Failed to answer 62 of its 88 questions: Hindenburg responds to Adani

New Delhi: US short seller Hindenburg Research has dismissed charge that its report on Adani Group's malfeasance was a "calculated attack" on India, saying a "fraud" cannot be obfuscated by nationalism or a bloated response that ignored key allegations.

Adani group's listed companies have lost over USD 70 billion since the January 24 report of the New York firm that flagged high debt levels at the ports-to-energy conglomerate and the alleged use of offshore entities in tax havens. The Indian group has denied all charges and threatened to sue the US firm.

Hindenburg responded to a 413-page detailed statement issued by the Adani Group late on Sunday, saying it failed to specifically answer 62 of its 88 questions, and conflated the company's "meteoric rise" and the wealth of Asia's richest man "with the success of India itself".

In the Sunday evening statement, Adani group had called Hindenburg "Madoffs of Manhattan" and that its report was "not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India." Standing by its report that alleged "fraud" at the second largest conglomerate in India run by the world's then-third richest man, Hindenburg said it disagrees with Adani group's assertion of its report being an attack on India.

"To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future," it said. "We also believe India's future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation." A "fraud is fraud, even when it's perpetrated by one of the wealthiest individuals in the world," it said, adding, "Adani also claimed we have committed a 'flagrant breach of applicable securities and foreign exchange laws'. Despite Adani's failure to identify any such laws, this is another serious accusation that we categorically deny." Adani's 413 page response only included about 30 pages focused on issues related to the report and the remainder consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on "irrelevant" corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables.

On Sunday evening, Adani group said the Hindenburg report was intended to enable the US-based short seller to book gains by crashing stock prices.

The report had come just as a Rs 20,000-crore share sale at the group's flagship company, Adani Enterprises, opened to anchor investors.

"All transactions entered into by us with entities who qualify as 'related parties' under Indian laws and accounting standards have been duly disclosed by us," it had said late on Sunday. "This is rife with conflict of interest and intended only to create a false market in securities to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means at the cost of countless investors." Hindenburg reiterated that it was short on the Adani group through US traded bonds and non-Indian-traded derivative instruments.

In the January 24 report, it had called out the conglomerate's "substantial debt", which includes pledging shares for loans; that Adani's brother Vinod "manages a vast labyrinth of offshore shell entities" that move billions into group companies without required disclosure; and that its auditor "hardly seems capable of complex audit work".

Hindenburg said it "found Adani's lack of direct and transparent answers" on the allegations of use of offshore entities "telling".

Hindenburg, which is known for having shorted electric truck maker Nikola Corp and Twitter, said the Adani group has responded to its questions on the source of billions of dollars that have flowed from Vinod Adani-associated offshore shell entities saying it is neither aware nor required to be aware of the source of funds.

Separately on Sunday, Adani Group CFO Jugeshinder Singh had expressed confidence in the follow-on public offer of Adani Enterprises sailing through.

The offer has been subscribed barely two per cent so far and closes on January 31.

Singh likened the behaviour of Indian investors participating in the sell-off to the colonial-era Jallianwala Bagh massacre in Amritsar.

"In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians," Singh told the Mint business daily, when asked why the market believed the Hindenburg report. "So am I surprised by the behaviour of some fellow Indians? No." At least 379 people were killed when Gen. Reginald Dyer on April 13, 1919, ordered about 50 Indian army soldiers to shoot at unarmed, peaceful civilian protesters.