On Wednesday, stocks of companies under the Adani Group experienced a downturn, following allegations made by Hindenburg Research of involvement in a prolonged scheme of stock manipulation and accounting fraud. The financial research firm, which specializes in forensic analysis, spent two years conducting its investigation.
The investigation report suggests that Gautam Adani, the founder and chairman of the Adani Group, has seen a drastic rise in his net worth, which is now estimated to be around $120 billion. The primary reason for this increase is the substantial growth in stock prices of the group’s seven most vital publicly traded companies, which have surged by an average of 819% over the last three years.
The investigation involved multiple steps, including interviews with former senior executives from Adani Group, examination of thousands of documents and on-site inspections in almost a dozen countries. This extensive research was conducted to ensure due diligence.
According to the report from the forensic financial research company, even if one disregards the findings of the investigation and takes the financials of Adani Group at face value, the seven key listed companies of the group have a 85% downside potential purely based on fundamental valuations due to excessive valuations.
The report highlights that the major listed companies of Adani have taken on a substantial amount of debt, particularly by using shares of their overvalued stock as collateral for loans, thereby putting the group’s overall financial well-being at risk.
As per the report, the Adani Group has been under investigation for four major fraud cases by the government, which are believed to have cost a total of $17 billion and include accusations of money laundering, theft of tax dollars, and corruption.
According to the report by Hindenburg Research, it is alleged that members of the Adani family have worked together to establish shell companies in tax-haven jurisdictions such as Mauritius, the UAE, and Caribbean Islands. The motive behind these actions was to generate fake or illegitimate turnover and divert money from the listed companies, by creating forged import/export documentation.
The impact of the Hindenburg Research investigation was such that the market capitalization of the seven stocks under the Adani Group was significantly impacted on Wednesday, as it lost ₹96,672 crore.
On January 25th, shares of Adani Enterprises fell by 1.54% to Rs 3,389.85 and other companies under the Adani Group such as Adani Green Energy, Adani Ports and Special Economic Zone, Adani Power, Adani Total Gas, Adani Transmission, and Adani Wilmar also experienced a decline in their share prices, ranging from 5% to 9%. Additionally, the recent acquisitions of the Adani Group, such as ACC, Ambuja Cements, and NDTV also saw a decrease in their share prices, with a drop of 7.26%, 7.71%, and 4.98% respectively.
On Wednesday, the market value of Adani Total Gas dropped by ₹12,366 crore, Adani Ports lost ₹8,342 crore, and Adani Transmission experienced a loss of ₹8,039 crore in a single day.