Gautam Adani accused of pulling ‘the largest con in corporate history’ by Hindenburg Research

The world’s third-richest man has been accused of pulling off the “biggest scam in corporate history” through the India-based Adani Group corporation.

US investor Hindenburg Research, which began shorting the conglomerate via bonds, has conducted a two-year investigation into chief Gautam Adani, who is worth $125 billion.

The firm alleges that Adani and his family controlled a network of fictitious offshore accounts that they used to commit acts of corruption, money laundering and tax theft, all while diverting money from the companies they owned.

“Adani has accomplished this mammoth feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities,” the firm wrote in its report posted Tuesday.

The Adani Group immediately denied the claims and expressed shock at the allegations that cost the company $12 billion in market value and saw its flagship firm, Adani Enterprises, fall nearly 4 percent on Wednesday.

Hindenburg’s two-year investigation alleges that Adani, his family and close associates mixed money to manipulate stocks and hide debts. Adani is among the most powerful men in India and remains a close ally of Prime Minister Narendra Modi. The two are shown in 2019.

In his scathing report, Hindenburg questioned how the Adani Group used its offshore entities in tax havens such as Mauritius, the Caribbean Islands and the United Arab Emirates, adding that certain offshore funds and shell companies linked to the group ‘surreptitiously’ hold shares in Adani-listed companies.

The short seller alleged that at least 28 of the shell entities were operated by Adani’s older brother Vinod or his “close associates” as Hindenburg highlighted Indian officials’ investigation into fraud allegations against the group.

According to officials in those investigations, Vinod would move money from offshore entities to private offshore trusts and family-owned businesses. That money would then go to entities in Mauritius before being used to invest in Adani Group shares.

“If the Adani Group secretly controls significant amounts of publicly traded shares without disclosure, the resulting share price of Adani-listed companies could easily be manipulated to suit the immediate needs of the Adani Group,” Hindenburg concluded.

The alleged money laundering would not only allow the conglomerate to manipulate shares, but also allow its companies to “maintain the appearance of financial health and solvency” despite its debt, the short seller added.

Hindenburg said Adani’s key publicly traded companies had “substantial debt”, which has put the entire group on “precarious financial footing”.

The short seller said shares of seven Adani-listed companies are 85 percent down on a fundamental basis due to what he called “sky-high valuations.”

The report also noted that the Adani Group has been the subject of four government investigations, alleging that the conglomerate illegally benefited from government tax credit programs.

The investigative report, Hindenburg said, was based on a two-year investigation that involved speaking to dozens of people, including former Adani Group executives, as well as a review of documents.

Pictured: Investigators described how Adani and his associates shifted money from their offshore entities to their companies.

The Adani Group has denied the allegations against it, claiming the report is intended to harm them ahead of its largest secondary share offering scheduled for Friday.

The Adani Group dismissed the US short seller’s claims as unfounded, saying he was slated to damage its reputation ahead of a big stock offering.

Adani Enterprises is set to launch India’s largest secondary public offering of shares on Friday, aiming to raise $2.5 billion to finance capital expenditures and pay down part of the debt.

Adani Group’s chief financial officer, Jugeshinder Singh, said in a statement that the company was shocked by the report, calling it a “malicious combination of targeted misinformation and outdated, unsubstantiated and discredited allegations.”

“The Group has always complied with all laws,” the company said, without addressing the specific allegations made by Hindenburg.

“The timing of the report’s publication clearly reveals a brazen and bad faith intent to undermine the reputation of the Adani Group with the primary aim of damaging Adani Enterprises’ upcoming follow-on public offering,” it added.

After the report was filed, flagship Adani Enterprises fell 4 percent before leveling off.

Adani Transmissions also saw its valuation drop 9 percent on Wednesday.

Adani’s new cement company ACC also saw its shares fall by 8 percent.

Along with the fall of Adani Enterprises, shares of Adani Transmission fell 9 percent, Adani Ports And Special Economic Zone fell 6.3 percent. Adani’s fledgling cement company ACC fell more than 8 percent.

In bond markets, US dollar-denominated bonds issued by Adani Green Energy fell nearly 15 cents to just under 80 cents on the dollar, according to Tradeweb data.

International bonds issued by Adani Ports And Special Economic Zone, Adani Transmission and Adani Electricity Mumbai experienced similar declines.

The dives reflected Hindenburg’s findings. The short seller is a prominent research firm best known for its report that brought down electric car maker Nikola.

Hindenburg described the company as being built on “dozens of lies”, which led to Nikola founder Trevor Milton resigning as chairman and being found guilty of securities fraud.

Nitin Chanduka, a Singapore-based analyst, told Bloomberg: ‘These are big-name short sellers. Its track record has been strong, with recent allegations against Nikola Corp. leading to a 40 percent drop in share prices.’

Chanduka said that if the allegations pan out, it could result in “increased regulatory oversight and deeper scrutiny given Adani Group’s systemic importance” in Asia.