NEW DELHI (UKTN) — Asia’s richest man Gautam Adani has seen his companies lose $68 billion in market value after Hindenburg Research accused him of “pulling the biggest scam in corporate history,” leading to a massive sell-off of Adani shares.
Last week’s report from US-based Hindenburg attacked India’s second-largest conglomerate for alleged stock price manipulation and fraud just as the group began a stock offering designed to raise $2.5 billion .
Adani, 60, has since slipped from the world’s third richest man ranking to 11th, as his net worth shrank more than $30 billion to an estimated $84 billion, according to Bloomberg’s Billionaire Index.
WHO IS GAUTAM ADANI?
The son of a middle-class family in Ahmedabad in the western Indian state of Gujarat, Adani dropped out of college to become a diamond trader in Mumbai, India’s financial capital. In the 1980s, he began importing plastics before founding Adani Enterprises, which traded everything from shoes to buckets and remains his flagship business.
India opened up its economy in the 1990s and a new middle class emerged as tens of millions of people escaped poverty and the economy boomed, leading Adani to bet on infrastructure and coal.
Adani’s first major project, the Mundra Port in Gujarat, opened in 1998 and is now India’s largest. Adani Ports and Special Economic Zone Ltd. is India’s largest private port operator. Within a decade, Adani became India’s largest developer and operator of coal mines. It has expanded into Australia and Indonesia and is on its way to becoming “one of the largest mining groups in the world,” according to Adani Power’s website.
Adani companies operate airports in major cities, build roads, generate electricity, produce defense equipment, develop agricultural drones, sell cooking oil and run a media outlet. Despite its roots in fossil fuels, Adani Green aims to become the world’s largest renewable energy player by 2030.
HOW ADANI BECOME THE RICHEST MAN IN ASIA
Adani’s net worth has skyrocketed by about 2,000% in recent years as the share prices of his publicly traded companies soared.
His critics say much of his success stems from his close ties to the government and Prime Minister Narendra Modi, who sometimes campaigned on an Adani jet. They have accused the government of adjusting the bidding rules to make it easier for Adani to win contracts to operate airports, for example. The company denies this, saying contracts were won fairly through a transparent process.
Before Modi took office, Adani was friends with the rival Congress Party, which ruled Gujarat state when many of his early projects began. Adani has been “close to every politician in power,” RN Bhaskar, a journalist who wrote a biography on Adani, told The UK Time News.
Adani’s supporters say he has cleverly aligned the group’s priorities with those of the government by investing in key industries such as renewable energy, defense and agriculture. And his projects abroad, in strategically important countries such as neighboring Sri Lanka, help New Delhi compete with regional rival Beijing.
WHY HAS THE ADANI GROUP LOST $68 BILLION?
Companies in the Adani Group lost about $68 billion, as estimated by Bloomberg, after Hindenburg Research released its report last week. The short-selling firm says it conducted two years of research on the Adani group and concluded that the seven listed Adani companies were overvalued, with a downside risk of “85%”.
The main allegations against the conglomerate include stock price manipulation and accounting fraud. The report alleges that the Adani Group used offshore shell companies associated with Adani’s family to drive up stock prices. It asked 88 questions for Adani to answer.
The five-year-old Hindenburg, run by Nathan Anderson, attracted attention in 2020 when he accused electric vehicle manufacturer Nikola of lying and misrepresenting its technology. The founder of Nikola was found guilty of fraud last year.
The Adani group has rejected Hindenburg’s allegations and released a 413-page report dismissing the questions, saying none of them were “based on independent or journalistic fact-finding”. Adani’s response included documents and data tables and said the group has made all necessary legal disclosures and abided by local laws.
Hindenburg responded by saying that Adani only answered 26 of the 88 questions and failed to address many of the issues it raised.
Adani has said it is considering legal action. Hindenburg welcomed the idea, saying a legal challenge in the US could give it access to documents related to Adani’s business dealings.
HOW TENS OF BILLIONS IN MARKET VALUE DONE
Hindenburg’s report raised concerns about broader issues and prompted investors to dump Adani Group shares. Since Jan. 25, the flagship company, Adani Enterprises, and others in the group are down as much as 20% in a single day.
Some analysts said that if the issues raised by Hindenburg turn out to be true, it could hurt financial institutions and banks from which the group has borrowed.
But Aveek Mitra, founder of Aveksat Financial Advisory, says he believes the situation will only cause “a few days of turmoil”. Hindenburg has raised important questions about Adani stock valuations, but that doesn’t mean his entire business or assets are “a sham,” he said.
Adani Enterprises’ stock offering was fully underwritten by late Tuesday, suggesting the company continues to enjoy support. Still, the shares of three Adani companies fell by 5 to 10%.
“If the shares continue to fall, Adani as a businessman will have to take that into account and see where and how to invest next,” said Mitra.
“It could also increase scrutiny as lenders may need more guarantees, which could make the company more cautious,” he said. “But whether this is a setback or a temporary dip for Adani, that is the billion-dollar question.”