Adani Group loses Rs 46,000 cr in market cap as stocks crash by 10% following Hindenburg’s revelations

The report accuses Adani Group of manipulating stocks and accounting fraud, and connects family members with shell firms used to inflate prices of shares pledged for loans.

FPJ Web DeskUpdated: Wednesday, January 25, 2023, 04:27 PM IST
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Often questioned by the opposition for his proximity to the ruling dispensation, Gautam Adani’s meteoric rise can be summarised by a 2300 per cent rise in the price of Adani Enterprise’s stock in five years. The consistent stock is only one shining star in Adani’s constellation of seven listed stocks, with stock market debuts planned for more group firms between 2026 and 2028. But a report by US-based financial research firm Hindenburg, claims that Adani’s unreal rise, is indeed based on a sham with inflated stocks and massive debt.

Stocks crash despite Adani’s response

The report slammed by Adani as stale and filled with misinformation, claims that five out of the group’s seven listed firms, have a current ratio lower than one. Current ratio indicates a company’s ability to pay back short term loans, and a lower ration can increase the pressure on liquidity. Claims made in the report have led to a 10 per cent crash in the prices of Adani Group stocks, wiping off more than Rs 46,000 crore from the group’s market cap.

Directly accused of fraud

Biggest losers in the Rs 17.8 lakh crore conglomerate were Adani’s gas arm which took a Rs 12,366 crore, followed by Adani Port and Adani Transmission, both of which lost more than Rs 8,000 crore. The report which directly labelled Adani’s rise as an elaborate con, also accused the group of manipulating stocks and pulling off accounting fraud.

Findings that raise eyebrows

Hindenburg has also added how stocks with inflated prices have been pledged to raise loans, and Adani’s seven group firms also have a downside of 85 per cent. It went on to mention how eight out of 22 key figures in the Adani Group are Gautam Adani’s family members, giving disproportionate decision-making power to a few people. The firm further mentions an offshore fund called Elara, which holds Adani shares worth $3 billion, and that its former trader revealed that Adani controlled the stocks.

Hindenburg’s report also alleges that Elara’s CEO has worked closely with a fugitive accountant who had worked with convicted stock market fraudster Ketan Parekh.

It has also mentioned Gautam Adani’s brother Vinod Adani, who controls shell companies without any employees or substantial operations, and was also named in the Panama Papers. Hindenburg highlighted the fact that Vinod’s daughter is married to the son of Jatin Mehta, who is wanted for a $1 billion diamond and gold scam in India.

Timing of report could damage Adani

Hindenburg Research has been known to unearth stock frauds by companies with dubious dealings, and bet against them on the market. Its revelations can affect plans of Adani Enterprises to raise Rs 20,000 crore by selling shares through an FPO.

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