Adani considering ‘legal options’ against Hindenburg for ‘unresearched report’

Adani Group is considering legal options against US activist-investor Hindenburg Research, which made damaging allegations against the group in a report on Wednesday (India time), sending its shares downhill.

The group said on Thursday that it is examining legal options to take “punitive action” against Hindenburg Research for its “reckless” attempt to sabotage a share-sale at the conglomerate’s flagship firm.

“The maliciously mischievous, unresearched report published by Hindenburg Research on January 24, 2023, has adversely affected the Adani Group, our 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,” the groups lead head Jatin Jalundhwala said in a statement.

Hindenburg to benefit from Adani share slide

He said 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 its own admission, is positioned to benefit from a slide in Adani shares.

Also read: Adani Group terms Hindenburg report ‘malicious’ after stocks crash

“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 (Follow-on Public Offering) from Adani Enterprises,” he said.

“We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research.”

The statement, however, did not clarify if the group is planning to sue Hindenburg.

“No attempt to contact Group”

Hindenburg, a US-based investment research firm that specialises in activist short-selling, said on Wednesday that its two-year investigation revealed that Adani Group has “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”

The report came just as a Rs 20,000-crore follow-on share sale of Adani Enterprises opened for institutional investors. All the listed stocks of the group took a beating after the report.

Adani Enterprises closed 1.54% lower on Wednesday, while Adani Ports & SEZ ended 6.3% down.

Also read: Gautam Adani: Terror attack survivor, Asia’s richest man, is now on to a mega FPO

After the report came out, Adani Group stated it was shocked to see the report that was published without any attempt to contact it to get the factual matrix.

“The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts,” the ports-to-energy conglomerate said in a statement.

Group questions report timing

It went on to question the timing of the report, saying its publication ahead of the FPO “clearly betrays a brazen, malafide intention to undermine Adani Group’s reputation with the principal objective of damaging” the issue.

“Gautam Adani, founder and chairman of Adani Group, has amassed a net worth of roughly USD 120 billion, adding over USD 100 billion in the past 3 years largely through stock price appreciation in the group’s seven key listed companies, which have spiked an average of 819 per cent in that period,” the US researcher’s report said.

The Hindenburg’s report details a web of Adani-family-controlled offshore shell entities in tax havens spanning the Caribbean and Mauritius to the United Arab Emirates, which it claims were used to facilitate corruption, money laundering, and taxpayer theft, while siphoning off money from the group’s listed companies.

Also read: Adani Group’s gross debt increases 42% to ₹2.22 lakh crore: Report

“Our research involved speaking with dozens of individuals, including former senior executives of Adani Group, reviewing thousands of documents, and conducting diligence site visits in almost half a dozen countries,” it said. Hindenburg claimed to have uncovered “rudimentary efforts seemingly designed to mask the nature of some of the shell entities.”

“Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its 7 key listed companies have 85 per cent downside purely on a fundamental basis owing to sky-high valuations,” the report said, adding key listed Adani companies have also taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing.

“No debt concerns”

Adani Group has repeatedly dismissed debt concerns. Its Chief Financial Officer Jugeshinder Singh on January 21 on a media call stated that “Nobody has raised debt concerns to us. No single investor has.”

Also read: Know more about 5 Adani Group companies set for IPOs by 2028

“The investor community has always reposed faith in Adani Group on the basis of detailed analysis and reports prepared by financial experts and leading national and international credit rating agencies,” the group said on Wednesday.

“Our informed and knowledgeable investors are not influenced by one-sided, motivated and unsubstantiated reports with vested interests.”

(With agency inputs)