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Published: Jan 26, 2023
Updated: Jan 26, 2023

Adani Group Under Fire: Hindenburg Research Accuses Indian Conglomerate of Decades-Long Stock Manipulation and Accounting Fraud

Shares crash

On Wednesday, shares of Adani Group companies traded in the red zone following a report by Hindenburg Research that accused the Indian conglomerate of participating in a clear stock manipulation and accounting fraud scheme over the course of decades. The research firm conducted its investigation for two years, interviewing former Adani Group senior executives and examining thousands of documents, as well as conducting due diligence site visits in close to a dozen different nations.

The Allegations of Fraud

According to the Hindenburg Research report, Gautam Adani, the founder and chairman of the Adani Group, has a net worth of about $120 billion, which he has increased by over $100 billion in the last three years primarily as a result of stock price growth in the group's seven most important publicly traded companies, which have increased by an average of 819 percent during that time.

The report also alleges that the Adani family members cooperated to create offshore shell entities in tax-haven jurisdictions like Mauritius, the UAE, and Caribbean Islands, generating forged import/export documentation in an apparent effort to generate fake or illegitimate turnover and to syphon money from the listed companies.

The Financial Situation of Adani Companies

Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its seven key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations," said Hindenburg Research in its report. The key listed Adani companies have also incurred significant debt, notably by pledging shares of their inflated stock as collateral for loans, placing the group's overall financial situation in risk.

Government Fraud Investigations

The Adani Group has reportedly been the subject of four significant government fraud investigations that have been estimated to have cost US$ 17 billion in total and have included allegations of money laundering, theft of tax dollars, and corruption.

Market Impact

Shares of Adani Total Gas, Adani Enterprises, Adani Transmission, Adani Green Energy, Adani Ports & Special Economic Zone, Adani Power, and Adani Wilmar were trading 1-4 percent lower in Wednesday's trade. Reacting to the news, the seven Adani Group stocks lost ₹46,086 crore in market cap on Wednesday. Adani Total Gas lost ₹12,366 crore on Wednesday, followed by Adani Ports that lost ₹8,342 crore and Adani Transmission, which lost ₹8,039 crore.

Serious questions on financial practices

The accusations made by Hindenburg Research have sent shockwaves throughout the financial industry and raised serious questions about the transparency and integrity of the Adani Group's financial practices. It remains to be seen how the group will respond to these allegations and what impact they will have on the company's future.