{"id":81022,"date":"2023-01-27T00:27:26","date_gmt":"2023-01-27T04:27:26","guid":{"rendered":"http:\/\/dbsjeyaraj.com\/dbsj\/?p=81022"},"modified":"2023-01-27T22:35:48","modified_gmt":"2023-01-28T02:35:48","slug":"new-york-investment-firm-hindenburg-research-targets-indias-richest-man-gautam-adani-publishe-detailed-report-that-describes-the-adani-group-as-the-largest-con-in-corporate-hist","status":"publish","type":"post","link":"https:\/\/dbsjeyaraj.com\/dbsj\/?p=81022","title":{"rendered":"New York investment firm Hindenburg Research Targets India\u2019s Richest man Gautam Adani; publishe detailed report that describes the Adani Group as \u201cthe largest con in corporate history\u201d.-The Economist”"},"content":{"rendered":"

From meagre beginnings in the 1980s, Gautam Adani has emerged as India\u2019s richest citizen. Now, in just a few days, the foundations of his sprawling empire have been shaken. <\/strong><\/p>\n

On January 24th a small New York investment firm, Hindenburg Research, published a report calling the Adani Group \u201cthe largest con in corporate history\u201d. In a series of statements, the group responded by saying that the report was \u201cmaliciously mischievous\u201d, \u201cunresearched\u201d and intended to \u201csabotage\u201d a secondary share offering of the group\u2019s flagship listed company, Adani Enterprises. <\/p>\n

The group also said that Hindenburg had published its report \u201cwithout making any attempt to contact us or verify the factual matrix\u201d. \u201cWe are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public,\u201d wrote the group\u2019s top lawyer, Jatin Jalundhwala.<\/p>\n

These fierce denials have not averted a sell-off of shares in Mr Adani\u2019s seven listed companies, first right after Hindenburg\u2019s report was published, then again when markets reopened on January 27th after a public holiday. In two trading days the collective market value of the Adani Group\u2019s listed firms fell by $47bn, or 22%. <\/p>\n

Mr Adani\u2019s personal fortune declined from $122bn at the end of 2022 to $93bn, according to the Hurun Report, a research firm. The episode has also drawn the world\u2019s attention to one of India\u2019s corporate success stories\u2014and a significant motor of the country\u2019s recent economic growth.<\/p>\n

In targeting Mr Adani, Hindenburg could not have selected a bigger whale. After dropping out of school at the age of 16, the entrepreneur moved through a succession of jobs, trading first in diamonds, then in metals and cereals, before entering the infrastructure business. <\/p>\n

<\/p>\n

Today his firms run some of India\u2019s biggest ports, warehouse 30% of its grain, operate a fifth of its power-transmission lines, accommodate a quarter of its commercial air traffic, and produce perhaps a fifth of its cement. An affiliated Singaporean joint venture vies to be India\u2019s largest food company. The Adani Group has also invested in strategically located ports in Australia, Israel and Sri Lanka.<\/p>\n

In the last financial year the group\u2019s listed companies had total revenues of $25bn, equivalent to 0.7% of Indian gdp, and a net profit of $1.8bn. Their combined annual capital spending of around $5bn accounts for 4% of the total for all non-financial public companies in India. And Mr Adani\u2019s plans are grander still. Between 2023 and 2027 the group is forecast to spend more than $50bn on investments, including in clean energy and hydrogen.<\/p>\n

Mr Adani is widely regarded as a master operator, with a genius for navigating the complicated legal and political landscape of Indian capitalism. Some investors have, though, occasionally expressed concerns about his group\u2019s governance and opaque finances. That is the focus of Hindenburg\u2019s report. It describes a complex network of funds and shell companies, some based in Mauritius, which interact with 578 subsidiaries spread through the seven publicly listed firms. Last year, Hindenburg claims, these entities engaged in 6,025 related-party transactions.<\/p>\n

Byzantine corporate structures are common in India and other emerging markets. But the report contends that the Adani Group is \u201cengaged in a brazen stock-manipulation and accounting-fraud scheme\u201d. The point of the complexity, Hindenburg alleges, is to manipulate the listed firms\u2019 share prices and to shift money onto their balance-sheets \u201cto maintain the appearance of financial health and solvency\u201d amid high debts and relatively few liquid assets.
\nAs a consequence, Hindenburg wrote, valuations for the companies were overstated by as much as 85% and financial holes were temporarily papered over, despite severe shortages of liquid assets in five of the public firms. The group\u2019s \u201cobvious accounting irregularities and sketchy dealings\u201d were enabled by \u201cvirtually non-existent financial controls\u201d. <\/p>\n

Hindenburg claimed that Adani Enterprises had 156 subsidiaries but its reports were audited and signed off by a tiny accounting firm employing a handful of people, including some in their early 20s.
\nSuch allegations, the Adani Group said, have been \u201ctested and rejected by India\u2019s highest courts\u201d. On January 27th the group released a PowerPoint presentation rebutting Hindenburg\u2019s claims. Specifically, it noted that the group\u2019s indebtedness is decreasing, and the operating companies\u2019 debt issuance had been classed as investment grade by various rating agencies. <\/p>\n

It added that multiple accounting firms had been used to provide audits. Mr Jalundhwala said that Hindenburg\u2019s report had led to \u201cunwanted anguish for Indian citizens\u201d and adversely affected the company and its shareholders. \u201cWe are evaluating the relevant provisions under us and Indian laws for remedial and punitive action against Hindenburg Research,\u201d Mr Jalundhwala wrote.
\nHindenburg responded on Twitter that it stood by its report and that it welcomed the prospect of legal action, especially in America. \u201cWe have a long list of documents we would demand in a legal discovery process,\u201d the investment firm said.<\/p>\n

For the time being, the report has upended Adani Enterprises\u2019 much-anticipated secondary share offering. This was intended to raise around $2.5bn in new capital, in part to reduce debt. The first stage of the offering, accounting for 30% of the capital-raising, took place on January 25th and was fully subscribed, raising $735m. Several prominent investors put in bids, including the Abu Dhabi Investment Authority, Life Insurance Company of India, and entities related to two American banks, Goldman Sachs and Morgan Stanley. <\/p>\n

Since then Adani Enterprises\u2019 share price has fallen below the offer price. The bigger public portion of the offering, which began on January 27th and was meant to conclude on January 31st, has so far attracted almost no buyers.<\/p>\n

Courtesy:The Economist<\/em><\/p>\n

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From meagre beginnings in the 1980s, Gautam Adani has emerged as India\u2019s richest citizen. Now, in just a few days, the foundations of his sprawling empire have been shaken. On January 24th a small New York investment firm, Hindenburg Research, published a report calling the Adani Group \u201cthe largest con in corporate history\u201d. In a …<\/p>\n

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