ADANI VS.

HINDENBURG – “HOW
THE ASIA'S RICHEST MAN LOST
HIS CROWN IN A FEW DAYS”

AKASHDEEP SENGUPTA
ROLL – 0026
SEMESTER – 6
B.COM LLB (H)
CORPORATE LAW II
CIA OTHER COMPONENTS
 ABOUT THE COMPANIES

• Hindenburg Research Company – Hindenburg Research LLC is an

investment research firm with a focus on activist short-selling, founded by
Nathan Anderson in 2017, based in New York City. Named after the 1937
Hindenburg Disaster, which they characterized as a human-made avoidable
disaster, the firm generates public reports via websites and allege corporate
fraud and malfeasance.

• Adani Group – Adani Group is an Indian Multinational Conglomerate,

headquartered in Ahmedabad. It was founded by Gautam Adani in 1988 as a
commodity trading business, with the flagship company ‘Adani Enterprises’.
The Group’s diverse business includes port management, electric power
generation and transmission, renewable energy, mining, airport operations,
natural gas, food processing and infrastructure.
 HINDENBURG’S ALLEGATIONS AGAINST
THE ADANI GROUP

• Hindenburg Research has alleged that the Adani Group was “engaged in a stock
manipulation and accounting fraud”.
• The research firm alleges that the Adani group has engaged in Rs.17.8 trillion
(US$ 218 billion) brazen stock manipulation and accounting fraud schemes over
the course of decades.
• The report accused the company of overstating the number of jobs its proposed
coal mine project would create, and of violating environmental regulations in its
ports and logistics operations.
• The Hindenburg’s report alleges that the Adani family controlled offshore shell
entities in tax havens spanning the Caribbean and Mauritius to the United Arab
Emirates, which it claims were used to facilitate corruption, money laundering
and taxpayer theft, while syphoning off money from the group’s listed companies.
Here is a simplified overview of
the alleged scheme, which
appears to involve money being
routed out of companies
controlled by the Adani Group,
through multiple tax havens and
then invested back into listed
stocks of the Adani Group.
 ADANI GROUP’S RESPONSE TO THE ALLEGATIONS

Through a twitter post on 25th January, 2023, the Adani Group said that the report is “a
malicious combination of selective misinformation and stale, baseless and discredited
allegations that have been tested and rejected by India’s highest courts”.
Thereafter, it responded, a 413 pages response, with a point-by-point rebuttal of the
allegations made by Hindenburg Research.
• It denied any fraud or artificial pumping of prices.
• Regarding the issue of over-leverage, it claimed that its companies are highly rated and are
subject to scrutiny and monitoring by the government anyway, so there is not much scope
for irregularities here – overall, promoter leverage is less than 4% of promoter holdings.
• Of its 9 publicly listed entities, 8 are audited by the Big 6, except Adani Total Gas, which is
also set to follow the same route in auditing.
There were several other points raised by the rebuttal report from the Adani Group. However,
they also mentioned that they will be looking at legal avenues in order to take remedial and
punitive measures against those who casted these allegations on the Adani Group.
Hindenburg Research in turn mentioned that if legal actions do take place, they too will
demand the release of several important documents to the public and judicial eye during the
trial. In other words, when it comes to its Adani Report Hindenburg has chosen to stand by it
so far.
 SEBI PROBING U.S. SHORT-SELLER ALLEGATIONS ON ADANI

• The Securities and Exchange Board of India (SEBI) also said it was looking into the
market activity immediately before and after Hindenburg published its report on
January 24.
• SEBI has been examining trade patterns and any potential irregularities in the $2.5
billion share sale of flagship company Adani Enterprises that the Adani group was
forced to cancel due to the plunge in its shares.
• SEBI confirmed the existence of the investigation for the first time in its Supreme
Court filing.
• "SEBI is already enquiring into both, the allegations made in the Hindenburg report as
well as the market activity immediately preceding and post the publication of the
report," the regulator said in the filing, adding the matter was in early stages of
examination.
• SEBI's filing to the Supreme Court came in response to separate public interest cases
that raised concerns about investor protection during market volatility caused by the
short seller's report.
• SEBI said the events that were the subject matter of these cases related to "one set of
entities in the market and have not had any significant impact at the systemic level."
 IMPLICATION ON THE COMPANY

• Seven listed companies in the Adani Group lost over $10.73 billion dollars in
market capitalization on 25th January i.e. after the release of the Hindenburg
report. The Adani Enterprises FPO may have suffered too, as in the early hours of
its opening day, the price was hovering at around Rs 3,130, which is close to the
lower end of the price band of Rs 3,112- Rs 3,276 per share.

• However, it must be noted that no Adani Group company has ever defaulted on
their debt repayments so far. Moreover, the bank debt component in the total debt
of the Adani group has only fallen from 86% in F.Y. 2016 to less than 40% in F.Y.
2022, which means any potential issue in the repayment is less likely to have any
impact on the banking system.

• The conglomerate is one of the global leaders in infrastructure and also has some
famous brands under its wing such as Fortune edible oil and rice. The total
revenue of the group is said to be around $ 23 billion dollars yearly.
 CONCLUSION
• The Adani Enterprises issue reached the Supreme Court of India after a
public interest litigation was filed seeking an investigation against US-
based firm Hindenburg Research, whose report led to a massive plunge in
the value of Adani Group shares in the stock market. The plea has also
been filed with market regulator Securities and Exchange Board of India
(SEBI) to conduct a probe against the short seller and its associates for
“exploiting and duping lakhs of innocent investors”.
• Advocate ML Sharma, who filed the PIL, said that he has sought a probe
against the US-based short-selling firm and its founder Nathan Anderson.
He also said that the petition has claimed that short-seller Hindenburg
Research “deliberately” released the report against the Adani Group just
before its Rs 20,000-crore follow-on public offer (FPO).
• The stock, which touched its all-time peak of Rs 4,189.55 on December 21,
2022, slipped to a 52-week low of Rs 1,017.10 on Friday, February 3,
falling 75.72 per cent from its peak. Adani Enterprises has lost over Rs
2.88 lakh crore in market cap. On December 21, 2022, the market cap (at
the close of trade) of the firm stood at Rs 4.45 lakh crore.
• In a 413-page response to the 106-page Hindenburg Research report, the
ports-to-power conglomerate said: “This is not merely an unwarranted
attack on any specific company but a calculated attack on India, the
independence, integrity, and quality of Indian institutions, and the growth
story and ambition of India.”
THANK YOU