‘Fraud cannot be obfuscated by nationalism’: Hindenburg’s response to Adani

Gautam Adani’s group on Sunday likened the damaging allegations made by short seller Hindenburg Research to a “calculated attack” on India, its institutions and growth story.

Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised, Hindenburg Research said on Monday hours after Gautam Adani group likened the damaging allegations by the US short seller to a “calculated attack” on India. The US-based investment research firm said the Adani Group “predictably tried to lead the focus away from substantive issues and insteadstoked a nationalist narrative.”

In a strongly-worded response, Hindenburg Research alleged that the Adani Group has “attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself.”

“We disagree. To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.”

“We also believe that fraud is fraud, even when it’s perpetrated by one of the wealthiest individuals in the world,” it further stated.

A scathing report by Hindenburg Research claiming brazen stock manipulation and accounting fraud scheme by Adani Group led to a bloodbath at Dalal Street as the ports-to-energy conglomerate lost nearly $50 billion in market value. In a 413-page response, Adani Group said the report was driven by “an ulterior motive” to “create a false market” to allow the US firm to make financial gains. 65 of them relate to matters that have been duly disclosed by Adani portfolio companies, Adani Group said.

“Of the balance 23 questions, 18 relate to public shareholders and third parties (and not the Adani portfolio companies), while the balance 5 are baseless allegations based on imaginary fact patterns.”

Hindenburg said Adani failed to specifically answer 62 of the 88 questions raised by the firm and of the questions it did answer, the group “largely confirmed or attempted to sidestep its findings.”

“Instead, it mainly grouped questions together in categories and provided generalized deflections,” it said.

“In other instances, Adani simply pointed to its own filings and declared the questions or relevant matters settled, again failing to substantively address the issues raised.”

Hindenburg’s response came ahead of the final few days of a $2.5 billion share sale by Adani Enterprises Ltd., which received overall subscriptions of 1% on Friday.

Concerns have been raised over the exposure of India’s top public sector banks and state insurer to the Adani Group which is facing its toughest test yet after Hindenburg Research characterized its meteoric rise as “the largest con in corporate history.”

India’s opposition parties targeted the Narendra Modi-led central government alleging high exposure of financial institutions like the Life Insurance Corporation of India (LIC) and the State Bank of India (SBI) to the Adani Group. Congress general secretary Jairam Ramesh said that the exposure has implications for “financial stability and for the crores of Indians whose savings are stewarded by these pillars of the financial system.”

The banks maintained that nothing was alarming about their exposure to the Adani, which, they said, was within the limits prescribed by the Reserve Bank of India. RBI allows for no more than 25% of a bank’s available eligible capital base to be exposed to any one group of connected companies. According to a Reuters report, bank executives at two other private lenders said that they were not yet in “panic mode” but were being watchful.

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