Hindenburg report is not gospel truth: Former SEBI executive director JN Gupta

Former SEBI executive director J N Gupta believes that Hindenburg Research lacks credibility as there is a motive attached to it and that most of the allegations are already disclosed in the public domain by Adani Group

The listed entities of Adani Group include Adani Enterprises, Adani Ports & SEZ, Adani Transmission, Adani Power, Adani Total Gas, Adani Green Energy, Adani Wilmar, ACC, Ambuja Cements and NDTV.

US-based short seller Hindenburg Research may well have alleged that Adani Group has indulged in stock manipulation, accounting frauds and round tripping of funds through shell companies but many in the market believe that the report is motivated and that Hindenburg has not said anything new.

J N Gupta, Founder and MD of Stakeholders Empowerment Services (SES), a proxy advisory firm and a former executive director of the Securities and Exchange Board of India (SEBI), is of the view that the Hindenburg report lacks credibility because of the short positions – designed to profit from a fall in stock price – that the US-based firm has.

“In my opinion, Hindenburg report is not a gospel truth,” says Gupta.

“There were many issues that were raised (in the Hindenburg report) but I am yet to find something that was not already in public domain. A report can be called credible if there is no motive attached to it. In this particular case, there appears two motives. One, clearly stated that they have a short position. The other is an indirect motive, aimed at causing maximum harm to the shares of Adani Group, once again to further their motive of short selling,” explains Gupta.

He further adds that it is a strange coincidence that Hindenburg claimed that the report was two years in the making and it was released just ahead of the follow-on public offering of Adani Enterprises.

The Rs 20,000 crore FPO of Adani Enterprises was called off last month – after it was subscribed 1.12 times -- as the market price was hovering around Rs 1,000 even as the FPO price was fixed between Rs 3,112 and Rs 3,276 per share.

The impact of the Hindenburg report can be further gauged from the fact that the market capitalisation of Adani Group dropped by more than $100 billion in a matter of few days with most group companies seeing their share price halve.

The listed entities of Adani Group include Adani Enterprises, Adani Ports & SEZ, Adani Transmission, Adani Power, Adani Total Gas, Adani Green Energy, Adani Wilmar, ACC, Ambuja Cements and NDTV.

Meanwhile, Gupta believes that the businesses of Adani Group are backed by real assets and its debt – pegged at a little over Rs 2 lakh crore – is not a cause for concern given the sheer size of the business.

“For a group of this size, the number (debt quantum) is not a big amount especially when you see that all businesses are asset-based and are appreciating in value. They also have cash flow to support that quantum of debt,” he says.

“It looks like a concerted effort to negatively impact the group as his rise was rapid and he has acquired many businesses as well. There could be many factors,” says Gupta.