Adani stocks drop after Hindenburg alleges ‘brazen’ fraud

Adani stocks drop after Hindenburg alleges ‘brazen’ fraud

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The broadside from Hindenburg comes at a critical time for the ports-to-power tycoon.

Adani is seeking to raise his international profile and is aggressively branching into new businesses, including cement and media, in his power base of India, where he is seen to enjoy a close relationship with Prime Minister Narendra Modi.

The Adani empire’s expansion plans are closely aligned to the government’s development and economic goals.

Adani rocketed up the Bloomberg Billionaire’s Index last year past the likes of Bill Gates and Warren Buffett, and his fortune now totals $US118.9 billion ($167.5 billion), making him the fourth-wealthiest person in the world.

A prominent research outfit, Hindenburg is best known for its critical reports on the electric vehicle space. It was instrumental in bringing down the founder of e-truck company Nikola, which was accused by Hindenburg in 2020 of being built on “dozens of lies”.

Nikola founder Trevor Milton eventually stepped down as chairman and was found guilty of securities fraud. More recent targets include Clover Health and Lordstown Motors.

Hindenburg said it had taken a short position in Adani’s companies through US-traded bonds and non-Indian-traded derivative instruments.

“Even if you ignore the findings of our investigation and take the financials of Adani Group at face value, its seven key listed companies have 85 per cent downside purely on a fundamental basis owing to sky-high valuations,” Hindenburg said in the report.

Adani companies trade at price-to-earnings ratios many times that of peer companies both in India and around the globe, including firms in the Reliance empire of rival tycoon Mukesh Ambani – Adani’s predecessor as Asia’s richest man.

There are some signs that the bull run is slowing, with most Adani group stocks starting the year with declines even before Hindenburg’s report.

Investors and analysts have also flagged concerns over the high levels of debt seen in the empire’s listed units.

Gross debt at six Adani firms – Adani Enterprises, Adani Green Energy, Adani Ports and SEZ, Adani Power, Adani Total Gas and Adani Transmissi – stood at 1.88 trillion rupees as of March-end 2022.

Bloomberg

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