Since a report accused it of “the greatest fraud in business history,” the international corporation has lost more than $90 billion.
The Adani Group, India’s second-largest company and managed by Indian billionaire Gautam Adani, one of the world’s richest men, has been thrown into disarray after an investment research firm accused the economic empire of widespread corruption and misconduct.
Hindenburg Research, a New York-based investment research firm, accused the conglomerate of engaging in “a brazen stock manipulation and accounting fraud scheme over the course of decades” in a January 24 report titled “Adani Group: How The World’s Third Richest Man Is Pulling The Largest Con In Corporate History.“
Adani’s net worth reportedly plunged by $6 billion overnight as a result of the 100-page analysis, and the tycoon’s wealth has continued to dwindle since then.
No longer Asia’s richest man
According to the Financial Times, Adani’s company’s value has dropped by $91.7 billion since the Hindenburg Research study, surpassing the $90 billion barrier on Wednesday. That equates to about 40% of the empire’s stock being wiped out in less than a week.
Even Adani Enterprises’ $2.5 billion stock offering, which began on January 27 and ended on Tuesday in an attempt to broaden the group’s investor base, was reversed and failed to help the situation because investors were scared off by the controversy.
On February 1, Forbes revealed that Gautam Adani, 60, was no longer the richest man in Asia, and that his net worth had decreased to $74.7 billion, a reduction of more than $50 billion following the incident.
Offshore shell entities
“Adani Group has been able to execute a big, flagrant deception in broad daylight in large part because investors, media, citizens, and even politicians have been hesitant to speak out for fear of retaliation,” according to Hindenburg Research.
The audit discovered, among other things, that Vinod Adani, Gautam Adani’s elder brother, operated 38 offshore shell corporations in Mauritius with his colleagues, as well as entities in Greek-administrated Cyprus, the UAE, Singapore, and many Caribbean Islands.
Hindenburg Research claimed to have catalogued the complete Mauritius corporate registration, however many of those firms did not appear to be operating – they had no known personnel, independent locations, or phone lines.
They also discovered 13 websites made for some of the shell businesses, several of which were launched on the same days using stock photographs, presumably to “hide” their true origins.
“Despite this, they have together transferred billions of dollars into Indian Adani publicly traded and private firms, frequently without necessary notification of the related party character of the transactions,” according to the paper.
It was suggested that the shell companies were set up for the illegal practise of stock parking, in which shares are sold to a third party for temporary storage only to be bought back by the original owner, and laundering money “onto the balance sheets of listed companies in order to maintain the appearance of financial health and solvency.”
According to the investigation, Adani Group had been inflating its market value, producing “false or illegal turnover,” and syphoning money.
Hindenburg Research also stated in the research that sparked outrage and controversy that the Adani Group has previously been involved in four “significant government fraud investigations involving suspected money laundering, theft of taxpayer funds, and corruption,” totaling nearly $17 billion.
Adani Group issued a 413-page rebuttal to the Hindenburg Research study over the weekend, calling it a “planned attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and aspiration of India.”
Separately, Adani Group CFO Jugeshinder Singh called the research “a vicious combination of selective falsehoods and outdated, unsubstantiated, and debunked charges.”
Gautam Adani, chairman of Adani Group, said in a statement on Wednesday that his company’s “financial sheet is quite solid, with strong cash flows and safe assets.”
Hindenburg Research was also backed by billionaire hedge fund manager Bill Ackman, who claimed the study was “very reputable and exceptionally well researched.”
According to Reuters, India’s market regulator, the Securities and Exchange Board of India (SEBI), has initiated an inquiry into the report’s accusations, as well as alleged irregularities in the Adani Enterprises share sale.