The Adani Group, one of India’s largest conglomerates with interests in ports, energy, mining, airports and more, faced a major setback in January 2023 when a US-based short-seller Hindenburg Research published a scathing report accusing the group of large-scale accounting fraud and stock manipulation.
The report alleged that Adani Group had inflated its assets and revenues by using shell companies and tax havens, and that some of its key shareholders were connected to dubious entities. The report also claimed that Adani Group had received preferential treatment from the Indian government and regulators.
The Hindenburg report sent shockwaves across the Indian stock market, as investors dumped Adani Group’s shares en-masse. The group’s six listed companies lost a combined market value of over $130 billion within a few weeks, wiping out more than 60% of their peak wealth.
The biggest loser was Gautam Adani, the chairman and founder of Adani Group, who saw his net worth plummet from $81 billion in December 2022 to $53 billion in March 2023, according to M3M Hurun Global Rich List 2023. He also lost his status as India’s richest individual and the world’s second richest billionaire to Reliance Industries’ Mukesh Ambani and Tesla’s Elon Musk respectively.
Adani Group denied all the allegations made by Hindenburg Research and said that they were baseless and motivated by ulterior motives. The group also said that it had complied with all the applicable laws and regulations in India and abroad, and that it had strong corporate governance practices in place.
However, the damage was done. The Hindenburg report raised serious questions about Adani Group’s credibility and transparency among investors, analysts, regulators and media. The group faced scrutiny from various authorities such as SEBI (Securities and Exchange Board of India), NSDL (National Securities Depository Limited) and MCA (Ministry of Corporate Affairs) over its financial statements, shareholding patterns and corporate structure.
The Hindenburg report also tarnished Adani Group’s reputation as one of India’s most successful business groups that had achieved remarkable growth in diverse sectors over the last three decades. The group had ambitious plans to expand its presence in global markets such as Australia, Indonesia, Myanmar and Bangladesh, but those plans may now face hurdles due to regulatory uncertainties and reputational risks.
The Hindenburg report was a wake-up call for Adani Group to address its vulnerabilities and improve its disclosures. It was also a reminder for investors to be cautious about investing in companies that have complex structures or opaque operations. The Hindenburg report may have been an isolated incident or part of a larger trend of increased scrutiny on Indian corporates by foreign entities. Either way, it was a lesson for both Adani Group and Indian business community at large.