[WorkingGuru]

So Adani has just released a 413 page statement in response to Hindenburg allegations :



Gist of the response by Adani :









More fodder for the "research" team to chew on and churn-out more evidence, but by then the FPO would be done with and Indian media would pay this news down.

IMHO, this fiasco points out to how companies think Indian investors are intellectually incompetent in terms of their understanding of atleast these 3 things :

Company Law
Domain expertise
Operating/Management capability

This contempt in their mind is not unfounded, given how many companies were invested into based on hysteria, (Ex. Paytm, Nykaa, BharatPe etc) it has been demonstrated far too often. Many people pretending to know how to will listen & adhere to cryptic abstract illogical advice by those who've no skin in the game. These people, when they're buying the most common commodity at their local brick & mortar store, would dissect the product & seller to the last straw asif the sellers are thieves, largely because they think they can. Same for their investments into land/other property.

Have seen SO MANY friends tense, stressed & lose sleep over the past week, I feel tempted to remind them of my advice to never ever invest into stock markets, but I don't & stick to pacifying them with a pep talk about how it's the little things that matter in life.

Hard earned money being eroded (with serious downside risks) like this in stock market shows regulatory ineffectiveness to deal with creative books & loud branding.

My 2¢.

[extreme_torque]

Hindenburg has come out with a response to Adani's '413' page response. As expected, there is very little substance and whole lot of fluff - the response is savage though

Fraud Cannot Be Obfuscated By Nationalism Or A Bloated Response That Ignores Every Key Allegation We Raised

Adani also claimed we have committed a “flagrant breach of applicable securities and foreign exchange laws.” Despite Adani’s failure to identify any such laws, this is another serious accusation that we categorically deny.

It also predictably tried to lead the focus away from substantive issues and instead stoked a nationalist narrative, claiming our report amounted to a “calculated attack on India.” In short, the Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself.

We disagree. To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.

https://hindenburgresearch.com/adani-response/

[whitewing]

edit: I saw extreme_torque posted the same just ahead of me.

And the expected rejoinder to the Adani response. https://hindenburgresearch.com/adani-response/

For me the key parts of the accusations were on the undeclared holding and price manipulation via these entities. I only looked at the response to these in the voluminous response from Adani. but, that doesn't inspire confidence as a lay investor.

On the related party Adani has stated


And the rebuttal from Hindenberg

[ninjatalli]

Clearly the Hindenburg team haven't lost their sense of humor. Their response begins with this note

Hours ago, Adani released a ‘413-page response’. It opened with the sensationalistic claim that we are the “Madoffs of Manhattan. [1]”

And the footnote at the end of their reply has this amusing quip

[1] Adani seems unaware that Madoff lived in Manhattan, so he was quite literally his own Madoff of Manhattan.

[MaheshY1]

In the markets, the rule is that anything grossly overvalued can continue to remain grossly overvalued until a trigger comes. And anything undervalued can continue to remain undervalued. Newton's first law of inertia is applicable here.

But, the pace at which the Adani group moved up had all the features of a bubble. A business can't grow at the pace at which the valuations jumped for Adani group. Even if it does, it's certainly not sustainable. Even if it doesn't correct, it'd have taken more than a decade to justify today's valuations.

With the yield curve inversion blaring loud as hell hinting at a potential multi-year downtrend, the Adani group could very well become the next Lehman. Because once it starts its downtrend, Newton's law will apply here too. And it could continue to slide well below its fair valuation.

[pranavshet]

This is a classic case where,

Hindenburg has cashed out big profits by creating panic among investors.

The related party definition is very tricky

It's quite different under the companies act 2013,
Disclosure is as per Ind AS 24. It is basically a disclosure standard.
SEBI LODR has its own criteria.

There are many finer details in rules and exceptions.

The facts may be clearer in may when the audited statements of fully listed companies would be released. I have seen the financials of their listed companies. Most of them are audited by Big 4 or big 6 firms. This is there in SA 200- 260 series. SA 200-220 being the preliminary ones.

Whenever a new auditor takes up an engagement he performs some due diligence for client acceptance procedures wrt risk from fraud or material misstatements.

The most important thing is whether the company has a sustainable cash-generating model or not. For me, the cash flow statement is even more important than the balance sheet.

One important note. One must invest in a stock based on its business model & not its valuation. I'm not supporting / against Adani, Personally have not invested in such businesses. But the sectors in which this group operates take time to become cash cows. They are also capital-intensive & cannot be compared to consumer companies' balance sheets.

Please note: I have cleared my company secretary exams and undergoing industrial training in a listed company and I'm a CA final student as well. I have undergone my training in a Big 5 firm.

Would love to know your take on the same guys.

[Imran.Syed]

AEL stock price up by about 5%, I was tracking it briefly and it had gone up by 10% at one point but receded back.

The worrying bit is that the Adani's bonds seem to be plunging even after the rebuttal by Adani.
https://www.bloomberg.com/news/artic...o-stem-concern

Edit:
As expected, Adani's CFO has claimed that Hindenburg Research will be sued... In India.

[pganapathy]

CAVEAT EMPTOR.

Let the buyer beware. This very old Latin saying expresses it best. Whenever you see any company promise huge returns or their stocks going up exponentially, it is almost always a scam of some kind. I look forward to the day the Adani empire crashes, because it is necessary for people to learn there is no such thing as a free lunch and anything that seems too good to be true probably is.

[poloman]

I am someone with right of center political views. But I don't like resorting to nationalism when it come to business. Crony capitalism is something I hate to the core. Be it Ambani or Adani or any 'setu' company in India all thrive on political connections. This is the hard truth. I am pained to see Adani trying to monopolize from apples to ports to airports to edible oils to power to infra to what not...! This is closer to oligarchy. This situation needs correctional forces like short sellers or contrarian orgs like Hindenburg.

India will never progress till we have family driven crony companies who only thrive on political connections not business or acumen. This is not limited to Adani. Every major company in India is ridden with nepotism, cronyism, poor corporate governance, market manipulation and every corporate ill you can imagine.

That said Hindenburg should limit their comments to the business side of the issue rather than commenting on the political angle which may only benefit Adani.

[m8002?]

I was never following any of the Adani group shares given the political connections.
But I was really surprised when I saw the FPO ad in the papers last week. Asking price of 3200/- for a 1Re share?
How do the investors think they will get the money back? Only case I can think of is expecting a greater fool to buy it at even greater valuations.

[deetee]

A meme from social media. (People who saw this regional movie may relate better)

[GeneralJazz]

How is this fine? What a disgusting response!

India's Adani Group has said a U.S. short-seller's report on the business house was a "calculated attack" on the country and its institutions while a senior executive has compared a rout of its stocks with a colonial-era massacre.

On April 13, 1919, a British officer ordered about 50 Indian army soldiers to shoot at unarmed civilians who were taking part in a peaceful protest. At least 379 people were killed, according to the official record, although local residents have said in the past the toll was far higher."In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians," Singh told the Mint business daily in an interview published on Monday, when asked why the market believed the Hindenburg report.
"So am I surprised by the behaviour of some fellow Indians? No."

Source

I've never had a lot of respect for these crony capitalists, but equating themselves to martyrs is not acceptable! Absolutely disgusting!

[MaheshY1]

I wonder why the Adani people need to worry and fight back so much if they believe their valuations are justified, unless they are holding long positions in FnO and are getting squeezed out of those.

If their share price is justified, then market forces will eventually bring it back to a fair price. It's possible that bringing it back to fair valuations is exactly what they are worried about.

[warp_10]

Even in the rebuttal if you see most of Adani's companies are audited by the so called big4 (EY or Delloite). A couple are done through the Shah Dhandharia which is the one being questioned. Really can such a small CA team handle one of world's largest enterprises ?

Also, why did they have to bring in nationalism, their work in social welfare etc. into picture. I mean they could have been to the point. Adding 400 page response doesn't it give a feeling of hiding a ticking bomb amidst tons of parchment ?

I don't think you need to be invested in Adani to go down, if you are an Indian and if Adani goes down, husha busha we all fall down !!
(given they are part of nifty 50, the index funds are all invested in it, MFs / LIC, banks who have loaned debt, secondary enterprises, the list goes on).

[SmartCat]

Some more funny stuff happening:

UAE based conglomerate invests $400 million in Adani Enterprises FPO
https://www.moneycontrol.com/news/co...o-9963381.html

IHC, one of Abu Dhabi's most valuable listed companies, was an investor in Adani Enterprises' share offering's anchor book as well. "Our interest in Adani Group is driven by our confidence and belief in the fundamentals of Adani Enterprises Ltd; we see a strong potential for growth from a long-term perspective and added value to our shareholders," said Syed Basar Shueb, Chief Executive Officer, IHC.

However, "nobody knows" () how IHC became a $240 billion marketcap company in UAE in 3 years flat. It is a bit like Adani's clone.
https://www.ft.com/content/3690cc04-...d-26b5c185e99d