Short Selling Forces and Asian Conglomerate Adani Clash 'Turning into Litigation Battle'

Dropped from 2nd to 7th in Global Wealth Rankings

[Asia Economy Reporter Yujin Cho] The report incident by the US short-selling firm targeting the Adani Group, led by Indian conglomerate chairman Gautam Adani, who was once the world's second-richest person, is expected to escalate into a lawsuit battle. The Adani Group is firmly denying allegations of stock manipulation and accounting fraud raised by the US short-selling firm Hindenburg Research, suggesting that the dispute will move to the courts.

According to major foreign media on the 29th (local time), the Adani Group, in a 413-page response document released late that day, stated, "All transactions we have entered into have been accurately disclosed by qualified companies in accordance with Indian laws and accounting standards." They also dismissed the Hindenburg report as "false, aimed at sacrificing investors through unfair means and obtaining massive financial gains."

The stock prices of Adani Group affiliates listed on the Mumbai Stock Exchange plummeted sharply due to the report by the US short-selling firm Hindenburg Research, which bet on a stock price decline citing debt difficulties. Since the report was released on the 24th, the stock prices of seven Adani Group listed companies fell sharply on the 25th and 27th, wiping out $48 billion (approximately 59 trillion KRW) in market capitalization.

[Image source=Reuters Yonhap News]

Chairman Adani rebutted the Hindenburg report as a malicious claim by short sellers aiming for expected profits and stated that legal measures are being considered.

Earlier, during a conference call with bond investors, the Adani Group said, "The Hindenburg report has had a serious and unprecedented negative impact on investors," adding, "This is not an unfair attack on a specific company but a calculated attack on India, the independence of relevant authorities, our growth story, and our future."

They also denied the accounting fraud allegations, stating that eight out of nine affiliates are audited by one of the Big Six accounting firms, fundamentally asserting that the claims lack factual basis.

After the conference call, Hindenburg responded via a Twitter statement, saying that the Adani Group failed to properly explain any of the issues raised. Regarding the threat of lawsuits, they said, "We welcome it," asserting that there is no problem with the report's content and that there is nothing to gain from filing a lawsuit.

Chairman Gautam Adani.
Photo by AFP Yonhap News

On the 24th, Hindenburg released a report accusing the Adani Group of stock manipulation and accounting fraud, revealing that they hold short positions betting on a decline in the company's value.

The report claimed that the debt of the Adani Group's core listed companies is excessive, making the entire group's financial foundation unstable, and argued that the stock prices of seven listed companies are excessively overvalued. Considering the fundamentals and competitor stock prices, it suggested a potential drop of more than 85%.

It also criticized the Adani Group for involvement in stock manipulation and accounting fraud and for improperly using offshore tax havens such as Mauritius.

Meanwhile, Chairman Adani benefited from infrastructure and renewable energy projects prioritized by Indian Prime Minister Narendra Modi, with some group companies' stock prices soaring over 1000%, making him the first Asian to rank as the world's second-richest person at one point.

According to the Bloomberg Billionaires Index, as of this date, Adani's assets stand at $92.7 billion, dropping from 2nd place in the global rich list as of September last year to 7th place currently.