The Hindenburg Report

Who is Hindenburg?
Who are they: Hindenburg Research LLC is an investment research firm with a focus on activist short-
selling founded by Nathan Anderson in 2017 and based in New York City

Why are they named Hindenburg: Named after the 1937 Hindenburg disaster, which they
characterize as a human-made avoidable disaster, the firm generates public reports via its website that allege
corporate fraud and malfeasance.
 Who is Hindenburg?
How do they operate?:
Hindenburg Research prepares its investigation report on a target company in six or more months by going
through its public records and internal corporate documents, as well as talking to its employees. The report is
then circulated to Hindenburg's limited partners, who, together with Hindenburg, take a short position in the
target company. Hindenburg takes profits if the target company's share price declines

Notable Takedowns:

• In September 2020, Hindenburg Research

• Hindenburg published a report against the
published a report on the Nikola Corporation that
Bollywood production house, Eros
included allegations of the company being "an
intricate fraud built on dozens of lies“
• They hired a private investigator and found
murkier details  like,  a payment to the tune of
• Following the release of the report, Nikola’s stock
$153 million — from Eros to an entity run by the
dropped by 40% and a Securities and Exchange
CEO’s in-law
Commission (SEC) inquiry was opened
• The company’s stock price has fallen by 90% in
• Nikola’s founder and chairman resigned and was
the past 5 years
eventually found guilty of wire & securities fraud
Who is Adani?
 Timeline of Events
January 25: Adani Group in January 27: Adani Group January 30:
a statement refutes the companies extend losses Hindenburg rejects
charges, saying that it is after trading re-opens, the 413-page
considering legal options to taking the two-day response, says fraud
take "punitive action against erosion in market cannot be obfuscated
Hindenburg. The group also capitalisation to Rs 4 lakh by nationalism.
reiterated that they are crore.
confident of the FPO seeing FPO on day 1 sees a
full subscription. subscription of 1 percent

24 Jan 25 Jan 26 Jan 27 Jan 29 Jan 30 Jan

January 24: January 26:

Hindenburg January 29: Adani
Hindenburg
Research issues a group releases a
Research releases a
statement saying 413-page statement,
scathing report on
that it stands by its calls the Hindenburg
Adani Group and
report as the Adani report a "calculated
calls them the largest
group did not answer attack" on India, and
con in Corporate
any of the 88 terms allegations as
History
questions. "nothing but a lie".
Allegation #1
Company is Overvalued
Hindenburg: “The 7 Listed Companies Of Adani Group Are 85%+ Overvalued Even If You
Ignore Our Investigation And Take The Companies’ Financials At Face Value”

“Infrastructure firms are generally relatively sleepy, low growth, low

multiple enterprises, yet valuation metrics of the Adani listed companies
are comparable to the frothiest of high-growth tech companies.”
 Allegation #2
Too much debt / Poor Current Ratio
Hindenburg: “From a solvency perspective, multiple listed entities in the group are highly
leveraged relative to industry. Four of 7 of these entities have negative free cash flow

“A company’s ‘current ratio’ is a measure of liquid assets less near-

term liabilities. Five companies in the group (all but Adani Ports and
Adani Wilmar) have current ratios below 1.0, suggesting a
heightened short-term liquidity risk.”
Allegation #3
Pledging
Hindenburg: “A Portion Of Promoter Equity In Adani Group Listed Entities Is Pledged For
Loans, Effectively Leveraging The Group To The Hilt”

“Equity share pledges are an inherently

unstable source of lending collateral
because if share prices drop, the lender can
make a collateral call. If no additional
collateral is available, the lender could
require a forced liquidation of shares (often
perpetuating a self-fulfilling cycle as stock
prices move lower and selling continues)”
 Allegation #4
Related Party Transactions and History of wrongdoing
Hindenburg: “A Family Affair: The Adani Group Is Largely Controlled By Family Members,
Creating A Ripe Environment For Unilateral And Opaque Financing Decision”

The Adani Group Has Repeatedly Faced Allegations Of Corruption, Money Laundering And Theft Of Taxpayer
Funds, Totaling An Estimated U.S. $17 Billion. Investigations Have Either Been Stalled Or Stonewalled By Various
Arms Of The Indian Government

Gautam Adani

Rajesh Adani – younger brother Sameer Vora– Brother in law Vinod Adani – Elder Brother
1. Rajesh Adani – Gautam Adani’s younger brother

Rajesh Adani currently serves as Adani Group’s

managing director, described as a “vital” part of
the Adani Group, adept at “developing its
business relationships.
Currently spearheads Energy vertical
Allegations & Arrests:

• Rajesh Adani helped plan a diamond trading Scheme Between

2004 to 2006, As Alleged By Directorate Of Revenue
Intelligence (DRI) Investigative Records

• Rajesh Adani has been arrested twice, in 1999 and 2010.

• The 1999 arrest was over allegations of customs tax evasion,

forging import documentation and illegal coal imports

• The 2010 arrest was linked to a separate allegation of customs

tax evasion and undervaluation of imported goods, this time
related to naphtha and petroleum products
2. Sameer Vora– Gautam Adani’s brother-in-law

Sameer Vora currently serves as

Executive Director at Adani Australia. In
that role he oversees the company’s key
Carmichael Mine and Rail Project

Allegations & Arrests:

• Samir Vora, Was Allegedly A Ringleader Of The Same

Diamond Trading Scam And Was Accused Of
Repeatedly Making False Statements To Regulators,
Per The Same DRI Fraud Investigation
3. Vinod Adani – Gautam Adani’s elder brother
Vinod Adani held various official executive roles early in
the history of the Adani Group until at least 2011.
A pre-IPO prospectus for Adani Power from 2009 detailed
that Vinod was director of at least 6 Adani Group
companies, a shareholder of Adani Enterprises and part
of the promoter group of Adani Power. He does not
appear to hold any current formal positions

Allegations & Arrests: Gautam Adani had stated that

Vinod Adani “does not hold any
• Vinod was a group executive implicated in the diamond formal position with the
and power equipment scams group,” but “remains actively
• Like younger brother Rajesh, Vinod also allegedly played a involved with the group,
key role in the INR 6.8 billion (U.S. $151 million) diamond especially when negotiating
trading scandal international finance and
connections
Hindenburg: “Such a scheme could have critical implications for any investor in Adani
listed companies. If the Adani Group secretly controls significant amounts of publicly
traded stock without disclosure, the resultant share price of Adani listed companies could
be easily manipulated to meet the immediate needs of the Adani Group”
Hindenburg: “Adani Group Companies Lent INR 6.2 Billion (U.S. $87.4 Million) To A
Company Run By Yet Another Family Friend Who Passed Most Of It Along To Adani Power”

The Adi Group is a coal supplier and longstanding client of the Adani Group. Adi Group’s promoter is Utkarsh
Shah, who has been described as 30+ year friend of Gautam Adani, per Economic Times

Adicorp Enterprises is a small company, with 2020 revenues of just INR 643 million (U.S. $9 million) and
total net profit of INR 6.9 million (U.S. ~$97,000), per its 2020 financials.

Despite Adicorp Enterprises’ modest financial profile, 4 Adani Group companies lent the company a total of INR
6.2 billion (U.S. $87.4 Million) in 2020. No disclosure of these transactions in the financial statements of the
Adani Group lenders, several of which are publicly listed.

Given its net profit, it would take Adicorp Enterprises

around 900 years to earn enough to pay back the loans
even without interest.

In 2020, Adicorp Enterprises used its newfound capital to

loan INR 6.1 billion (U.S. $86 million) to Adani Power on
an unsecured basis. The loan to Adani Power represented
about 98% of the funds it received from the 4 other Adani
entities
Allegation #5
Breaking the 75% rule
 What is SEBI’s 75% rule: Minimum Public Shareholding ?

• As per market regulations, all listed companies must maintain an MPS of 25%.
• Newly listed firms are given three years to meet the requirement of 25% public
float
• To Limit Insider Trading, Stock Manipulation, And Undisclosed Margin Lending

Hindenburg: “4 of Adani’s Listed Companies Are On The Brink Of India’s Delisting

Threshold Due To High Reported Promoter Ownership”
 “A group of 5 supposedly independent investment funds have an incredibly
suspicious pattern of holdings. All 5 entities were formed out of Mauritius by
the same incorporator, based out of the same address, and with multiple
overlapping nominee directors”

All 5 funds are controlled by Monterosa Investment Holdings (“Monterosa”)

 Adani’s Connection to Monterosa
Alastair Guggenbühl-Even
CEO & Chairman, Monterosa
Monterosa’s Chairman and CEO resides in
Switzerland and has promoted his strong ties to
India, having been a “pioneer investor in the
Indian sub-continent” since the 1990s
He has served as director of Monterosa entities
in India as far back as 2002. He has also
previously served as a director on at least
three separate Indian companies alongside
Mehta, according to online company directories
Jatin Rajnikant Mehta,
Indian fugitive Diamond Merchant
Mehta stands accused of illegally
siphoning U.S. $1 billion from various
Indian banks through standby letters
of credit, then fleeing the country to a
tax haven with no extradition treaty,
per media reports
 Adani’s Connection to Monterosa

According to local media, Mehta’s son married Vinod Adani’s daughter Krupa, indicating a close familial tie

(Suraj – son of Jatin Mehta, and Krupa, daughter of

Vinod Adani)
Allegation #6
Accounting Red Flags
Hindenburg: “Key Accounting Red Flag #1: Adani Group Has Had Extensive
Turnover In Its CFO Roles”

The top accounting executive role at Adani

Enterprises has seen remarkable turnover in a
short span—5 CFOs in 8 years—a key red flag
suggesting accounting and internal financial
control issues.

In fact, all the Adani listed companies have

struggled to retain CFOs, with extensive turnover
across the group:
Hindenburg: “Key Accounting Red Flag #2: The Independent Auditor For Adani
Enterprises And Adani Total Gas Is A Tiny Firm That Reported Having Only 4 Partners
And 11 Total Employees

Given the complexity of Adani Total Gas and,

particularly, Adani Enterprises, with 156
subsidiaries and many more affiliates and joint
ventures, one would expect a large, highly
experienced team to be monitoring its
labyrinthian corporate structure

But Adani Group has apparently shunned this

approach, choosing a tiny auditor named Shah
Dhandharia to oversee the audits for these two
public companies.

The Audit Partners Who Signed Off On The Companies’ Financials Are 28 Years Old. They Were 23 And 24 Years
Old When They Started Approving Financials For The Now-U.S. $100 Billion Combined Market Cap Companies
Aftermath