Hindenburg Research claimed the Adani Group committed “brazen” corporate fraud, but the Adani Group dismissed the report.
Shares in Asia’s richest man Gautam Adani’s business empire plunged, resulting in $48 billion in losses after a US investment firm claimed it had committed “brazen” corporate fraud.
Seven publicly traded companies in the Adani conglomerate collectively lost $48 billion in market cap after Hindenburg Research raised concerns about debt and the use of tax havens in a Jan. 24 report.
Adani, who was the third-richest person in the world at the start of the week, is now seventh on Forbes’ billionaire tracker after his fortune fell by $22.6 billion in Friday trading.
Adani Enterprises, the group’s flagship, plummeted nearly 20 percent on the day in Mumbai, briefly triggering an automatic halt to trading before recovering slightly to close 18.52 percent lower.
Five other group companies hit their own stock market breaker, with shares in Adani Total Gas, Adani Green Energy and Adani Transmission each falling 20 percent.
“Obviously it’s panic selling,” Ashish Chaturmohta, head of equity research at JM Financials, told AFP, adding that traders set up new short positions to protect previous bullish bets on Adani stock.
Hindenburg Research said in its report that the Adani Group used undisclosed related party transactions and profit manipulation to maintain “the appearance of financial health and solvency” of its publicly traded businesses.
The Adani Group dismissed the report as unfounded and that it was the victim of a “maliciously impish” reputation attack by Hindenburg.
Legal chief Jatin Jalundhwala said Adani is considering taking legal action against the New York-based research adviser in US and Indian courts.
Hindenburg responded that Adani sidestepped the issues his research had raised, resorting instead to “bumping and threats.”
“If Adani is serious, it should also sue in the United States,” the law firm said in a statement. “We have a long list of documents that we would require in a court investigation.”
Adani is said to be a close supporter of Prime Minister Narendra Modi with a net worth of $96.6 billion. India’s main opposition party in Congress has often accused Adani and other billionaires of receiving preferential political treatment from Modi’s government, allegations the billionaire has denied.
Adani Group was founded in 1988 and started with commodity trading. The conglomerate’s business interests now range from ports and airports to mining and renewable energy.
The report said a decades-old pattern of “government leniency towards the group” has resulted in investors, journalists, citizens and politicians being unwilling to challenge the group’s behavior “for fear of reprisals”.
“The signal is that because the Adanis are very close to today’s powers that be, nobody would challenge them,” economist Arun Kumar told AFP.
“Those who used to criticize Adani, those who tried to investigate, Adani hung up big [legal] Cases against them, so they put a lot of people off,” he added.