteer at the cost of Adani Group’s shareholders and public investors. Adani Group alleges against Hindenburg Research that this report was not published for altruistic reasons but only for selfish motives. According to the securities market book, Adani Group mentioned that Hindenburg is an unethical short seller who gains from the price reduction of shares.

The Group says that Hindenburg published a report to manipulate and depress the stock price and create a false market that spread like fire and rubbed out the investor’s wealth, and Hindenburg earned profit from it. Adani Group declares that the report is neither independent nor objective nor well-researched. The Allegations from Hindenburg Research 1-3, 27-32, 72-80 are judicially disproven, and Adani Group disclosed all of these to its investors and regulators. In the report, Hindenburg repeatedly mentioned a diamond scam, but the Customs Excise and Service Tax Appellate Tribunal closed the case in favor of Adani Group.

The decision was also confirmed by the Supreme Court twice, which was missing from Hindenburg Research. The Adani Group states that Allegations 9, 15, 19,24, 25,32, 33, 35, 40-51, 53-61, 81-83 of the Hindenburg report are baseless allegations regarding transactions that are compliant with the law and fully disclosed on proper commercial terms. Qualified third parties have already approved these disclosures, reviewed them, and reported that they are aligned with accounting standards and applicable laws.

The Adani Group claimed the Hindenburg report’s allegations 4, 36, 37, 38, and 39 were misleading and reckless. The report claimed that Adani Group uses offshore entities to make high-priced shares. But Adani Group denied this allegation and mentioned that these statements have no proof and that they never understood the Indian laws related to parties and their transactions. In response to allegations 5-8, 10-14, 16-18, 10-13, 26, and 52, the Adani Group said there is a manipulative aspect around unrelated third-party entities.

The Group said shares of listed companies on Indian stock exchanges are trading regularly. No one can curb the buyer or seller in the company. The Adani Group said rhetorical allegations 84, 85, 86, 87, and 88 from the Hindenburg report were biased and unsubstantiated. They also added that criticism does not include the right to make false and derogatory statements, which damages stakeholders’ image of interest.

Impact of Hindenburg Research’s Allegations

In 2023, Hindenburg’s report and Adani Group’s response affected market value, investor confidence, regulatory future, and reputation. Immediately after the release of Hindenburg’s report, a massive decline in Adani Group stock suddenly diminished market value. The stock price dropped from 100% to 50% from its peak. It’s turmoil in the stock market. This hurt the Adani Group’s high valuations and long-term trust or investments. Due to the allegations in Hindenburg’s report, the Adani Group is bound to cancel the Follow-on-Public offering to protect investors from financial losses.

After the Hindenburg report, the Indian and International regulatory bodies investigated the ownership and stock exchange of the Adani Group. Once, the Adani Group was India’s largest and most influential company, but the controversy destroyed its global reputation. This also hampers international partnerships, raising capital and expansion plans in green energy. This report tumultuous the stock market, and India’s most extensive stock became a downswing stock. It plummeted by 83 per cent. After the Hindenburg report was released, the stock price dropped to 1017, a 70 % decline.

It took more than one year to recover the stock fully. Adani Wilmar’s stock declined from 573 to 286, a 50% drop. The Adani Group did not recover its former value, and its stock price is currently at 385, still 33% below its previous value. Adani Power’s stock price faced a 52% decline. It is falling from 275 to 132. After the Hindenburg Report, Adani Ports’ stock dropped to 395, a 48% decline.

It took 119 days to recover to its pre-report value. Adani Solutions faced a decrease of 77%, and its stock price dropped from 2726 to 632. The current stock price of Adani Solutions is 1104, which is still 60% less than the pre-report level. Adani Green Energy’s stock declined from 1917 to 485, a 75% drop after the release of the Hindenburg report.

Hindenburg’s Allegation on SEBI

After the release of the Hindenburg Report, the Security and Exchange Board of India investigated the Adani Group stock market and share price. However, after a complete investigation, the SEBI chairperson stated that all of Hindenburg’s allegations were baseless and lies. Then, Hindenburg’s accusations shifted towards India’s security exchange board. Hindenburg was shocked after seeing SEBI’s statement for nearly 18 months. They claimed they exposed offshore Mauritius-based shell entities used for dollars and transactions. However, no public orders against Adani Group exist on the SEBI website.

Hindenburg said Adani Group and SEBI claimed their allegations were baseless and lies. They also mentioned that at least 40 independent media investigations were expressed in their reports and collecting and presenting evidence of fraud by the Adani group against shareholders and taxpayers. They said that the security and exchange regulator must take immediate action against some third parties that ran secret offshore shells engaged with billions of dollars. SEBI has no interest in their offshore shell empire, but SEBI has more interest in those who expose such malpractices as stock manipulation. The Indian Government arrested four journalists and expelled some members of parliament who were against the Adani Group and supported the Hindenburg report.

Hindenburg Research declares that, according to their discussion with sources in the Indian Market, there is a connection between SEBI and Adani just before their January 2023 report. They also mentioned that SEBI pressured brokers to close short positions in Adani due to investigations and losses. SEBI was creating buying pressure and setting Adani’s stock at a crucial time. At first, when the public and the Supreme Court investigated the issues, SEBI became a flounder. At that time, SEBI agreed with several findings, but later, SEBI claimed to be unable to investigate further.

The court document states that SEBI had drawn a blank and further inquiry. This proves that SEBI did not want to investigate serious allegations against Adani. Later, SEBI wants to impose technical violations on the Adani Group. But in Late June 2024, Adani CFO Jugeshinder Singh, some regulator notices pointed toward the Adani Group as minor. This confidence is the evidence of Adani’s relationship with SEBI. SEBI sent a show cause notice to Hindenburg Research where SEBI mentioned that this research suspected violations of Indian regulations.

However, SEBI did not identify any errors or frauds in their January 2023 report and focused on the short position.  In the Hindenburg report, they claimed that Madhabi Puri Buch and her husband, Dhaval Buch, had stakes in offshoring entities that invested in Adani Group stocks.

The fund was close to Adani. Anil Ahuja, the founder and CEO of the IPE Plus Fund, was an ex-director of Adani Enterprises and Adani Power. They also claimed that the current chairperson of SEBI, Madhabi Puri Buch, and her husband, Dhaval Buch, had hidden stakes in the same off-course Bermuda and Mauritius Funds, which Vinod Adani uses. According to Madhabi Puri Buch’s LinkedIn profile, she was appointed as a full-time member of SEBI in April 2017. The Hindenburg mentioned that just a few weeks ago, after this appointment, on March 22^nd, 2017, her husband, Daval Buch, wrote a letter about his wife’s investment in the Global Dynamic Opportunities Fund to Mauritius Fund Administrator Trident Trust.

SEBI’s Response to Allegation

In response to Hindenburg allegations, SEBI vehemently denies all claims and biases in its investigations. Chairperson Madhabi Puri Buch and her husband rejected the allegations and called them baseless. They are confident to disclose all the necessary information. They stressed that their finance is transparent and they are not associated with wrongdoing. They also welcomed any authorities to scrutinize their finances and documents.

SEBI mentioned that in its order 3, 2024, the Hon’ble Supreme Court noted that SEBI had completed twenty-two out of twenty-four investigations into the Adani Group. SEBI also states that the showcase notice was sent to Hindenburg Research on June 27, 2024, because this firm violated the securities laws. SEBI also claimed that there is a proper reason to send it to Hindenburg research in this showcase notice. The Hindenburg report claimed that the implementations of SEBI regulations in 2014 and the changes in such regulations were made just for the benefit of multinational financial corporations.

SEBI said that before introducing new regulations or amendments to an existing regulation, there is a robust consultation process where inputs and feedback from the industry, investors, intermediaries, and relevant committees are required. Hence, claims that changes in regulations related to REITs were just for one large multinational financial conglomerate are inappropriate. SEBI introduces new regulations or amendments to an existing regulation for developing the Indian Security market. SEBI changes some regulations related to REITs, SM REITs, InvITs and municipal bonds to democratize markets and financialization of household savings for capital formation.

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