Hindenburg Research is a New York-based firm that specializes in forensic financial research. It was founded in 2017 by Nathan Anderson.
Hindenburg Research has accused the Adani group of engaging in ‘decades of stock manipulation and accounting fraud’. The Hindenburg report came to this conclusion after two years of investigation. Hindenburg alleged that the Adani group was heavily in debt and claimed that even though its findings have been questioned, 7 major listed companies of the Adani group ‘There was a fall of 85 per cent purely on fundamentals due to skyrocketing valuations.’
Hindenburg Research has argued, ‘Adani’s major listed companies have also taken a lot of debt, which includes pledging shares of their increased stock to take loans. This has put the entire group in a precarious financial position. 5 out of 7 major listed group companies have reported ‘current ratio’ below 1, indicating near-term liquidity pressure.
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The report states that the Adani group has previously been at the center of 4 major government fraud investigations, with allegations of money laundering, theft of taxpayers’ money and corruption amounting to an estimated US$17 billion. The same report said, “Members of the Adani family allegedly collaborated in setting up shell companies in tax-haven countries such as Mauritius, the UAE and the Caribbean Islands, using listed companies to start fake or illegal businesses.” Prepared fake export/import documents to withdraw money.
The report further states, ‘Adani Group’s apparent accounting irregularities and unsettled deals indeed make it appear that it is under the control of almost non-existent financial institutions. Listed companies of the Adani Group have seen consistent turnover in the role of Chief Financial Officer. For example, Adani Enterprises had 5 chief financial officers over a span of 8 years, who kept pointing out potential accounting problems.
Why questions arose on the report?
Gautam Adani’s younger brother Rajesh Adani was accused by the Directorate of Revenue Intelligence (DRI) of playing a major role in the export/import of diamond business around 2004-2005. He was later arrested twice for evasion of custom duty, forged import documents and illegal coal import. The question arises, given his history, why was he later promoted to serve as the Managing Director in the Adani Group?
Sameer Vora, Gautam Adani’s brother-in-law, was accused by the DRI of being involved in the same diamond trade scam case and of repeatedly making false statements to the government regulator. He was later promoted as the Executive Director of Adani Australia Division.
Gautam’s elder brother Vinod Adani has been described by the media as an ‘elusive person’. He has regularly found himself at the center of government investigations into the Adani group, including his alleged role in managing a network of companies based outside the country used to facilitate fraud.
rejected the report
Adani Group has responded to 88 questions raised by the research firm. Responding to the allegations, the group has termed the report as “a bundle of maliciously selected misinformation, outdated and baseless allegations”.
“We are surprised that Hindenburg Research published the report on January 24, 2023, without making any effort to contact us or verify the facts,” Group Chief Financial Officer Jugeshinder Singh said in a statement on Wednesday.
Shares of Adani group companies fell sharply after Hindenburg Research released a controversial report. Shares of group flagship company Adani Enterprises fell 1.66 per cent to Rs 3,385.70 on Wednesday after Hindenburg Research revealed it holds short positions in Adani group companies.
What is short selling?
Short selling is a trading technique based on the assumption that the price of a security will decline. This clearly means that the trader sells a stock that he does not own in the hope of covering the position at a lower price.
According to Investopedia, short selling is opening a position by borrowing shares of a stock or other asset that the investor believes will decline in value. Later, the investor sells these borrowed shares to buyers who are ready to pay market rates.
Traders bet that the price will continue to fall and will be able to buy shares at a lower price before returning the borrowed shares. Since there is no limit to the increase in the price of any asset, there is definitely no limit to the risk of loss on short sale.
What is Hindenburg Research?
Hindenburg Research is a New York-based firm that specializes in forensic financial research. According to the website, it primarily looks into accounting irregularities, illegal or unethical practices, undisclosed related party transactions, as well as undisclosed regulatory, product, or financial issues. It was founded in 2017 by Nathan Anderson.
The company’s website claims, ‘While we use fundamental analysis to aid in making our investment decisions, we rely on the most influential research results to uncover hard-to-find information from unusual sources. .
English Article Link: www.news9live.com/analysis/explained-hindenburgs-charges-against-the-adani-group-au17-2038559
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