Billionaire Gautam Adani is under siege.
Since Jan. 24 Asia's richest man has faced serious allegations of fraud, money laundering and price manipulation that threaten to take away much of his fortune.
Indeed, the New York investment firm Hindenburg Research has launched an offensive against one of the largest Indian conglomerates.
"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 published on Jan. 24.
"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."
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 shell companies in tax havens to boost its revenue and manipulate the stock market price of its various entities. As a result, the firm shorted stocks of the Adani conglomerate through U.S.-traded bonds and non-Indian-traded derivative instruments.
This means that Hindenburg Research, a well-known short-seller, is betting on a short-term drop in the prices of these equities.
These accusations come as the Adani empire seeks to attract the general public and foreign institutional investors to a $2.5 billion offering.
'A Calculated Attack on India': Adani
Hindenburg's report caused a stock-market rout for the entities making up the Adani conglomerate on the Mumbai stock exchange. In total, the Adani empire lost $68 billion in market value during the three stock market sessions following the publication of the Hindenburg report.
Aware that its two first declarations failed to allay the concerns and questions raised by Hindenburg, Adani, 60, has just pulled out the patriotism weapon.
"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 in a 413-page report. According to the company, the report answers most of the questions posed by Hindenburg on Jan.29.
In this report, the conglomerate repeatedly says that Hindenburg does not understand how Indian institutions work. It suggests that Hindenburg simply does not understand India.
The company is reaching for nationalism in the hope of undoubtedly provoking a surge of sympathy among the local population and the authorities. The word "Indian" comes up regularly in Adani's 413 response pages.
"The queries make reckless statements without any evidence whatsoever and purely on unsubstantiated speculations without any understanding of the Indian laws around related parties and related party transactions," Adani said of questions asked by Hindenburg about its governance and alleged malpractices.
"The assumption that the entities, as stated in the report, are related to Adani listed entities, is imaginary, vague and unsubstantiated and flows only from a lack of understanding by Hindenburg of the Indian laws, regulations and accounting standards," the company also said.
Adani 'Stoked a Nationalist Narrative': Hindenburg
"Hindenburg Research does not appear to have any understanding on matters of Indian law or accounting standards and yet makes claims of entities being undisclosed 'related parties' with no understanding of what constitutes a related party."
In addition to accusations of ignorance of Indian institutions, Adani also does not hesitate to accuse the New York firm of snubbing India.
"Hindenburg deliberately ignores Indian legal processes and regulations in their insinuations against us," Adani said.
The short-seller sensed the strategy.
"Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised," Hindenburg 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."
Adani Group is one of the most valuable companies in India. The firm holds mines, ports and power plants. It owns a dozen commercial ports and is present in coal, electricity and renewable energy. It also has diversified into airports, data centers and defense.
The company also recently entered the cement sector by buying assets of cement manufacturer Holcim (HCMLY) in India and is also looking to set up an aluminum factory.
Adani has grown the group by acquiring companies with debt.
Last August, the CreditSights subsidiary of Fitch Ratings warned that the Adani conglomerate was "deeply overleveraged" and may "in the worst-case scenario" spiral into a debt trap.
But two weeks later the credit-rating firm said it discovered that it had made "calculation errors" in two of Adani Group's companies. It corrected its report and removed the words "deeply overleveraged."
"CreditSights' views have not changed from its original report and we still maintain that the group's leverage is elevated," CreditSights concluded.
