Hindenburg Research has conducted a 2-year investigation and presented evidence that the Indian conglomerate Adani Group, led by Gautam Adani, has engaged in stock manipulation and accounting fraud over the course of decades. The research claims that Adani’s net worth has reached $120 billion, largely through stock price appreciation in the group’s 7 key listed companies, which have spiked an average of 819% in the past 3 years. The investigation involved speaking with dozens of individuals, including former senior executives of the Adani Group, reviewing thousands of documents, and conducting diligence site visits in almost half a dozen countries.
According to the research, even if you ignore the findings of the investigation and take the financials of Adani Group at face value, its 7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations. The key listed companies have also taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. 5 out of 7 key listed companies have reported “current ratios” below 1, indicating near-term liquidity pressure.
The group’s very top ranks and 8 out of 22 key leaders are Adani family members, a dynamic that places control of the group’s financials and key decisions in the hands of a few. A former executive described the Adani Group as “a family business.” The Adani Group has previously been the focus of 4 major government fraud investigations which have alleged money laundering, theft of taxpayer funds, and corruption, totaling an estimated $17 billion. Adani family members allegedly 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 siphon money from the listed companies.
Gautam Adani’s younger brother, Rajesh Adani, was accused by the Directorate of Revenue Intelligence (DRI) of playing a central role in a diamond trading import/export scheme around 2004-2005. The alleged scheme involved the use of offshore shell entities to generate artificial turnover. Rajesh was arrested at least twice over separate allegations of forgery and tax fraud. He was subsequently promoted to serve as Managing Director of Adani Group. Gautam Adani’s brother-in-law, Samir Vora, was accused by the DRI of being a ringleader of the same diamond trading scam and of repeatedly making false statements to regulators. He was subsequently promoted to Executive Director of the critical Adani Australia division. Gautam Adani’s elder brother, Vinod Adani, has been described by media as “an elusive figure.” He has regularly been found at the center of the government’s investigations into Adani for his alleged role in managing a network of offshore entities used to facilitate fraud.
The research also claims that Vinod Adani, through several close associates, manages a vast labyrinth of offshore shell entities. It has identified 38 Mauritius shell entities controlled by Vinod Adani or close associates, and entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands. Many of these entities have no obvious signs of operations but have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals. The research also uncovered rudimentary efforts seemingly designed to mask the nature of some of the shell entities.
It also added a disclosure
” After extensive research, we have taken a short position in Adani Group Companies through U.S.-traded bonds and non-Indian-traded derivative instruments. This report relates solely to the valuation of securities traded outside of India. This report does not constitute a recommendation on securities. This report represents our opinion and investigative commentary, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report “