The stock-market bleeding from the empire of Gautam Adani continues.
Asia's richest man is still unable to put out the fire caused by the New York investment firm Hindenburg Research on Jan. 24. The firm said then that it had shorted the Adani conglomerate, which means it bet on the short-term stock market decline of the Indian juggernaut.
This empire, with interests in ports, energy and cement, particularly in India, owes its expansion to acquisitions of companies financed mainly by debt. Hindenburg used this last point in particular to feed its report, which casts doubts about the governance of the group.
Hindenburg is credited with bringing down Trevor Milton, the founder of Nikola (NKLA), whom he accused of building the electric-heavy-truck maker on lies. Last October Milton was found guilty in federal court on three of four counts of fraud relating to false statements he made to drive up the value of Nikola’s stock.
"We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades," Hindenburg wrote in a report.
"Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities."
'Calculated Attack on India'
The report describes a galaxy of shell entities based in tax havens -- the Caribbean, Mauritius and the United Arab Emirates -- controlled by the Adani family.
The short-seller claims that the conglomerate has used the shell companies to boost its revenue and manipulate the stock-market prices of its various entities.
These accusations come as the Adani empire seeks to attract the general public and foreign institutional investors to an offering of 200 billion rupees, or $2.5 billion.
After two statements that did not convince investors, the Adani empire replied on Jan. 29 by publishing a 413-page report, which according to the company answers most of the questions Hindenburg posed.
This report asserts that Hindenburg's allegations are baseless.
"The report seeks answers to '88 questions'– 65 of these relate to matters that have been duly disclosed by Adani Portfolio companies in their annual reports available on their websites, offering memorandums, financial statements and stock exchange disclosures from time to time," Adani said.
"Not one of these 88 questions is based on independent or journalistic fact finding. They are simply selective regurgitations of public disclosures or rhetorical innuendos colouring rumours as fact," it continued.
The Indian group adds that the attacks against it are actually aimed at India.
"This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India," Adani said.
$68 Billion Market Value Evaporated
Hindenburg was quick to react. It accuses Adani of taking refuge behind nationalism and avoiding responding to the questions and issues raised by its report.
"Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised," the short-seller said in a statement.
Adani Group "predictably tried to lead the focus away from substantive issues and instead stoked a nationalist narrative, claiming our report amounted to a 'calculated attack on India.' In short, the Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself."
For now, the markets appear to be siding with Hindenburg as the stock-market rout that started after Hindenburg's accusations has continued for a third trading session.
The stocks of most of the entities that make up the Adani empire have once again been punished by investors on the Mumbai Stock Exchange. Adani Total Gas and Adani Green Energy both fell by the daily 20% limit, Adani Transmission dropped more than 15% and Adani Power lost 5%. Adani Ports and Special Economic Zone erased earlier gains and ended the session about flat.
Flagship Adani Enterprises ended the session up 4.8% after falling about 10% in the session. In all the conglomerate lost about $17 billion in market capitalization, according to Bloomberg News. In total, the Adani empire has seen $68 billion in market value evaporate in three trading sessions.
Last week, the conglomerate lost $51 billion of market value during the two sessions that followed the publication of the Hindenburg report.
This stock-market slump also affects the personal fortune of founder Gautam Adani, whose fortune has shrunk by $26.3 billion since the allegations against him and his empire.
His net worth was valued at $92.7 billion by the Bloomberg Billionaires Index as of Jan. 29. But with the stock market decline of Jan. 30, this fortune has undoubtedly further decreased because it is linked to the billionaire's holdings.
Last September, Adani became the second richest man in the world behind Elon Musk with a fortune that had risen to $150 billion. He then finished the year fourth in the world. He is currently seventh on the list.
