Disclaimer: I have no interest in any of Adani’s stocks and I do not hold them in personal capacity
US-based investment research firm Hindenburg Research, had recently published a report alleging stock manipulation and accounting fraud by Adani Group.
In its recent report on Adani conglomerate, Hindenburg Research said “We have uncovered evidence of brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades. 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 entire Hindenburg report comes to a 100 pages when saved as a pdf. On going through the report, one wonders why would this take two full years to publish unless the Hindenburg guys had multiple other projects to work on in parallel. A similar type of research on any conglomerate in the world would yield similar results. SEBI investigations and other charges against Adani is all known to the markets. So, there’s nothing unique in the Hindenburg’s findings to go gaga about.
The phrase “stock manipulation” is used frequently and we do not know in which category this “manipulation” come under. There is very little reason to believe that this is some anti-India propaganda. People can spin whatever they want but this is purely driven by earnings money through the “short” trade no matter. As simple as that.
The allegation that Adani has been using offshore investment vehicles/funds to buy his companies and inflate his stock prices is nothing new in companies with hard physical assets. Rio Tinto, Shell, Samsung can be called out for the same. Not sure what is illegal with respect to Adani though!
Also, the timing of the release seems dubious, especially when Adani is looking to raise capital. The Hindenburg Research report came just two days before Adani Enterprises’ Follow-on Public Offer (FPO) of ₹20,000 crore, the biggest ever FPO in India, was scheduled to open for subscription on 27 January 2023.
Consider this – Company A run the largest port chain in India and makes enough cash to pay dividends. Company A legally takes the money outside the country and start a company in a tax haven and invest in a fund which in turn buys the shares of the port chain. If there is a law that prevents this, then the owner of Company A need to be behind the bars. If the money is somehow linked to owner of Company A and accusing him of holding 75%+ stake in the company, then yes he should pay for it. But, when neither of this is established, then there simply is no issue. “Anonymous” person’s scoop is all hogwash, anyone can say anything and say “anonymous” person. Moving assets between these shell companies is something that all conglomerates do. Violations are what we need to focus on: “related party transaction disclosure” being the most obvious one. But, if there are “unrelated” entities not sure how they might be related parties.
Issues regarding the auditors seems genuine in terms of capability but then there are no regulations that say that auditors who are in their 20s cannot sign off on financials or there isn’t any stipulation by the CA institute on these lines.
The true intentions of of Hindenburg can be found in its disclaimer. Hindenberg has a reputation for specializing in ‘short-selling’. Short-sellers are those investors who bet against a certain stock and borrow them from a party, ‘short’ them and later sell it at other exchanges to buy them back at a lower price to return to the lender, pocketing a profit in the process.
Lastly, India’s economy is not held back by broken capital markets. This is a low resolution argument.If Indian economy were held back by broken capital markets then neither FIIs would’ve come to India nor would you have a domestic mutual fund industry that has approxiimately ₹40 lakh crores of Assets Under Management.
The only thing that definitely makes some sense is the valuation argument. Yes, the stocks trade a high multiples. But, the onus is on the investor, they can buy or stay away. The promoter pledges are no big deal and won’t create any issue.
The trope that “Adani is silencing journos/analysts” is just an insurance policy for Hindenburg to escape in case no one buys these findings.
Perhaps, the general public is hearing all of this for the first time and is getting swayed by all the hullaballoo generated by media. The common investor, public, citizens aren’t scared of Adani.
For them, they just want to invest in a stock and make money. It could be Adani or Tata or Ambani. The only ones who have issues are a few “activist-journalists”, “activist-analysts” like Hindenburg and ofcourse Opposition politicians.
This article is based on the Twitter thread of Kishore Iyer.
I went through the entire #HindenburgReport (comes to 100 pages if you try to save it as a pdf)
My first set of observations:
1. I don't know why this would take 2 years to publish this report unless you had multiple other projects to work on in parallel
— KishoreIyer (@KishoreIyer5) January 27, 2023
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