A small US investment firm has challenged the Indian behemoth, the Adani group, and shaken it to its foundations. The Hindenburg Research, a short-selling firm, brought out a 129-page report on the Adani group marshaling evidence of all the funding operations and offshore activities of the 578 subsidiaries and shell companies linked to the seven listed companies of the Adani group. The report states that this is the “biggest con in corporate history”. The report lays bare the complex network of funds and shell companies, some of them in Mauritius, Cyprus, and UAE which have been used for manipulating the share prices of the listed companies and to shift money on to their balance-sheet “to maintain the appearance of financial health and solvency amid high debts and few liquid assets”. The report estimates that the valuations for the Adani companies were overstated by as much as 85 percent. The report accuses the Adani group of having “engaged in brazen stock manipulation and accounting-fraud scheme”. The Adani group responded by calling the Hindenburg report a “calculated attack on India”. Having no worthwhile defense to put up, the Adani group sought cover under nationalism to cover its flanks. It declared that this was an attack on the “independence, integrity and quality of Indian institutions and the growth story and ambition of India”.
The effect of the Hindenburg report was instant. In the week following the report, the Adani group lost USD 67 billion, or, around Rs 5.6 lakh crore of market capitalisation in the stock market. Gautam Adani himself has lost about USD 50 billion of his wealth and from being the third richest man in the world, he has fallen to the fifteenth position. The fraudulent dealings of the Adani group are of great concern to the people because, over the years, what has been looted are the country’s natural resources and public funds. The Adani group has become, thanks to the patronage of the Modi government, the largest private operator of ports, and airports and the biggest in grain warehousing and controls a fifth of power transmission and the cement industry. It is the largest thermal power private producer in the country with a large stake in coal mining.
The Hindenburg report came on the eve of an Adani open share offer to raise Rs 20,000 crore. Despite the crash in share prices of the Adani group of companies, the offer was finally fully subscribed due to big amounts of money put in by non-institutional investors which included high-net-worth individuals. In an act of class solidarity, it is reported that leaders of big businesses like Mukesh Ambani, Sajjan Jindal, Sunil Mittal, and Pankaj Patel put up money to buy shares. However, the very next day, Adani enterprises canceled the issue of shares and declared it would return the money to all the investors. This sudden decision seems to be motivated by the fact that allegations have arisen that two Adani front companies have invested in the follow-on offer. The meteoric rise of the Adani group and its rapid expansion has not gone unquestioned in India. Over the years, many serious questions and accusations were leveled at how Gautam Adani went about building his empire. Charges of over-invoicing of coal imports, opaque offshore funding of his companies, a gross violation of environmental norms, and bending of rules and regulations to get projects through were frequently raised in the media and by business analysts. It is, therefore, necessary to wage a determined struggle to see that the regulatory bodies and law enforcement agencies investigate the entire financial and business activities of the Adani group. A high-level investigation team must be constituted to go into the allegations levelled by Hindenburg Research against the Adani group and it should be monitored by the Supreme Court.