5 Key Questions In The Report That Remain Unanswered By Adani As Per Hindenburg
The chaos in the Adani conglomerate following the publication of Hindenburg Research report on 24 January 2023 hasn’t subsided yet. We don’t know if Adani is going to come out with an even stronger response, we don’t know if Hindenburg is having more arrows aimed at the billionaire.
Has Adani been able to give satisfactory responses to Hindenburg’s questions? No, as per the short-seller. Even though Adani Enterprises came out with quite a lengthy response to Hindenburg’s allegations, the short seller says Adani failed to answer “specifically answer 62 of our 88 questions.”
“In other instances, Adani simply pointed to its own filings and declared the questions or relevant matters settled, again failing to substantively address the issues raised … The core allegations of our report focused on numerous suspect transactions with offshore entities were left completely unaddressed,” said Hindenburg.
FOLLOWING ARE THE QUESTIONS WHICH HINDENBURG RESEARCH ALLEGES ADANI SIDE-STEPPED
1. Hindenburg Research report had alleged that the Adani Group has engaged in suspicious dealings to the tune of billions of dollars with Gautam Adani’s brother Vinod Adani and his “labyrinth of offshore shell entities”. It said that these dealings raised “serious questions about the stock and accounting manipulation”. Hindenburg says it presented “extensive evidence” that the offshore shell entities that are “directed by or associated with” Vinod Adani have been used used for “stock parking/stock manipulation” or “engineering Adani’s accounting.”
However, as per the short seller Adani’s response “did not seem to dispute the existence of these transactions and made no effort to explain their obvious irregularities.”
It goes on to say that “Adani bizarrely argued that Vinod Adani is not a relate party to Adani Group, and that there are no disclosable conflicts relating to the transactions that have collectively moved billions of U.S. dollars through Adani Group entities, largely through offshore shell entities.”
2. Further, Hindenburg questioned Adani about the source of the many billions of dollars that “have flowed from Vinod Adani-associated offshore shell entities through the Adani Group”. The short-seller’s report mentions of a USD 253 million loan from a Mauritius entity where Vinod Adani served as a director. The report also speaks of an investment worth USD 692.5 million from a Mauritius company controlled by the head of Adani Group’s private family investment office.
“We found Adani’s lack of direct and transparent answers to these questions telling … Adani’s response claimed ignorance, stating “We are neither aware nor required to be aware of their ‘source of funds'”. It also added that it is “not in a position to comment on allegations on the business dealings and transactions of Mr. Vinod Adani,”” said Hindenburg Research.
According to the short-seller, the responses by Adani Group prompts Hindenburg Research to believe that Gautam Adani had no idea why his brother Vinod Adani lent massive sums of money to Adani entities, and no idea where the money originated from.
“If any of that were true, Gautam could easily clear up the mystery by calling his brother, or asking him at the next family dinner, why he has been directing billions of dollars to Adani-controlled entities through a network of opaque offshore shell entities. He could also call the head of his own Family Investment Office and ask the same,” said the report.
3. Hindenburg Research further questioned “numerous irregularities and connections between suspected offshore stock parking entities and Adani promoters, raising key questions about whether promoter holdings were fully disclosed.”
“Adani’s response claimed it simply doesn’t know who its largest public holders are,” said the short-seller.
4. Hindenburg’s report included a 2007 SEBI ruling which declared Adani promoters had “aided and abetted infamous market manipulator Ketan Parekh in his manipulation of shares of AEL, the predecessor entity to Adani Enterprises.”
“How does Adani explain this coordinated, systematic stock manipulation in its shares, together with one of India’s most notorious convicted stock fraudsters?,” asked Hindenburg.
“Adani responded by simply declaring the question to be “incorrect” without explanation, adding that the matter had earlier been settled,” said the short-seller.
5. The Hindenburg Research report included evidence showing that “SEBI investigated and prosecuted more than 70 entities and individuals, including Adani promoters, for manipulating Adani stock between 1999 to 2005.”
The short-seller sought an explanation from Adani as to why his listed companies “so regularly seem to be the subject of market manipulation investigations and prosecutions.”
“Adani Group’s response once again claimed it was not “aware of, nor are we required to be, aware of any proceedings against these other ‘entities and individuals.'””
