Adani may take legal action against Hindenburg US-based as the US-based firm alleges stock manipulation

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Mumbai: Shares of Adani Group companies lost over Rs 80,000 crore in market capitalisation Wednesday after New York-based investor research firm Hindenburg Research, which specialises in short selling, accused industrialist Gautam Adani’s companies of “brazen stock manipulation and accounting fraud scheme over the course of decades”.

Hindenburg Research disclosed in the report that it has “taken a short position in Adani Group Companies through U.S.-traded bonds and non-Indian-traded derivative instruments”. The report has been published just two days before the group’s flagship Adani Enterprises follow-on public offer of Rs 20,000 crore is scheduled to open for subscription on January 27.

The Adani Group shares fell by up to 8 per cent, and the benchmark Sensex closed 1.27 per cent or 774 points down at 60,205.06 and the NSE Nifty Index fell 226 points to close at 17,891.95 with all-round selling by foreign and local investors dampening market sentiments.

The Adani Group is considering legal action against Hindenburg Research, whose report calling out the conglomerate’s debt position.

Companies linked to the group also said that they are planning a detailed response on Friday to the short seller’s report that they labelled as “bogus,” according to bondholders who participated in a conference call with Adani executives.

Hindenburg said in a 129-page document that its two-year effort and investigations led to several countries, including the tax haven of Mauritius.

Researchers from Hindenburg had pointed out the complicated maze of transactions undertaken by many of the listed Adani Group firms.

Slamming Hindenburg, Adani Group said the “maliciously mischievous” and “unresearched” report published on 24 January has adversely affected the group, its shareholders and investors. “The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens,” it added.“Clearly, the report and its unsubstantiated contents were designed to have a deleterious effect on the share values of Adani Group companies as Hindenburg Research, by their own admission, is positioned to benefit from a slide in Adani shares. [“We hold short positions in Adani Group Companies through US-traded bonds and non-Indian-traded derivatives, along with other non-Indian-traded reference securities.”],” it said.

“We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO from Adani Enterprises,” it added. The ₹20,000 crore FPO of group flagship Adani Enterprises, which opens on Friday and closes on 31 January, on Wednesday saw a clutch of foreign and domestic investors buy shares worth almost ₹6,000 crore as part of the anchor book allocation.

It said that that the company fully stands by its report, and any action against them will be “meritless”. “Regarding the company’s threats of legal action, to be clear, we would welcome it,” the US-based short seller said.

“In the 36 hours since we released out report, Adani hasn’t addressed a single substantive issue we raised. At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions,” Hindenburg Research said.

“If Adani is serious, it should also file suit in the US where we operate. We have a long list of documents we would demand in a legal discovery process,” it added.

 

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