Adani Group, accused of market manipulation and account fraud, on Sunday hit back at the US-based Hindenburg Research, saying its conduct was a 'calculated securities fraud'. In an over 400-page response, the group led by Gautam Adani called all the allegations "unsubstantiated" and "misleading".
Adani Group’s response also raised questions about the 'ulterior motives' and 'modus operandi' of Hindenburg that it said has conveniently ignored the Indian judiciary and regulatory framework.
The group's detailed response covered its governance standards, credentials, creditworthiness, best practices, transparent conduct, financial and operational performance, and excellence. It said the Hindenburg report has been made with a clear intent to profiteer at the cost of the group's shareholders and public investors. "Its report is neither 'independent' nor 'objective'," the response said.
"It is a manipulative document that is rife with conflict of interest and intended only for creating a false market in securities to book wrongful gain, which clearly constitutes securities fraud under Indian law," the port-to-power conglomerate added.
Earlier this week, Hindenburg, an investment research firm, published a scathing report saying the conglomerate has engaged in brazen stock manipulation and accounting fraud schemes over the course of decades. The firm said it spoke to dozens of individuals, including former and senior executives of the group, reviewed thousands of documents, and conducted diligence site visits in almost half a dozen countries.
"We have uncovered evidence of brazen accounting fraud, stock manipulation, and money laundering at Adani, taking place over the course of decades. Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities,” the report said.
Today, the conglomerate, whose stocks plunged in the last few days following the damaging report, said the report is a manipulative document that is rife with conflict of interest and intended only for creating a false market in securities to book wrongful gain, "which clearly constitutes securities fraud under Indian law".
Of the 88 questions posed by Hindenburg, the response said 68 refers to the matters that have already been duly disclosed by Adani group companies in their respective annual reports, offering memorandums, financial statements, and stock exchange disclosures from time to time.
Sixteen out of 20 questions are pertaining to public shareholders and their sources of funds, while the balance four are simply baseless allegations. "Hindenburg has created these questions to divert the attention of its target audience while managing its short trades to benefit at the cost of investors," the response stated.
What Hindenburg claimed in its report
The investment firm said that its research, which included downloading and cataloguing the entire Mauritius corporate registry, has uncovered that Gautam Adani’s elder brother Vinod Adani through several close associates manages a vast labyrinth of offshore shell entities. It claimed that it had identified 38 Mauritius shell entities controlled by Vinod Adani or close associates. "We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands," it said.
According to the report, many of the Vinod Adani-associated entities had no obvious signs of operations, including no reported employees, no independent addresses or phone numbers, and no meaningful online presence. Despite this, it said, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals.
The firm also claimed that it had uncovered rudimentary efforts seemingly designed to mask the nature of some of the shell entities. For example, it said, 13 websites were created for Vinod Adani-associated entities; many were suspiciously formed on the same days, featuring only stock photos, naming no actual employees and listing the same set of nonsensical services, such as "consumption abroad" and "commercial presence".
"The Vinod-Adani shells seem to serve several functions, including (1) stock parking/stock manipulation (2) and laundering money through Adani’s private companies onto the listed companies’ balance sheets in order to maintain the appearance of financial health and solvency," it said.
Adani Group's response pertaining to Vinod Adani
Responding to questions raised in the report on Gautam Adani's elder brother, the Adani group said Vinod Adani does not hold any managerial position in any Adani-listed entities or their subsidiaries and has no role in their day-to-day affairs. "...we are not in a position to comment on your allegations on the business dealings and transactions of Mr. Vinod Adani," the response said.
"We reiterate that any transactions by the Adani portfolio companies with any related party have been duly identified and disclosed as related party transactions in compliance with Indian laws and standards and have been carried out on arm’s length terms," the response added.
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