Hindenburg firm on its report despite Adani's 'punitive action' threat

New Delhi: The Adani Group on Thursday said it is examining legal options to take "punitive action" against Hindenburg Research for its "reckless" attempt to sabotage a mega share sale at the conglomerate's flagship firm - a statement that the US activist investor responded by saying it stands by its report that alleged "brazen" market manipulation and accounting fraud by the group.

A day after its stock took a beating after Hindenburg Research made damaging allegations, the Adani Group issued a terse statement warning of action, hours after which Hindenburg on its Twitter handle said the Indian conglomerate hasn't answered any of the 88 "straightforward" questions it had asked in the report and would want them to file a suit in the US where it will demand a long list of documents in a legal discovery process.

"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," Adani Group's lead head Jatin Jalundhwala said in a statement.

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 their own admission, is positioned to benefit from a slide in Adani shares, he said.

"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 say if the group is planning to sue Hindenburg.

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 per cent lower on Wednesday, while Adani Ports & SEZ ended 6.3 per cent lower. This also led to Gautam Adani, the group's founder and chairman, slipping to the fourth spot on the world billionaires index with USD 119 billion of wealth behind Jeff Bezos' USD 120 billion.

"In the 36 hours since we released our report, Adani hasn't addressed a single substantive issue we raised," Hindenburg Research said. "At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions." Stating that it "fully stands" by the report, Hindenburg said it believes any legal action taken against it would be meritless.

"If Adani is serious, it should also file suit in the US where we operate. We have a long list of documents we would demand in a legal discovery process," it said, adding Adani has in its statements referred to its 106-page, 32,000-word report, with over 720 citations and prepared over the course of 2 years, as unresearched.

After the report came out, Adani Group had stated that it was shocked to see the report that came out 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 had said in a statement.

It had gone 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 had 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.

"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.

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".

"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."