2. Introduction
● On 24th January, Gautam Adani was the 3rd Richest Person in the world. Within one
week, his position fell to 15th.
● An American Company named, Hindenburg Research Company released a report
titled “Adani Group : How The World’s 3rd Richest Man Is Pulling The Largest Con In
Corporate History. ”
● Hindenburg accused Adani group of stock manipulation and accounting fraud for many
years
● Several shares of Adani group saw a huge fall after this report. SEBI launched an
investigation against Adani group in the aftermath of the report
3. What is Hindenburg Research Company
● Founded in 2017 by Nathan Anderson, HRC is a
financial Research and investor company that claims to
uncover hard-to-find information from atypical sources.
● The name Hindenburg comes from a tragedy that
occured in 1937 when an airship named hindenburg
caught fire accidently, killing 35 people.
● Anderson compares the stock market disasters to this
disasters saying that these are man made and totally
avoidable disasters and their company’s purpose is to
find and stop such disasters in stock market.
4. Hindenburg Research Company: History and
Credibility
● Hindenburg Research company has accused various companies before Adani group and
did short selling on their shares earning huge profits.
● Such companies include Nikola Motors, Wins Finance, Genius Brands, China Metal
Resources Utilization Limited. Ever since its formation in 2017, at least 16 such
companies have been accused by HRC and their stocks have been sold short.
● In Sept 2020, they released one such report on Nikola Motors accusing them of lying
about their product. After the report, their shares lost 71% of their value.
● In may 2020, they targeted CMRU, bringing forth various irregularities in their financials.
Following the report their shares fell more than 90%.
● In all such cases, HRC accused the company of fraud or scam and then sold short on their
shares. Many of these reports were proceeded with investigation by the concerned
authorities.
5. Allegations Against Adani: A Family Business
● Vinod Adani, elder brother of Gautam Adani was accused by HRC to be running 28 shell
companies that manipulate Adani group’s stock prices
● Rajesh Adani, younger brother of Gautam Adani was accused by the Directorate of
Revenue Intelligence(DRI) for evading 1000 Crore Taxes in 2004-05 and has allegedly
been to jail a couple of times for it. He was later promoted to Managing director of Adani
group
● Gautam Adani’s brother-in-law Samir Vora, who was accused by the DRI of being a
ringleader of the diamond trading scam was promoted to Executive Director of Adani
Australia Division.
● HRC questions as to why such people have been offered such high positions in the Adani
group management
6. Allegations Against Adani: Shell Companies
● HRC accused Adani group of using shell companies to artificially increase their stock
prices.
● Adani group allegedly uses shell companies and offshore companies for round trip
trading. It is a method by which you keep selling and buying the shares among the shell
companies to artificially increase the trading volume and thereby the stock prices.
● Adani group is also accused of using shell companies to increase their profits on paper.
● Hindenburg has brought forward a mauritius based company called Elara Capital which
hold $3 Billion in Adani group’s shares. Hindenburg company claims that the purpose of
Elara Capital is to manipulate Adani group’s share prices
7. Allegations Against Adani: Government
Support
● The report alleges that the Indian government is not investigating the Adani group
properly.
● It claims that Adani group is involved in Corruption, money laundering and many such
exploits which have netted them a profit of around $17 Billion. In Spite of this, there
haven't been any investigations on Adani group.
● Many ongoing investigations on Adani groups have been cancelled without a result.
● The report accuses Adani group to have bribed various officials in the government.
8. Allegations Against Adani: Debts
● Hindenburg Research claims that adani
group companies have too much debt in
accordance with their assets.
● 5 of their companies have current ratio<1
● This means their debt is more than their
assets therefore to pay those debt, more
debt has to be taken.
● To take more loans for the same, Adani
group uses their promoter shares as
collateral(The shares which Hindenburg
claims to have been artificially boosted )
9. Response From Adani Group
● The Adani group called this report a calculated attack against India. They claim that the
hindenburg report is un-researched. The Adani group went so far as to compare the
report to the Jallianwala Bagh Incident.
● In their response, adani group tell that they have great credit ratings and that all
companies of Adani group meet the corresponding guidelines as set by the government of
India
● They claim that the report does selective and manipulative presentation to create a false
narrative.
● Adani group claims that the shell companies being referenced in the report are
independent companies which are not controlled in any way by the adani group.
● Adani group has claimed that they will provide documentary evidence that will prove that
the report is false but have not done so yet.
10. Response From Hindenburg
● Hindenburg responds to Adani’s response by stating that the Adani group have not
answered any questions being asked in the report
● Hindenburg says that Adani group just keeps saying that they have the approval of
government regulatory bodies and that all data is publicly available but haven't answered
any question properly
● Hindenburg says that Fraud can not be obscured by nationalism to hide from the actual
questions.
11. Repercussions of the Hindenburg Report
● Forbes accused Adani group to have likely bought into $2.5 Billion of its own shares to
artificially inflate their stock prices.
● Credit Suisse and City bank’s wealth unit have stopped accepting Adani group bonds as
collateral for margin loans. They have assigned a zero lending value to Adani group’s
bonds.
● Adani group called off their FPO(Follow on Public Offer), saying that the stock price is
fluctuating so much that going ahead with the FPO will not be morally correct.
● In the wake of the report being published, Adani group stocks have been bleeding heavily
on most days and has led to the conglomerate’s market value loss swelling to Rs. 10 lakh
crore since January 24.
● Gautam Adani’s net worth has plummeted by more than 50% bringing him out of the
world’s richest top 20.
12. Conclusion
● The Hindenburg report on Adani group raises serious concerns about the company’s
financial and operational practices.
● While Adani group are strongly denying these allegations, it is important for investors to
take these concerns seriously and to undertake a thorough investigations of the claims
made in the report
● The report’s release is a reminder of the need for increased transparency and
accountability in the business world and the importance of ensuring that the companies
operate ethically and sustainably
