India’s Adani Group has been accused of fraud and stock manipulation by the Hindenburg Report and has subsequently lost $100 billion in value.

Hindenberg has issued a 100-page report highlighting five red flags after two years of research that it identified in the Adani Group

1.    The group uses a web of companies in tax havens such as Bahamas and Mauritius to inflate revenue and stock prices by increasing intra-group sales.

2.    The Adani Group has appointed family members in top positions throughout the group showing a lack of corporate governance.

3.    The company has falsified balance sheets to conceal debts which has pumped up the share price.

4.    The company used a 11-employee audit firm called Shah Dhandaria to audit the giant conglomerate.  The audit partner was a newly qualified 24 year old and the only other company the audit firm had dealt with was worth just $8 million as opposed to the muti billion Adani Group with 156 subsidiaries, affiliates, and joint ventures.

5.    The proposed $2.5 billion share sale was underwritten by Elara Capital and Monarch Networth Capital which is controlled by members of the Adani family. This suggests market rigging as the Adani Group would be expected to use experienced, credible bookrunners to manage the deal instead of entities it can influence or control outright. This sale was subsequently cancelled, and money returned to investors.

The breakneck growth of the Adani Group which overtook the market capitalisation of the well-established Tata Group seemed too good to be true. This raises further questions about India’s ability to regulate its large companies adequately.

The Hindenburg Report suggests that Adani’s activities ‘seemed to be enabled by virtually non-existent financial control’. It suggests that Adani used his immense power to pressure government and regulators who were afraid to speak out for fear of reprisal. The Adani Group also set up trusts which bought billions of dollars’ worth of its own shares to gain investor confidence.

The Adani Group has responded by stating the report is baseless and malicious and motivated by the short-seller’s desire to profit from the fall in the share price.

The Adani Group is considering taking legal action against Hindenburg.

Was it right for Hindenburg to publish the report and then benefit financially from the falling share price?

If you are planning on doing Advanced Tax in March 2023, I recommend you purchase Advanced Tax Condensed which will allow you to learn the technical rules at lightning speed.  

 You can purchase it using the link below:

#neildacosta #kaplan #accaglobal #icaewinsights #ctastudents