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    The Fallout of Hindenburg's Report on Adani Stocks

    The Fallout of Hindenburg's Report on Adani Stocks

    F4 months ago 295
    Unmasking the Mirage - Hindenburg’s Blow to Adani’s Stock and the 
Unfolding Truth
Abstract
The recent development within the country and more importantly the flow of funds to the 
government in the contemporary world is primarily due to the IT service sector. The 
government has focused on increasing investments on IT firms and has supported the 
development of a culture of entrepreneurship. This strategic focus has in particular contributed 
to a massive boost in employment rates. Higher employment not only incurs more revenue 
circulation but also plays a significant part in the development of a country and thus, to the 
National Income. Nevertheless, with the progress of economic development, there are various 
risks such as fraud, manipulation, and excessive related parties’ transactions. One of the most 
recent and eye-opening cases is the Adani Group that became the subject of discussion after 
the accusations made by Hindenburg Research. The case involves a report that was published 
early in 2023 which indicted the Adani Group of several cases of fraud. Consequently, of these 
allegations the stock value of the Adani Group plummeted, which showed the gravity of the 
situation. This has turned into a major showdown between the Adani Group and Hindenburg 
Research capturing the interest of not only the financial markets but also the regulatory 
authorities. As much as this paper aims to discuss the allegations made by Hindenburg 
Research, it is important to look at the specific accusations made against the Adani Group. 
Consequently, by analyzing these allegations within the Indian context, the paper seeks to give 
an overview of the legal and financial aspects of the case. This analysis will not only help in 
understanding the veracity of the said allegations, but also the implications that this has for 
corporate governance and regulation in India at large.1
Keywords: Government Investment, Financial Irregularities, Adani Group, Hindenburg 
Research, Stock Manipulation
1
‘Explained: How Gautam Adani v/s Hindenburg saga has unfolded so far - Times of India’ (The Times of India) 
<https://timesofindia.indiatimes.com/business/india-business/explainer-how-adani-v/s-hindenburg-saga-hasunfolded-so-far/articleshow/97558775.cms> accessed 25 June 2024.
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    Introduction
In the business world, the famous quote by Warren Buffet, “In the business world, the rearview 
mirror is always clearer than the windshield” is a very appropriate statement that shows that it 
is easier to analyse past events and their impact than trying to predict the future. This cannot 
be more relevant whenever one is studying the constantly shifting and competitively growing 
economy of India. India is one of the biggest and fastest growing economies globally and across 
the sectors has emerged as a progressively resilient as well as robust market.
There are two methods of measuring GDP commonly, the first being on the basis of market 
exchange rates and the second on the basis of purchasing power parity, in terms of the former 
India ranks fifth in the world and in terms of the latter it ranks third according to the IMF. It 
has a low debt-to-GDP ratio and impressive gross domestic product nominal of USD 3 trillion. 
73 trillion. A per capita income of $2,612 paints a picture of a pluralistic economy of India that 
has the opportunities and but also the challenges of the fastest growing economy across the 
continents of the world.2
The IT Industry is one of the wheels that support India’s economic chariot, it is one of the 
industries that handle a significant percentage of the country’s GDP. Today India has proved 
to be one among the top IT service exporting nations and this proves the advanced technologies 
and talented human resources. According to the estimate made by World Computer Bureau, in 
2023, the contribution of the IT sector to the Indian GDP is expected to be about 7.5% and it 
is considering as important part of economic structure in the nation. The IT industry in India is 
therefore diverse in that it embraces many types of business ventures, both services oriented, 
and manufacturing oriented businesses that offer solutions within and outside India.3
However, the current face of the India industry can be gazed in the Adani Group which is an 
Indian multinational business conglomerate based in Ahmedabad. With Gautam Adani at its 
head, the group has continued to spread its wings across newer domains such as energy, 
2 By Nikhil Inamdar, ‘India's economy: The good, bad and ugly in six charts’ (BBC Home - Breaking News, World 
News, US News, Sports, Business, Innovation, Climate, Culture, Travel, Video & Audio, 30 April 2024) 
<www.bbc.com/news/world-asia-india-68823827> accessed 25 June 2024.
3
ibid.
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    logistics, and food processing. It is not only emphasising the diverse business model of the 
group but also displaying its impact on the Indian economy.
Hindenburg Research is an American investment research company which was initially 
launched in 2017 by Nathan “Nate” Anderson and mainly focuses in releasing investigative 
reports about several companies. This is because the firm takes a lot of pride in the ability to 
obtain information that might not be easy to find in more conventional means and this primarily 
deals with issues concerning fraud and other types of misconduct. Hindenburg Research 
releases all these reports on its website, and through such announcements, a company’s 
operating practices are put under intense scrutiny, causing massive reactions within the 
market.4
One of Hindenburg’s significant examples of entailing a company was the case when the firm 
released a report about the Indian conglomerate – Adani Group. This report had some very 
damning findings – allegations of stock manipulation, fraudulent audits, and many other illegal 
activities. In response to the severe critique, the market responded rapidly and intensely; within 
three days of the publication, Adani’s Group of companies suffered nearly $65 billion of lost 
value. Hindenburg Research was unrelenting and stated they would be prepared to defend 
themselves and their work with the help of the court against the legal team of the Adani Group.
Previously in last year, Hindenburg Research published information revealing its short 
exposure to Adani companies through bonds floated in the United States and non-India listed 
derivatives. Hindenburg Report provided evidence that Adani has used tax haven and 
questioned the lofty debts of the company. Subsequently, the Adani Group refuted the claims 
by categorizing the report as unfounded and terming the allegations as hearsay. In response to 
the report, the Adani Group quickly dismissed it as baseless, while characterizing the claims 
as “hearsay.5
4
 ‘Hindenburg Report’ (Business Standard) <www.business-standard.com/about/what-is-hindenburg-report> 
accessed 25 June 2024.
5
 ‘'Hindenburg report tried to shake our foundation but...': Gautam Adani’ (mint) 
<www.livemint.com/companies/news/hindenburg-report-tried-to-shake-our-foundation-but-gautam-adanirecalls-rout-prompted-by-us-short-seller-11710343850752.html> accessed 25 June 2024.
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    Functioning of Hindenburg
Hindenburg research is a company that deals in exposing frauds and manipulations of stocks 
which they classify under what they call man-made disasters. This company exposes 
companies in a unique and relentless approach that separates it from any other company of its 
kind. Hindenburg research also notes that it employs basic methods of research while investing, 
however, its best research originates from looking for substantive information from 
unconventional avenues. In other words, it goes beyond the regular productions of balance 
sheets, trading data, and other financial features by striving to acquire information that is often 
hard to find. They use a complex and very scrupulous analytical approach where they study 
every aspect of a company’s activity, its financial reports, and outside communication 
searching for signs of inefficiency and abuse.
For instance, Hindenburg Research has two major areas of concentration which examine 
between four to six outlined red flags within corporations. These include analysing balance 
sheets for discrepancies and any indications of a disguised fraudulent reporting system that 
results in the provision of erroneous details regarding the performance of a company. It 
scrutinize experience certificates, employment references, credit histories and any other 
information that may reveal personally unethical or irresponsible officials, origination from the 
background of executives and other personnel who may previously have been implicated in 
fraudulent activities. It actively seeks out undisclosed transactions between the company and 
parties connected to its insiders, in particular its executives or members of the board of 
directors, for often these interactions raise the possibility of conflicts of interest or fraud.
The company also monitors for any indications that it may be undertaking unlawful or 
scandalous business actions or failing to disclose losses or other facts critical to investors that 
could infect the enterprise with extreme penalties. Last but not least, they look for holes that a 
particular company might have, including, but not limited to, regulatory proceedings against 
the company, a product that has serious flaws which the public is still unaware of, and financial 
issues that have not come to light yet as they can affect the company’s stock astonishingly 
when unveiled.6
6
 ‘Adani AGM 2024: 'Hindenburg incident was designed to defame us,' Gautam Adani tells shareholders’ 
(Moneycontrol) <www.moneycontrol.com/news/business/adani-agm-2024-hindenburg-incident-was-designedto-defame-us-gautam-adani-tells-shareholders-12754839.html> accessed 25 June 2024.
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    Through identifying and addressing such important areas of concern, Hindenburg Research 
provides investors with an opportunity to be shielded from financial losses, facilitated by 
concealed risks and fraud, for the enhancement of corporate disclosure and stock market 
integrity. Their work then potentially betrays the lapses in business and investment research 
that must be invoked to explain how fraudulent practices could be pursued for years before the 
scam finally collapses.
Anderson shown how similar the calamity of the stock market is like the one that befallen the 
Hindenburg air ship in 1937. The infamous Hindenburg incident which was a terrible Fire lead 
to the killing of about 35 people and has since earned itself the title of huge failures. Anderson 
equates this to the falls in share price of a company, stressing on the fact that most falls are 
sudden, abrupt and may be very fatal. He points out that Hindenburg Research, the company 
at the centre of the article, fits the activist role since it becomes an investor to uncover and 
combat frauds. This view is not isolated to disclosure but is closely tied to the financial 
management of the company, which, as will be discussed in the following section, includes 
short selling.7
Short selling is commonly referred to as ‘shorting’ or ‘going short’ and is considered a high 
risk, high reward investment method utilized by discerning traders. Short selling is different 
from traditional trading in which the trader’s main aim is to purchase the asset at a cheaper 
price and then sell it when the prices are higher, it involves selling stocks that are not owned 
by the trader with the belief that the price of the respective stock shall decline. Trader buys the 
stock on margin and sells it at a higher price to the public, aims to purchase the same at a lower 
price with maximum profit difference. This strategy is based on the presumption that a stock 
is overpriced and needs a wakeup call. For instance, if a trader finds it suitable to trade at a
specific share that is at 200 rupees and the trader expects it to reduce to 180 rupees the trader 
sells the stock at 200 rupees to other traders. After the price lowers to 180 rupees each, they 
immediately buy it back and get a profit of 20 rupees per share. This kind of trading is made 
possible by an MIS Margin intraday settlement, account. In India the market regulator SEBI or 
Securities and Exchange Board of India allowed short selling, but only for those trades which 
7
 ‘For Hindenburg Research, Adani Group is a man-made disaster in the making’ (Hindustan Times) 
<www.hindustantimes.com/business/for-hindenburg-research-adani-group-is-a-man-made-disaster-in-themaking-101674826184041.html> accessed 25 June 2024.
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    are delivery-based trade and any such trade which is done by short selling has to be squared 
off on the same day in the market.
Hindenburg Research is a financial research company that is focused on a short selling strategy 
in an effort to report fraud from different organizations. As its modus operandi they engage in 
detailed financial analysis and place a derivative bet on the carry-on dive of the exposed 
company share price. However this method can be quite lucrative, it also implies a rather high 
level of risk at the same time. The main disadvantage of short selling is that this type of trading 
entails much higher risks, as all losses are not necessarily limited by the amount of funds that 
has been invested in a security as it is in case of classical trading. If the stock price rises instead 
of falling, the losses that can be incurred are huge without a change of heart. For instance, 
where a trader has sold 100 shares of a stock at a price that he believes will decline, but it so 
happens that the price rises instead, the trader faces potentially unlimited losses, since there is 
no cap to the upside of a particular share price. The only exceptional case is when an upper 
circuit breaker occurs as there are no sellers to meet buyers’ demands. However, if such a 
situation is not the case, then one can realize an infinite amount of money, but the financial risk 
being in short sale is very large, which speaks to high stakes for this type of trading.
Framework of Short Selling in India
Short selling is legal and allowed in today’s world and India in particular. It was not always so 
as these paper aims to establish when analysing a few selected educational institutions. Short 
selling was considered unlawful from 2001 to 2008 because of cases of insider trading which 
were alleged to have instigated a massive crash on most stocks. The ban was a preventative 
measure used by the Indian regulators to delist the US securities from its market for keeping 
the market steady during the period of uncertainty in order to protect the interest of the 
investors.8
However, Indian regulators decided this year to reopen the short selling but with conditions to 
curb the hazards that could occur. These new regulations involved control of day trading by 
institutional investors, rule that requires investors to report short sales, and creation of an 
8
 ‘Navigating the Maze: Scrutinising SEBI’s Framework for Short Selling - IndiaCorpLaw’ (IndiaCorpLaw) 
<https://indiacorplaw.in/2024/02/navigating-the-maze-scrutinising-sebis-framework-for-short-selling.html> 
accessed 25 June 2024.
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    exclusive short selling platform. They were meant, inter alia, to improve transparency and 
avoid specific market abuses.
During the contraction of the economy owing to the COVID-19 outbreak in March and 
October, 2020, Indian regulators have again closed the short selling temporarily. This decision 
was taken as part of emergency risk management measure when the market was facing an 
unprecedented global turmoil.
Only domestic institutional investors such as mutual funds, FIIs, banks and insurance 
companies, are permitted to short sell, assuming that the appropriate derivative products for 
the involved securities are available. short sale and if the stock is a short sale or not to be 
disclosed at the time of the transaction, apart from meeting their ability to borrow the shares to 
their broker. While, institutional investors are restricted from releasing this information while 
the market is open and this information can be released by retail investor by the close of the 
market.
Notably, the naked short selling practice is considered unlawful within the territory of India. 
The current SL/B regime is implemented through the CC/CH of the securities market or 
through the stock exchanges. By controlling the ways through which investors can leverage the 
available demand for securities this system is suboptimal. It has been mooted to improve this 
system by the employment of Approved Intermediaries (AISs) and initially the banks shall be 
acting as the custodians. This timid strategy is being employed in a bid to achieve a sound and 
secure environment for lending and/ or borrowing institutions.9
Most of the companies are open to FPIs and FIIs but, short selling is prohibited for FPIs and 
FIIs by the regulatory rules and laws. This restriction is thus meant to mitigate any possible 
problems to keep the efficiency of the market uninterrupted and curb any activities that may 
inhibit the efficiency of the short selling practices in the Indian financial markets.
The external actors still partake in trade within India through different incorporation or 
organizations that are still legal on the conductance of such mechanisms. However, it should 
be noted these measures do not directly aim at the essence of problem but are only focused on 
9 Tarun Thakur and Navya Bassi, ‘SEBI's Comprehensive Framework: Navigating Short Selling in the Indian 
Market’ (CBFL, 5 March 2024) <www.cbflnludelhi.in/post/sebi-s-comprehensive-framework-navigating-shortselling-in-the-indian-market> accessed 25 June 2024.
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    direct intermediaries. Therefore, it is the original problem that is still unresolved. From crosssectional comparison of securities markets, it can be noted that the markets do not directly 
regulate and control lending and borrowing activities. This is because OTC transactions are the 
usual practice in most of these transactions and thus the involvement of a third party like a 
stockbroker is compelled. Thus, instead of being owners or operators, the custodians and 
depositors are those who provide management and running of these lending and borrowing 
institutions. In the event that India opts for this framework, any resulting short-selling 
regulations require implementation together with this new scheme.
In India, there exist many other corporate organizations which have not been restricted to 
perform trading with foreign entities. These regulations are primarily directed at controlling 
various activities of direct intermediate parties, without addressing roots of the trading activity. 
Tom is therefore commercially correct in positing that the issue of unauthorized trading by 
foreign entities is not adequately addressed. Globally, the idea of how to govern securities 
markets is that of restraining interference with the lending/borrowing processes. Such 
transactions occur at OTC, and thus are controlled by custodians and depositors of the lending 
and borrowing institutions. Would India have to undertake a system of better international 
model, it would have a like need to introduced rules regarding short selling for better over 
bearing regulation.10
However, attempts to regulate the said activities remain a challenge; foreign entities are able 
to circumvent the forbidden restrictions of trading directly with India through the use of any 
corporation or organization which is allowed to trade directly with the country. This has not 
fully addressed the problem since the current regulations work with the current trading and 
only pays attention to the direct intermediary and does not probe into the sources of the trading. 
In other countries, it is not feasible for the securities markets to directly deal with the over-thecounter lending and borrowing processes, which is why they are not required to regulate these 
processes. It can usually be attributed to the custodians and depositors who manage the lending 
and borrowing processes of the respective business. Accordingly, any similar system that has 
to be incorporated for India there would be need for the regulation to fillip short selling 
provisions as part of this new framework.
10 ‘Reserve Bank of India - Regulatory Reporting’ (RBI) <www.rbi.org.in/scripts/DataDefinition.aspx> accessed 
25 June 2024.
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    Foreign entities continue engaging in trading, specifically within India, through associating 
with corporations or organizations that are still formally authorized to trade despite existing 
regulations. These regulations are aimed at direct intermediaries only though they do not 
address the mater appropriately. Therefore, the central problem persists, as the two characters 
further the plot but do not address the underlying problem. Therefore, while in the securities 
markets outright purchases and sales of securities take place, lending and borrowing activities 
per se are not controlled and do occur OTC. However, these are managed by non-executive 
custodians and depositors themselves and not by these lending and borrowing institutions. If 
India were to introduce such a scheme at some point in the future, it will be important to do so 
in conjunction with short-selling regulations as these would need to be complementary for all 
to operate in a coherent and effective manner.11
Initial Impact on Adani by Hindenburg Report
It is noteworthy that the Hindenburg report launched a substantial blow to the Adani Group 
and led to the decrease in the company’s market capitalization that accounts for $100 billion. 
This financial shock relegated Gautam Adani from being the third wealthiest person in the 
world in asset terms back to the 20s. The fact of the report raised many concerns and 
speculations about the role and maybe control that now Indian Prime Minister Narendra Modi 
has had on the exponential growth of the Adani Group. There are speculations that struggling 
together and coming from Gujarat, India, there is a close relation between both that showed 
positive impacts to get them to where they are today.12
In response to these allegations, Adani categorically denied any outside influences meddling 
with his business. He assured people that all its contracts and associations of the Adani Group 
have been orally and in the public domain. Adani in his defence said that there was no wrong 
doing by his company to have received political patronage since the success of his business is 
as a result of business operation prowess. He claimed that he is an independent businessman 
who has made his fortune despite being the son of a footballer.
In response to the report, Adani described it as ‘merely an expansion of the same unfeasible 
Short Attack from Hindenburg Research’. Jugeshinder Singh, Chief Financial Officer of Adani 
11 ibid. 
12
 ‘PM Modi, Ambani, Adani reshaping India to become economic superpower: CNN report’ (The Economic 
Times) <https://m.economictimes.com/news/india/pm-modi-ambani-adani-reshaping-india-to-becomeeconomic-superpower-cnn-report/articleshow/109954741.cms> accessed 25 June 2024.
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    Enterprises, also denied the report as baseless and was an act of extremism by Hindenburg. 
Criticizing the report, Singh said it was an incorrect assembly of half-truths: misinformation 
from decades ago that was still considered as unverified, slanderous, and thoroughly debunked 
by India’s Supreme Court. This was typical Singh’s mentality of dismissing the report and 
assuring the stakeholders that there are no rot in the Adani Group business.13
Since Hindenburg was not the only investigative industry that had delved into the activities of 
the Adani Group of companies. As the House may be aware, many RTI applications had been 
made against the Adani entities. Most of these applications were aimed at the Adani group and 
several other off-shore companies including Elara, Monterosa Investment Holdings, new 
Leina, and other related companies operational in Mauritius. These offshore entities had been 
under scrutiny for over eighteen months before the leaks rocked the world. In view of this it is 
likely that Indian authorities, headed by the political, did not consider the Adani Group as a 
viable entity they could support or a financially feasible company they could accept.
It thus increases the chances of directors submitting RTIs to SEBI to report manipulative 
trading activity. This involves Ketan Parekh, a former stock market manipulator who was 
accused of being involved in a number of stock scandals including securities fraud, involving 
Dharmesh Doshi, a fugitive accountant, and Samir Arora, who is a brother-in-law to Gautam 
Adani. Moreover, members of the Adani family were also accused of wrongdoing in the share’s 
fraud scam. This also involves Vinod Adani as the elder brother to Gautam Adani and Rajesh 
Adani as his young brother.
Majority of the investigations within India was headed by the Director of Revenue Intelligence 
(DRI). Such serious cases as financial and regulatory misconduct by the Adani Group and its 
related companies were analysed with the active participation of the DRI. The findings of this 
wide-ranging analysis indicate the vast lengths that different Indian authorities have gone to 
monitor, investigate, and seek to contain the vast network of financial and regulatory concerns 
related to the Adani Group and its associated entities.
Within the report, a number of suspicious related to the Adani Group are pointed, and the 
Group’s managerial effectiveness and financial integrity are called into question. One area of 
concern is the high dependency on related parties’ transactions and activities. Namely, the 
13 ibid.
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    report cites numerous transactions while involving the Adani Group with different 
organizations including Monterosa Investment Holdings which reportedly has stakes of over 
INR 360 billion invested in the different listed companies of the Adani`s group. Another 
company involved in the case is Elara, an offshore firm that is said to be owning about $3 
billion worth of Adani stocks. The scope of these transactions is massive; for instance, seven 
key listed entities in the Adani Group have a total of 578 subsidiaries and under the relatedparty transactions rule, engaged in 6,025 transactions in the fiscal year 2022. The business 
implications of this practice are clear: it prompts questions regarding the quality of these 
transactions, as well as the orientation of the processes to the common good of all 
shareholders.14
Furthermore, the report also highlights that there is a high turnover of employees occupying 
strategic accounting and reporting roles. It would be interesting to know that Adani Enterprises 
being a reputed organization had witnessed having seen 5 CFOs in next eight years. Thus, the 
switching of CEOs in this particular function often can be a sign of discontent or instability of 
financial management in the company; which inevitably can hamper the company’s financial 
health and strategic financial plan.
Even the audits conducted by Adani are also placed under scrutiny with regards to credibility. 
Out of these, Adani Enterprises has one of the current independent auditors such as Shah 
Dhandaria audit company, which is a very small audit firm and they have no well-designed 
company website. It was apparent that this firm consists of only four partners and eleven 
employees and this information will obviously make one to doubt its ability to adequately audit 
such a large and complex conglomerate. It is reasonable to view the selection of such a small 
firm in the company’s auditing process as unfeasible, considering the possibility of 
inefficiencies in the audit process due to the lack of firm size.
14 ‘Two Offshore Companies That Invested in Adani Group Were Under Tax Scanner in India: Report’ (The Wire) 
<https://thewire.in/business/two-offshore-companies-that-invested-in-adani-group-were-under-tax-scanner-inindia-report> accessed 25 June 2024.
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    Impact of the Report and Revival of Adani Group
This means that even if the Report contained actual facts or false information it has done the 
job of causing harm by merely being released to the public. This led to a disastrous collapse of 
the Adani Group shares in the market with losses touching $ 140 billion in the wake of the 
report. Such a sudden twist greatly affected the confidence of the investors as well as inflated 
Hindenburg Research’s profits via short selling. As such, the economic power of Adani 
dropped from becoming the Third wealthiest man worldwide to the Twenty-Third in 2022. 
Earlier this year, the Hindenburg Research published a report claiming fraud stating that 
Adani’s conglomerate inflated its values and deceives foreign investors which as per the Hurun 
Global Rich List 2023 the business tycoon’s net worth erodes by around 300 crores each week 
after this report.15
The attack by a short seller forced the Adani Group to reevaluate its expansion goals and needs, 
especially after accumulating arguably the largest credit pile in India to fund new endeavours. 
Adani, known to be in the close contact of Modi and contributing to his vision of making a new 
India has been benefited as their group firms emerged as colossal since the Modi regime came 
into power. However, this growth trajectory was put into test when the group considered a new 
direction in the operation by seeking to diversify into sectors such as aluminium, steel, and 
roads. It was rumoured in March by Bloomberg News that sources with knowledge of the 
groups internal plans had revealed that it had withdrawn from a strategic level.
In space of a month poor Adani saw its days evaporate and it entered a period when it initiated 
heavy losses. Adani Enterprises plunged 5%, the most in over five years, and all of the six 
listed Adani companies closed at five-month or one-year lows. States Rohan Shah, head 
technical analyst at Stoxbox, that the Adani Group’s market capitalization was closer to ₹25 
lakh crore on the day of its respective peak. In February 24, 2023, this market value was fallen 
by more than 71% and created the loss above ₹17. 8 lakh crore. The latter made it through the 
list of the most affected; Adani Total Gas plunged by nearly 81%; Adani Green; Adani 
Transmission dropped about 74%. 5% and 74%, respectively. The impact was not limited to 
15 ibid.
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    only the power division but also affected the Adani Enterprises Limited, the flagship company, 
with the share price declining by 62%.16
After the publication of the critical report by the short seller, the Adani Group faced some 
problems. Nevertheless, these adversities did not deter Gautam Adani to continue with his 
mission to rebuild and solidify the company. Adani Enterprises Ltd (AEL), spearheaded by 
him, denied all accusations made by the Anderson company and remained operational. More 
recently, the Adani family tactically sold stakes owned by the Group CFO Jugeshinder 
‘Robbie’ Singh for $1.87 billion for a 10% stake from global private equity firm GQG Partners. 
Moreover, the group has received board approvals for a further $4 billion funding within the 
next one year, depicting the strong financial planning of the group.
In the future, the Adani Group is set for a major task of rebuilding its companies. One such 
effort includes ₹12,500 crore equity fundraising scheme, which has been prominently set out 
by AEL with the help of its subsidiary, ANIL, in green hydrogen. This programme focuses on 
creating an integrated system that includes green hydrogen production, downstream products 
including ammonia and urea, and the production of related supply chain components including 
wind turbines, batteries, and electrolysers. Further, the group is in the process of diversifying 
its focus from business segments that are more traditional and heavily reliant on capital 
intensive industries to consumer-focused sectors like airports, energy and gas distribution and 
real estate in its future growth strategy.17
Nevertheless, over the last few years, the group has faced some challenges, for instance, the 
scrutiny of SEBI following the Supreme Court’s expert committee probe into the Adani stock 
crash, however, the group has been able to continue its expansion efforts globally during the 
Hindenburg crisis. Credit for such resilience and development has been placed on the door step 
of the management team’s allegiance to Gautam Adani. This devotion has rightfully made them 
the pride and joy of the company as they rightfully call themselves the company’s greatest 
asset. In the future, the CFO has proposed that the group is going to operate with 14-15 
companies instead of the current 10 companies by 2033 which is a part of the strategic direction 
16
 Armaan Joshi, ‘Why Are Adani Shares Falling?’ (Forbes Advisor INDIA, 29 April 2023) 
<www.forbes.com/advisor/in/investing/why-adani-shares-are-falling/> accessed 25 June 2024.
17
 ‘Adani Energy Solutions board approves fundraising of up to Rs 12,500 crore’ (Business Standard) 
<www.business-standard.com/companies/news/adani-energy-solutions-board-approves-fundraising-of-up-to-rs12-500-crore-124052700931_1.html> accessed 25 June 2024.
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    to cut down the number of companies it operates with in order to increase the operational 
intensity.
Conclusion
The recent confrontation between Adani and Hindenburg should be seen as an important 
reminder that the corporate world is not always as simple and transparent as it seems, and there 
are always some hidden activities that are difficult to regulate, despite the fact that they are 
required to be in compliance with the regulatory norms set by SEBI, FDI, and CCI regulations. 
Such examples show that simple monitoring cannot prevent fraudulent and other illegal actions, 
so one has to look for additional ways. In light of the recent events, one cannot deny that many 
of the allegations made by Hindenburg Research are still unproven and that there is no solid 
evidence to substantiate them; however, the journalists believe that some of the accusations 
were perhaps overstated for the sake of effect.
Furthermore, it also highlights the current rules and regulations in India for short selling. 
Though legal, it becomes problematic when some individuals use it to slander a company or 
bet on their failures. Spite of all this, the extent of harm done by the short selling to the goodwill 
of a company can be massive and therefore calls for elaborate legislation on short selling and 
other related practice.
Therefore, as stakeholders, investors have to ensure they closely inspect the products and 
services companies offer in a bid to avoid such losses. Force majeure is evidenced by the 
Hindenburg report where publication of the report was out of the investor’s control and led to 
severe damage that cannot be compensated. Therefore, complaint resolution and effective 
investor protection systems should be put in place.
Moreover, this event provokes questions regarding ethics and governance of large companies. 
This is an indication that market regulators need to step up their game in protecting investors 
and also ensuring that they conduct proper oversight on organizations. It is for these reasons 
that transparency, accountability, and ethical corporate conduct are central to building trust and 
maintaining investors’ confidence in the international arena. In the end, whether or not 
accusations are true, this event is a good example of how investigation reports can significantly 
influence the market and investors’ feelings.
    14/14

    The Fallout of Hindenburg's Report on Adani Stocks

    • 1. Unmasking the Mirage - Hindenburg’s Blow to Adani’s Stock and the Unfolding Truth Abstract The recent development within the country and more importantly the flow of funds to the government in the contemporary world is primarily due to the IT service sector. The government has focused on increasing investments on IT firms and has supported the development of a culture of entrepreneurship. This strategic focus has in particular contributed to a massive boost in employment rates. Higher employment not only incurs more revenue circulation but also plays a significant part in the development of a country and thus, to the National Income. Nevertheless, with the progress of economic development, there are various risks such as fraud, manipulation, and excessive related parties’ transactions. One of the most recent and eye-opening cases is the Adani Group that became the subject of discussion after the accusations made by Hindenburg Research. The case involves a report that was published early in 2023 which indicted the Adani Group of several cases of fraud. Consequently, of these allegations the stock value of the Adani Group plummeted, which showed the gravity of the situation. This has turned into a major showdown between the Adani Group and Hindenburg Research capturing the interest of not only the financial markets but also the regulatory authorities. As much as this paper aims to discuss the allegations made by Hindenburg Research, it is important to look at the specific accusations made against the Adani Group. Consequently, by analyzing these allegations within the Indian context, the paper seeks to give an overview of the legal and financial aspects of the case. This analysis will not only help in understanding the veracity of the said allegations, but also the implications that this has for corporate governance and regulation in India at large.1 Keywords: Government Investment, Financial Irregularities, Adani Group, Hindenburg Research, Stock Manipulation 1 ‘Explained: How Gautam Adani v/s Hindenburg saga has unfolded so far - Times of India’ (The Times of India) <https://timesofindia.indiatimes.com/business/india-business/explainer-how-adani-v/s-hindenburg-saga-hasunfolded-so-far/articleshow/97558775.cms> accessed 25 June 2024.
    • 2. Introduction In the business world, the famous quote by Warren Buffet, “In the business world, the rearview mirror is always clearer than the windshield” is a very appropriate statement that shows that it is easier to analyse past events and their impact than trying to predict the future. This cannot be more relevant whenever one is studying the constantly shifting and competitively growing economy of India. India is one of the biggest and fastest growing economies globally and across the sectors has emerged as a progressively resilient as well as robust market. There are two methods of measuring GDP commonly, the first being on the basis of market exchange rates and the second on the basis of purchasing power parity, in terms of the former India ranks fifth in the world and in terms of the latter it ranks third according to the IMF. It has a low debt-to-GDP ratio and impressive gross domestic product nominal of USD 3 trillion. 73 trillion. A per capita income of $2,612 paints a picture of a pluralistic economy of India that has the opportunities and but also the challenges of the fastest growing economy across the continents of the world.2 The IT Industry is one of the wheels that support India’s economic chariot, it is one of the industries that handle a significant percentage of the country’s GDP. Today India has proved to be one among the top IT service exporting nations and this proves the advanced technologies and talented human resources. According to the estimate made by World Computer Bureau, in 2023, the contribution of the IT sector to the Indian GDP is expected to be about 7.5% and it is considering as important part of economic structure in the nation. The IT industry in India is therefore diverse in that it embraces many types of business ventures, both services oriented, and manufacturing oriented businesses that offer solutions within and outside India.3 However, the current face of the India industry can be gazed in the Adani Group which is an Indian multinational business conglomerate based in Ahmedabad. With Gautam Adani at its head, the group has continued to spread its wings across newer domains such as energy, 2 By Nikhil Inamdar, ‘India's economy: The good, bad and ugly in six charts’ (BBC Home - Breaking News, World News, US News, Sports, Business, Innovation, Climate, Culture, Travel, Video & Audio, 30 April 2024) <www.bbc.com/news/world-asia-india-68823827> accessed 25 June 2024. 3 ibid.
    • 3. logistics, and food processing. It is not only emphasising the diverse business model of the group but also displaying its impact on the Indian economy. Hindenburg Research is an American investment research company which was initially launched in 2017 by Nathan “Nate” Anderson and mainly focuses in releasing investigative reports about several companies. This is because the firm takes a lot of pride in the ability to obtain information that might not be easy to find in more conventional means and this primarily deals with issues concerning fraud and other types of misconduct. Hindenburg Research releases all these reports on its website, and through such announcements, a company’s operating practices are put under intense scrutiny, causing massive reactions within the market.4 One of Hindenburg’s significant examples of entailing a company was the case when the firm released a report about the Indian conglomerate – Adani Group. This report had some very damning findings – allegations of stock manipulation, fraudulent audits, and many other illegal activities. In response to the severe critique, the market responded rapidly and intensely; within three days of the publication, Adani’s Group of companies suffered nearly $65 billion of lost value. Hindenburg Research was unrelenting and stated they would be prepared to defend themselves and their work with the help of the court against the legal team of the Adani Group. Previously in last year, Hindenburg Research published information revealing its short exposure to Adani companies through bonds floated in the United States and non-India listed derivatives. Hindenburg Report provided evidence that Adani has used tax haven and questioned the lofty debts of the company. Subsequently, the Adani Group refuted the claims by categorizing the report as unfounded and terming the allegations as hearsay. In response to the report, the Adani Group quickly dismissed it as baseless, while characterizing the claims as “hearsay.5 4 ‘Hindenburg Report’ (Business Standard) <www.business-standard.com/about/what-is-hindenburg-report> accessed 25 June 2024. 5 ‘'Hindenburg report tried to shake our foundation but...': Gautam Adani’ (mint) <www.livemint.com/companies/news/hindenburg-report-tried-to-shake-our-foundation-but-gautam-adanirecalls-rout-prompted-by-us-short-seller-11710343850752.html> accessed 25 June 2024.
    • 4. Functioning of Hindenburg Hindenburg research is a company that deals in exposing frauds and manipulations of stocks which they classify under what they call man-made disasters. This company exposes companies in a unique and relentless approach that separates it from any other company of its kind. Hindenburg research also notes that it employs basic methods of research while investing, however, its best research originates from looking for substantive information from unconventional avenues. In other words, it goes beyond the regular productions of balance sheets, trading data, and other financial features by striving to acquire information that is often hard to find. They use a complex and very scrupulous analytical approach where they study every aspect of a company’s activity, its financial reports, and outside communication searching for signs of inefficiency and abuse. For instance, Hindenburg Research has two major areas of concentration which examine between four to six outlined red flags within corporations. These include analysing balance sheets for discrepancies and any indications of a disguised fraudulent reporting system that results in the provision of erroneous details regarding the performance of a company. It scrutinize experience certificates, employment references, credit histories and any other information that may reveal personally unethical or irresponsible officials, origination from the background of executives and other personnel who may previously have been implicated in fraudulent activities. It actively seeks out undisclosed transactions between the company and parties connected to its insiders, in particular its executives or members of the board of directors, for often these interactions raise the possibility of conflicts of interest or fraud. The company also monitors for any indications that it may be undertaking unlawful or scandalous business actions or failing to disclose losses or other facts critical to investors that could infect the enterprise with extreme penalties. Last but not least, they look for holes that a particular company might have, including, but not limited to, regulatory proceedings against the company, a product that has serious flaws which the public is still unaware of, and financial issues that have not come to light yet as they can affect the company’s stock astonishingly when unveiled.6 6 ‘Adani AGM 2024: 'Hindenburg incident was designed to defame us,' Gautam Adani tells shareholders’ (Moneycontrol) <www.moneycontrol.com/news/business/adani-agm-2024-hindenburg-incident-was-designedto-defame-us-gautam-adani-tells-shareholders-12754839.html> accessed 25 June 2024.
    • 5. Through identifying and addressing such important areas of concern, Hindenburg Research provides investors with an opportunity to be shielded from financial losses, facilitated by concealed risks and fraud, for the enhancement of corporate disclosure and stock market integrity. Their work then potentially betrays the lapses in business and investment research that must be invoked to explain how fraudulent practices could be pursued for years before the scam finally collapses. Anderson shown how similar the calamity of the stock market is like the one that befallen the Hindenburg air ship in 1937. The infamous Hindenburg incident which was a terrible Fire lead to the killing of about 35 people and has since earned itself the title of huge failures. Anderson equates this to the falls in share price of a company, stressing on the fact that most falls are sudden, abrupt and may be very fatal. He points out that Hindenburg Research, the company at the centre of the article, fits the activist role since it becomes an investor to uncover and combat frauds. This view is not isolated to disclosure but is closely tied to the financial management of the company, which, as will be discussed in the following section, includes short selling.7 Short selling is commonly referred to as ‘shorting’ or ‘going short’ and is considered a high risk, high reward investment method utilized by discerning traders. Short selling is different from traditional trading in which the trader’s main aim is to purchase the asset at a cheaper price and then sell it when the prices are higher, it involves selling stocks that are not owned by the trader with the belief that the price of the respective stock shall decline. Trader buys the stock on margin and sells it at a higher price to the public, aims to purchase the same at a lower price with maximum profit difference. This strategy is based on the presumption that a stock is overpriced and needs a wakeup call. For instance, if a trader finds it suitable to trade at a specific share that is at 200 rupees and the trader expects it to reduce to 180 rupees the trader sells the stock at 200 rupees to other traders. After the price lowers to 180 rupees each, they immediately buy it back and get a profit of 20 rupees per share. This kind of trading is made possible by an MIS Margin intraday settlement, account. In India the market regulator SEBI or Securities and Exchange Board of India allowed short selling, but only for those trades which 7 ‘For Hindenburg Research, Adani Group is a man-made disaster in the making’ (Hindustan Times) <www.hindustantimes.com/business/for-hindenburg-research-adani-group-is-a-man-made-disaster-in-themaking-101674826184041.html> accessed 25 June 2024.
    • 6. are delivery-based trade and any such trade which is done by short selling has to be squared off on the same day in the market. Hindenburg Research is a financial research company that is focused on a short selling strategy in an effort to report fraud from different organizations. As its modus operandi they engage in detailed financial analysis and place a derivative bet on the carry-on dive of the exposed company share price. However this method can be quite lucrative, it also implies a rather high level of risk at the same time. The main disadvantage of short selling is that this type of trading entails much higher risks, as all losses are not necessarily limited by the amount of funds that has been invested in a security as it is in case of classical trading. If the stock price rises instead of falling, the losses that can be incurred are huge without a change of heart. For instance, where a trader has sold 100 shares of a stock at a price that he believes will decline, but it so happens that the price rises instead, the trader faces potentially unlimited losses, since there is no cap to the upside of a particular share price. The only exceptional case is when an upper circuit breaker occurs as there are no sellers to meet buyers’ demands. However, if such a situation is not the case, then one can realize an infinite amount of money, but the financial risk being in short sale is very large, which speaks to high stakes for this type of trading. Framework of Short Selling in India Short selling is legal and allowed in today’s world and India in particular. It was not always so as these paper aims to establish when analysing a few selected educational institutions. Short selling was considered unlawful from 2001 to 2008 because of cases of insider trading which were alleged to have instigated a massive crash on most stocks. The ban was a preventative measure used by the Indian regulators to delist the US securities from its market for keeping the market steady during the period of uncertainty in order to protect the interest of the investors.8 However, Indian regulators decided this year to reopen the short selling but with conditions to curb the hazards that could occur. These new regulations involved control of day trading by institutional investors, rule that requires investors to report short sales, and creation of an 8 ‘Navigating the Maze: Scrutinising SEBI’s Framework for Short Selling - IndiaCorpLaw’ (IndiaCorpLaw) <https://indiacorplaw.in/2024/02/navigating-the-maze-scrutinising-sebis-framework-for-short-selling.html> accessed 25 June 2024.
    • 7. exclusive short selling platform. They were meant, inter alia, to improve transparency and avoid specific market abuses. During the contraction of the economy owing to the COVID-19 outbreak in March and October, 2020, Indian regulators have again closed the short selling temporarily. This decision was taken as part of emergency risk management measure when the market was facing an unprecedented global turmoil. Only domestic institutional investors such as mutual funds, FIIs, banks and insurance companies, are permitted to short sell, assuming that the appropriate derivative products for the involved securities are available. short sale and if the stock is a short sale or not to be disclosed at the time of the transaction, apart from meeting their ability to borrow the shares to their broker. While, institutional investors are restricted from releasing this information while the market is open and this information can be released by retail investor by the close of the market. Notably, the naked short selling practice is considered unlawful within the territory of India. The current SL/B regime is implemented through the CC/CH of the securities market or through the stock exchanges. By controlling the ways through which investors can leverage the available demand for securities this system is suboptimal. It has been mooted to improve this system by the employment of Approved Intermediaries (AISs) and initially the banks shall be acting as the custodians. This timid strategy is being employed in a bid to achieve a sound and secure environment for lending and/ or borrowing institutions.9 Most of the companies are open to FPIs and FIIs but, short selling is prohibited for FPIs and FIIs by the regulatory rules and laws. This restriction is thus meant to mitigate any possible problems to keep the efficiency of the market uninterrupted and curb any activities that may inhibit the efficiency of the short selling practices in the Indian financial markets. The external actors still partake in trade within India through different incorporation or organizations that are still legal on the conductance of such mechanisms. However, it should be noted these measures do not directly aim at the essence of problem but are only focused on 9 Tarun Thakur and Navya Bassi, ‘SEBI's Comprehensive Framework: Navigating Short Selling in the Indian Market’ (CBFL, 5 March 2024) <www.cbflnludelhi.in/post/sebi-s-comprehensive-framework-navigating-shortselling-in-the-indian-market> accessed 25 June 2024.
    • 8. direct intermediaries. Therefore, it is the original problem that is still unresolved. From crosssectional comparison of securities markets, it can be noted that the markets do not directly regulate and control lending and borrowing activities. This is because OTC transactions are the usual practice in most of these transactions and thus the involvement of a third party like a stockbroker is compelled. Thus, instead of being owners or operators, the custodians and depositors are those who provide management and running of these lending and borrowing institutions. In the event that India opts for this framework, any resulting short-selling regulations require implementation together with this new scheme. In India, there exist many other corporate organizations which have not been restricted to perform trading with foreign entities. These regulations are primarily directed at controlling various activities of direct intermediate parties, without addressing roots of the trading activity. Tom is therefore commercially correct in positing that the issue of unauthorized trading by foreign entities is not adequately addressed. Globally, the idea of how to govern securities markets is that of restraining interference with the lending/borrowing processes. Such transactions occur at OTC, and thus are controlled by custodians and depositors of the lending and borrowing institutions. Would India have to undertake a system of better international model, it would have a like need to introduced rules regarding short selling for better over bearing regulation.10 However, attempts to regulate the said activities remain a challenge; foreign entities are able to circumvent the forbidden restrictions of trading directly with India through the use of any corporation or organization which is allowed to trade directly with the country. This has not fully addressed the problem since the current regulations work with the current trading and only pays attention to the direct intermediary and does not probe into the sources of the trading. In other countries, it is not feasible for the securities markets to directly deal with the over-thecounter lending and borrowing processes, which is why they are not required to regulate these processes. It can usually be attributed to the custodians and depositors who manage the lending and borrowing processes of the respective business. Accordingly, any similar system that has to be incorporated for India there would be need for the regulation to fillip short selling provisions as part of this new framework. 10 ‘Reserve Bank of India - Regulatory Reporting’ (RBI) <www.rbi.org.in/scripts/DataDefinition.aspx> accessed 25 June 2024.
    • 9. Foreign entities continue engaging in trading, specifically within India, through associating with corporations or organizations that are still formally authorized to trade despite existing regulations. These regulations are aimed at direct intermediaries only though they do not address the mater appropriately. Therefore, the central problem persists, as the two characters further the plot but do not address the underlying problem. Therefore, while in the securities markets outright purchases and sales of securities take place, lending and borrowing activities per se are not controlled and do occur OTC. However, these are managed by non-executive custodians and depositors themselves and not by these lending and borrowing institutions. If India were to introduce such a scheme at some point in the future, it will be important to do so in conjunction with short-selling regulations as these would need to be complementary for all to operate in a coherent and effective manner.11 Initial Impact on Adani by Hindenburg Report It is noteworthy that the Hindenburg report launched a substantial blow to the Adani Group and led to the decrease in the company’s market capitalization that accounts for $100 billion. This financial shock relegated Gautam Adani from being the third wealthiest person in the world in asset terms back to the 20s. The fact of the report raised many concerns and speculations about the role and maybe control that now Indian Prime Minister Narendra Modi has had on the exponential growth of the Adani Group. There are speculations that struggling together and coming from Gujarat, India, there is a close relation between both that showed positive impacts to get them to where they are today.12 In response to these allegations, Adani categorically denied any outside influences meddling with his business. He assured people that all its contracts and associations of the Adani Group have been orally and in the public domain. Adani in his defence said that there was no wrong doing by his company to have received political patronage since the success of his business is as a result of business operation prowess. He claimed that he is an independent businessman who has made his fortune despite being the son of a footballer. In response to the report, Adani described it as ‘merely an expansion of the same unfeasible Short Attack from Hindenburg Research’. Jugeshinder Singh, Chief Financial Officer of Adani 11 ibid. 12 ‘PM Modi, Ambani, Adani reshaping India to become economic superpower: CNN report’ (The Economic Times) <https://m.economictimes.com/news/india/pm-modi-ambani-adani-reshaping-india-to-becomeeconomic-superpower-cnn-report/articleshow/109954741.cms> accessed 25 June 2024.
    • 10. Enterprises, also denied the report as baseless and was an act of extremism by Hindenburg. Criticizing the report, Singh said it was an incorrect assembly of half-truths: misinformation from decades ago that was still considered as unverified, slanderous, and thoroughly debunked by India’s Supreme Court. This was typical Singh’s mentality of dismissing the report and assuring the stakeholders that there are no rot in the Adani Group business.13 Since Hindenburg was not the only investigative industry that had delved into the activities of the Adani Group of companies. As the House may be aware, many RTI applications had been made against the Adani entities. Most of these applications were aimed at the Adani group and several other off-shore companies including Elara, Monterosa Investment Holdings, new Leina, and other related companies operational in Mauritius. These offshore entities had been under scrutiny for over eighteen months before the leaks rocked the world. In view of this it is likely that Indian authorities, headed by the political, did not consider the Adani Group as a viable entity they could support or a financially feasible company they could accept. It thus increases the chances of directors submitting RTIs to SEBI to report manipulative trading activity. This involves Ketan Parekh, a former stock market manipulator who was accused of being involved in a number of stock scandals including securities fraud, involving Dharmesh Doshi, a fugitive accountant, and Samir Arora, who is a brother-in-law to Gautam Adani. Moreover, members of the Adani family were also accused of wrongdoing in the share’s fraud scam. This also involves Vinod Adani as the elder brother to Gautam Adani and Rajesh Adani as his young brother. Majority of the investigations within India was headed by the Director of Revenue Intelligence (DRI). Such serious cases as financial and regulatory misconduct by the Adani Group and its related companies were analysed with the active participation of the DRI. The findings of this wide-ranging analysis indicate the vast lengths that different Indian authorities have gone to monitor, investigate, and seek to contain the vast network of financial and regulatory concerns related to the Adani Group and its associated entities. Within the report, a number of suspicious related to the Adani Group are pointed, and the Group’s managerial effectiveness and financial integrity are called into question. One area of concern is the high dependency on related parties’ transactions and activities. Namely, the 13 ibid.
    • 11. report cites numerous transactions while involving the Adani Group with different organizations including Monterosa Investment Holdings which reportedly has stakes of over INR 360 billion invested in the different listed companies of the Adani`s group. Another company involved in the case is Elara, an offshore firm that is said to be owning about $3 billion worth of Adani stocks. The scope of these transactions is massive; for instance, seven key listed entities in the Adani Group have a total of 578 subsidiaries and under the relatedparty transactions rule, engaged in 6,025 transactions in the fiscal year 2022. The business implications of this practice are clear: it prompts questions regarding the quality of these transactions, as well as the orientation of the processes to the common good of all shareholders.14 Furthermore, the report also highlights that there is a high turnover of employees occupying strategic accounting and reporting roles. It would be interesting to know that Adani Enterprises being a reputed organization had witnessed having seen 5 CFOs in next eight years. Thus, the switching of CEOs in this particular function often can be a sign of discontent or instability of financial management in the company; which inevitably can hamper the company’s financial health and strategic financial plan. Even the audits conducted by Adani are also placed under scrutiny with regards to credibility. Out of these, Adani Enterprises has one of the current independent auditors such as Shah Dhandaria audit company, which is a very small audit firm and they have no well-designed company website. It was apparent that this firm consists of only four partners and eleven employees and this information will obviously make one to doubt its ability to adequately audit such a large and complex conglomerate. It is reasonable to view the selection of such a small firm in the company’s auditing process as unfeasible, considering the possibility of inefficiencies in the audit process due to the lack of firm size. 14 ‘Two Offshore Companies That Invested in Adani Group Were Under Tax Scanner in India: Report’ (The Wire) <https://thewire.in/business/two-offshore-companies-that-invested-in-adani-group-were-under-tax-scanner-inindia-report> accessed 25 June 2024.
    • 12. Impact of the Report and Revival of Adani Group This means that even if the Report contained actual facts or false information it has done the job of causing harm by merely being released to the public. This led to a disastrous collapse of the Adani Group shares in the market with losses touching $ 140 billion in the wake of the report. Such a sudden twist greatly affected the confidence of the investors as well as inflated Hindenburg Research’s profits via short selling. As such, the economic power of Adani dropped from becoming the Third wealthiest man worldwide to the Twenty-Third in 2022. Earlier this year, the Hindenburg Research published a report claiming fraud stating that Adani’s conglomerate inflated its values and deceives foreign investors which as per the Hurun Global Rich List 2023 the business tycoon’s net worth erodes by around 300 crores each week after this report.15 The attack by a short seller forced the Adani Group to reevaluate its expansion goals and needs, especially after accumulating arguably the largest credit pile in India to fund new endeavours. Adani, known to be in the close contact of Modi and contributing to his vision of making a new India has been benefited as their group firms emerged as colossal since the Modi regime came into power. However, this growth trajectory was put into test when the group considered a new direction in the operation by seeking to diversify into sectors such as aluminium, steel, and roads. It was rumoured in March by Bloomberg News that sources with knowledge of the groups internal plans had revealed that it had withdrawn from a strategic level. In space of a month poor Adani saw its days evaporate and it entered a period when it initiated heavy losses. Adani Enterprises plunged 5%, the most in over five years, and all of the six listed Adani companies closed at five-month or one-year lows. States Rohan Shah, head technical analyst at Stoxbox, that the Adani Group’s market capitalization was closer to ₹25 lakh crore on the day of its respective peak. In February 24, 2023, this market value was fallen by more than 71% and created the loss above ₹17. 8 lakh crore. The latter made it through the list of the most affected; Adani Total Gas plunged by nearly 81%; Adani Green; Adani Transmission dropped about 74%. 5% and 74%, respectively. The impact was not limited to 15 ibid.
    • 13. only the power division but also affected the Adani Enterprises Limited, the flagship company, with the share price declining by 62%.16 After the publication of the critical report by the short seller, the Adani Group faced some problems. Nevertheless, these adversities did not deter Gautam Adani to continue with his mission to rebuild and solidify the company. Adani Enterprises Ltd (AEL), spearheaded by him, denied all accusations made by the Anderson company and remained operational. More recently, the Adani family tactically sold stakes owned by the Group CFO Jugeshinder ‘Robbie’ Singh for $1.87 billion for a 10% stake from global private equity firm GQG Partners. Moreover, the group has received board approvals for a further $4 billion funding within the next one year, depicting the strong financial planning of the group. In the future, the Adani Group is set for a major task of rebuilding its companies. One such effort includes ₹12,500 crore equity fundraising scheme, which has been prominently set out by AEL with the help of its subsidiary, ANIL, in green hydrogen. This programme focuses on creating an integrated system that includes green hydrogen production, downstream products including ammonia and urea, and the production of related supply chain components including wind turbines, batteries, and electrolysers. Further, the group is in the process of diversifying its focus from business segments that are more traditional and heavily reliant on capital intensive industries to consumer-focused sectors like airports, energy and gas distribution and real estate in its future growth strategy.17 Nevertheless, over the last few years, the group has faced some challenges, for instance, the scrutiny of SEBI following the Supreme Court’s expert committee probe into the Adani stock crash, however, the group has been able to continue its expansion efforts globally during the Hindenburg crisis. Credit for such resilience and development has been placed on the door step of the management team’s allegiance to Gautam Adani. This devotion has rightfully made them the pride and joy of the company as they rightfully call themselves the company’s greatest asset. In the future, the CFO has proposed that the group is going to operate with 14-15 companies instead of the current 10 companies by 2033 which is a part of the strategic direction 16 Armaan Joshi, ‘Why Are Adani Shares Falling?’ (Forbes Advisor INDIA, 29 April 2023) <www.forbes.com/advisor/in/investing/why-adani-shares-are-falling/> accessed 25 June 2024. 17 ‘Adani Energy Solutions board approves fundraising of up to Rs 12,500 crore’ (Business Standard) <www.business-standard.com/companies/news/adani-energy-solutions-board-approves-fundraising-of-up-to-rs12-500-crore-124052700931_1.html> accessed 25 June 2024.
    • 14. to cut down the number of companies it operates with in order to increase the operational intensity. Conclusion The recent confrontation between Adani and Hindenburg should be seen as an important reminder that the corporate world is not always as simple and transparent as it seems, and there are always some hidden activities that are difficult to regulate, despite the fact that they are required to be in compliance with the regulatory norms set by SEBI, FDI, and CCI regulations. Such examples show that simple monitoring cannot prevent fraudulent and other illegal actions, so one has to look for additional ways. In light of the recent events, one cannot deny that many of the allegations made by Hindenburg Research are still unproven and that there is no solid evidence to substantiate them; however, the journalists believe that some of the accusations were perhaps overstated for the sake of effect. Furthermore, it also highlights the current rules and regulations in India for short selling. Though legal, it becomes problematic when some individuals use it to slander a company or bet on their failures. Spite of all this, the extent of harm done by the short selling to the goodwill of a company can be massive and therefore calls for elaborate legislation on short selling and other related practice. Therefore, as stakeholders, investors have to ensure they closely inspect the products and services companies offer in a bid to avoid such losses. Force majeure is evidenced by the Hindenburg report where publication of the report was out of the investor’s control and led to severe damage that cannot be compensated. Therefore, complaint resolution and effective investor protection systems should be put in place. Moreover, this event provokes questions regarding ethics and governance of large companies. This is an indication that market regulators need to step up their game in protecting investors and also ensuring that they conduct proper oversight on organizations. It is for these reasons that transparency, accountability, and ethical corporate conduct are central to building trust and maintaining investors’ confidence in the international arena. In the end, whether or not accusations are true, this event is a good example of how investigation reports can significantly influence the market and investors’ feelings.


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